port of entry modernization which will improve the security of our nations borders as well as promote expanded commerce and trade and support local economic development. all of these investments have a significant impact on the communities in which these projects are located. gsa recognizes its role as an economic catalyst in these communities and works with stakeholders to align investments with community and economic development efforts. we also must use the federal buildings fund for our partner agencies and combat the growing costs of real estate. through consolidation and innovative space solutions, we have reduced the lease inventory by more than 3 million square feet, rentable square feet since 2012. with the projected reduction of 3 million additional l rentable square feet by the end of fy 2017. gsa has also partnered with agencies to accelerate the disposal of excess property in fy-2015 we helped agencies dispose of 172 properties,

generating $46 million in proceeds. beyond our brick and mortar infrastructure is our information technology infrastructure in which the government and the global economy depends. reliable i.t. is vital to all of the services the government provides. however, many agencies are not able to effectively have i.t. infrastructure, emission writ call systems due to large upfront capital investment needs and increasing share of costs that maintaining these older systems occupy in technology budgets. to address these issues, the budget includes requests to establish a $3.1 billion information technology fund, which would be used to retire and modernize legacy and information technology systems to improve cyber security and the delivery of services as well as reduce costs. in closing, gsa has made significant progress in fulfilling our mission to delivery the best value and real estate acquisition and

technology services to government and the american people. the president's fy-2017 request will enable us to move forward along this trajectory of providing more efficient and effective services at a lower cost so that agencies can focus on their crucial mission. thank you for this opportunity to be with you today and i look forward to answering your questions. >> thank you very much. and let me start the questions. i think you probably figured we would ask questions about the fbi. mr. serrano mentioned that in his opening statements when we met last year, we had a pretty lengthy discussion about the whole concept of this exchange swap. and a couple of questions, i guess to start with, what were you thinking last year was going to be the value of the hoover building? did you have any idea what that might be? and did you have any idea what it might cost to build 2.1 million square feet?

>> sir, we did have ideas that we have been working from. we've been avoiding talking about specific costs related to both the value of hoover as well as the project overall. primarily because we're in an active procurement process currently. >> how did you find out the hoover building is worth $1.8 billion less than you thought it might be? >> let me say, just in stepping back, the project itself and what we have before both this committee as well as the other committee from fbi is really a reflection of where the project is in terms of trying to achieve a full consolidation, as well as fbi's requirement. and i would say that over the past year, we've gotten a better understanding as the project is coming to its maturity with the cost reflect. so we believe with the funds we received from this committee in

fy '16, as well as the requests that's pending as well as any costs we received from its value would be reflective of what's needed for the project. >> last year when we talked, there was indication, i think $291 million was appropriated for the omnibus. was it $391 million or $291 million? i can't remember. but anyway, i think we were told that that would be it from the appropriations standpoint. that would get things started, whatever. now it's like you add up those two, it's about $1.4 billion. so i guess you can understand why we're a little surprised, can't you? >> absolutely. this has been an evolving project. and the part that i would point back to, in particular, is really what we're going to learn both from how the market values this project, but as well as the further understanding of the requirements of the project. we received clear indication that full consolidation for this project was supported in something that we needed to

ensure was a priority as we brought this project to bear and the requests are really reflective of that. >> how confident are you that now the valuation has been put on the hoover building? how confident are you that that's correct? >> we have worked very closely with fbi in terms of just -- and this is really going to the requirements overall, but in terms of the valuation, itself, we are really looking forward to what the market responds to. and we have the responses due back from the developers by this summer. that's really going to be the first indication of how they're valuing the project. and we're going to -- >> i mean, how do you know today that it's, like, $1.8 billion less than you thought? >> really because of the requirements. as we start to build out what the cost of the requirements are, and the way we've worked very closely with fbi over the past year, that really has given us a sense, as well as --

>> do you have an appraisal of the hoover building? >> we have -- the appraisal we have on record is actually an older appraisal. we will likely do appraisals as we go through the process this year. really what we're looking for, what we've stood up is compared to where the requirements are today from fbi and having worked closely with them what we know about the sight themselves and having gone through the environmental evaluation of them then what will see see in june as we get those responses back from the developers. that's really what we're lining up. >> were you not sure -- i guess there's two sides of the equation. if you're going to do a swap or exchange, you say what's the hoover building worth, right? >> yes. >> and how much is it going to cost to build this new 2.1 million square feet? it sounds like you didn't have a very good idea of what that was. if you missed it by almost $2 billion, right? >> i believe that what -- the

effort was really about an exchange to offset any requests for appropriations. i mean, ultimately to use the tool of the exchange and to be able to give the full project would have meant we didn't have to have an appropriations request. i think really having a full consolidation on the table, as the requirements as we understand them to really meet the mission of fbi, is reflective of the change that you're seeing. >> did you ever think about just selling the hoover building? >> sure. and one of the things that we know is with the exchange, we can ensure that the proceeds from that project go into the new hoover location. >> you're not going to -- you're going to do an exchange, right? >> yes. >> do you think about the fact that if you're going to exchange the building, then the developer is going to have some carrying costs while he builds the building which might -- did you think about whether you should just sell the building, put the money in the bank, then go ask somebody to build a new one? and use part of the proceeds for

that from what you -- i mean, how did you decide it was better to do a swap or an exchange than just sell the building and then hire somebody to build you a new space? >> oftentimes we have sold the properties and used our budget requests to go forward with a new project. ultimately, there's a couple of aspects of this proposal that are different and unique. one of them is the fact that we're talking about the hoover, which is on pennsylvania avenue. a rare place to get an opportunity to develop. i think that that was part of bringing developers to the table and being interested in this project. ultimately, if we were to do a typical disposal, we would have to come back and ask for a larger appropriations request, certainly, as well as then go through the process of a new building overall. and really, having the exchange as a part of this can offset what we have to ask this committee for. >> is this the biggest exchange you have ever done? >> this would be the largest. >> has gsa ever done any other exchanges? >> we have done other exchanges of varying scales.

i think the exchanges we've done in the recent past are the largest that we've seen in some time. >> you got any idea how many exchanges you've done the last ten years? >> in terms of this scale, we have not done any exchange of this scale. >> are you still comfortable -- last year we questioned whether or not -- this is pretty complicated. is this something that you have in-house capabilities to do? or is this something you're contracting with some outside folks? how are you handling this? >> sure. as a part of our projects, we'll definitely bring in expertise to help with various aspects. anything from evaluating the requests -- the proposals themselves, to doing traffic studies -- >> for instance, last year had you brought anybody in to kind of give you an idea what numbers we might be talking about? because, again, we missed it by at least $2 billion. for instance, and along that line, i mean, how do we know you asked for another $1.4 billion,

how do you know what this new $2.1 million of office space is going to cost? i mean, do you know that yet? where do those numbers come from? and why is half of it from gsa and half of it from fbi? >> what we do know is having worked with fbi much closely -- very closely over the past year, having a good sense of their requirements, that's giving us a sense of what the costs are. just really how they're programming the space and how they plan to utilize it. it really has been very much a shared effort between us and fbi. we worked intensely over the past year and it's part of the reason you're seeing the requests come from both. this is a shared effort. as well as the number, itself, would be large overall and definitely didn't want to overburden either budget request. but at the end of the day, what's really going to tell us what we have for the project are those various pieces. what the requirements are and really setting the cost,

ensuring we're receiving a full consolidation as part of this request and trying to both with the appropriations and the '16 funding and the offset of the value of hoover really bringing the project to bear. >> so do you have -- where do you get the $1.4 billion for the appropriation request this year? >> part of it is set by the requirements of the full consolidation. >> and who looked at that and decided it was going to cost $1.4 billion? >> we do use a team of experts to support our efforts. >> you got that laid out. is it 2.1 million square feet, is that right? >> yes. yes. >> now somebody said that's going to cost a little bit more than we might have thought. either you missed it on that side or missed it on the value of the hoover. i mean, i hope you'll appreciate our concern is, when you come in and say look, if we had $300 million, we've got a very valuable piece of property downtown, we can exchange it, somehow build us a building and

that's going to be great. and then still ask you what's the value and nobody seems to know yet other than the new estimate is we missed it by $1.8 billion. it's going to be $1.8 billion less than we thought or somehow the office space is going to cost more. i think as stewards of the taxpayers' dollars, we have to have a better handle from you on where the hundred is going to go. so that's -- i mean, other members might have questions as well, but i did want to bring that up because i think that's something that we're going to have to really work through. >> sure, mr. chairman. and it's not that we don't know what the project scope is. it really is a reflection of not wanting to overburden our request. ultima ultimately, if we had a project for full funding, for consolidation as we do now, it will have a large burden on our other projects as this will. but it's still a high-priority project.

the idea was for the exchange to offset the cost overall and offset what we would have to request and how we were actually staging the project. but we're talking in terms of where we are today full consolidation and requirements very much reflective of where fbi and where this project is today. >> and last -- just that was your idea, it was a great idea, but it wasn't based -- doesn't sound like it was based on reality unless we can find out more about where these appraisals are and all those kind of things. i think we're concerned about that. mr. serrano? >> thank you, mr.administrator, pundits would say it's very easy to confuse members of congress. well, this may be an example of one where we're innocent of being easily confused. it's just very confusing. we're trying to get to the bottom of it. based on your budget request it seems in addition of the $1.5

billion in appropriations, gsa will still need to give the hoover building to the developer. in last year's hearing, you would not tell the committee how much the hoover building was appraised for. there is no way for us to analyze your appropriation needs without knowing what you and the developer are assuming the hoover building is worth. can we get the current appraised amount today? >> the current appraised amount is actually from an old appraisal. as a part of this process, we will do an appraisal of the project. but in terms of both the estimates and costs that are going -- the estimates that are going into the project, it is much better situation for the government to be in to wait for responses from the developers. before we are talks about any of the numbers and getting through awards. i mean, ultimately we have three developers that are competing. they're running estimates on the various sites, as well as the overall project, as well as the value they will give us on hoover and to talk about those numbers as a part in an open

setting really will undermine our efforts. >> okay. except for the military, an open setting is a public hearing and we usually like to get the information. i'm not going to press you on that. could you at least give an idea of the appraisal value to our staffs at the minimum? i mean, they're sworn to secrecy. >> we'll definitely follow-up with the staffs. and again, it really is just the integrity of the procurement process that i'm focussed on. we are right in the middle of the procurement and really just want to make sure we get the best deal out of it that we can. >> i understand that, but, you know, the chairman has to respond to people, to members, who, for their own reasons and for their beliefs, don't believe in spending certain amounts of

money. i, on the other hand, want to be helpful in investing in the future as they are, too. so you don't help us by telling us, i can't tell you that in public. i'm trying to be helpful here to say, can you at least tell us in private that we have an idea what we're dealing with? because that's what we do as appropriators. we appropriate. we're not going appropriate in the dark. no mattparty's going to do that. it doesn't matter who the administration is, we're just not going appropriate in the dark. we need to ensure that we're getting the best price for the government for the hoover building, administrator. is there a chance the building is being undervalued as part of this exchange and would bring in a higher price if sold on its own? >> i think what's unique about this exchange in this process overall and part of what's

brought the interests to the table is the fact that hoover, itself, is on pennsylvania avenue and, you know, it's america's main street. and ultimately to be able to have access to that property, i think it's part of what makes the package overall attractive. so taking the exchange out would have an effect, i think, on the project overall. >> well, there's one part i totally don't understand, and it might be that i didn't pay attention to what the chairman was asking. why is the developer getting the building? i come from a city where the developer is always getting people -- people think the developers are getting more than they should. why is the developer getting the building? why is the topper developer -- refresh us again. why what is the developer giving us in return for getting the building? >> part of utilizing the

exchange tool, we're giving the building itself, the hoover building in exchange for a new building that will service as the headquarters for fbi. >> all right. are the fbi and department of homeland security headquarters being treated the same? specifically, i want to know what the gsa request is going to be used for, versus the agency's request. my understanding is that gsa provided, and gsa, appropriation was used for the interior. is that the same with the fbi's headquarters? >> it is the same. the requests that are before you and fbi's request is for construction. >> okay. i'm sure mr. yoder has some questions. i did notice something, mr. chairman. i thought america's main street was river avenue where yankee stadium was located, but i guess not.

michigan and chicago? i should have stopped while i was ahead. >> i'll turn to mr. yoder now. >> thank you, mr. chairman. i do represent the heartland which is the main street of the whole country. you're welcome to come at anytime. welcome to the committee. appreciate your testimony today. i wanted to ask you about your understanding of the gsa's role of the banister federal complex in kansas city, which is a former facility that's closed. i want to know about where it's going. i first want to talk about where it's been. if you are aware, the banister federal complex in kansas city made a variety of things. made airplane engines during world war ii but later they began making components for nuclear weapons. and after many folks dedicated their career there, it became aware they were exposed to significant amounts of radioactive material. there's been some $55 million paid out to these workers at a former gsa facility. but the vast majority are

frustrated and they haven't been paid. some live in my district, some live in emanuel cleaver's district where it's located in kansas city, missouri. the types of claims that have been uncompensated are pretty significant. you have hundreds of people with skin cancer, barilium sensitivity, female breast cancer, asthma, kidney cancer, bladder cancer. the list goes on and on and on. so i know this is a real tragedy that's occurred here, and these constituents are coming to me asking why their claims haven't been paid, only a fraction have been paid. i'd first like to know, can you provide me information about what the gsa's role was in that situation in terms of informing them what they might be exposed to and what are the general policies on that today for exposed to materials that can affect their health? >> we, congressman, thank you for the question. this has obviously been an ongoing item for the agency and one that we will continue to

address as concerns are raised. my understanding, and i spent just a little bit of time with this item, is that we did have situations in which there were individuals who were concerned about illnesses related to the environmental health of the location. at this point, we have not made -- gsa has not found that there's a connection between the environmental health of the footprint that is gsa. obviously there was another activity on this site overall. we continue to be open in listening to any requests that are brought forward. but at this stage, we don't have any that we have identified where there was an illness and relation to the illness that it was connected to the environmental health of the foot pretty managed by gsa. >> so you're saying the facilities weren't managed by the gsa? >> no, the footprint that's part

of gsa's footprint. there's another agency -- >> so what was the portion that the gsa was responsible for? >> i can't -- i don't know the property well enough as i sit here to talk about specifics of the separation of the site, itself, but there is a portion of the envelope that is gsa and a portion that's managed by another agency. >> and to your knowledge, there's no overlap in terms of individuals that would be exposed to radioactive material that would be gsa employees or gsa-controlled space? >> not to my knowledge, as i sit here, but we will definitely work with your staff and work very closely with any concerns that have been raised to your attention as well. i would like to deal with those. >> i just have hundreds of constituents in my district that feel like their claims aren't being heard. many of them suffering from devastating cancers. 554 people are deceased. some of their claims have been denied. the approval rate for cases involving former workers at the plant is particularly low, 23%,

less than half the national average. so it's a problem that, you know, my heart breaks for these folks and i want to make sure the government is doing them justice and doing them right. i would like your help to advocate for these workers to ensure that they were -- are being property compensated. i guess my follow-up is, two follow-ups. one, what are the measures the gsa is going to take going forward to ensure these types of things don't occur in the future for properties gsa manages? what are safety measures? then there's a timeline for clean-up of the facility for disposal and cleanup. can you clarify your agency's involvement in that process? >> sure. just to be clear, there were items that needed to be investigated by gsa and we have done so and we will continue to investigate any items that are brought to our attention. there has -- there's a number of things happening at that site because of the size of the

footprint. we actually are expanding some presence there. on certain parts of the site. and it would probably be worthwhile for us to come back to the committee staff and talk through the aspects of the site. but overall, we take the environmental concerns of our properties very seriously. obviously we have a number of properties that we manage in really the environmental health of the employees that work there and the safety of those employees is something that is of high concern to us, so we will continue to -- and we do with each of our sites watch and monitor closely, try to ensure that we have an understanding of vul nushlts there. necessary here to respond to your constituents specifically and the project overall that we continue to do that. >> i appreciate that. we need to make sure we do everything we can to make sure that doesn't happen and make

sure they're aware of it. protect them and then when things do go wrong and we do have health outcome, we do everything to compensate them and make it right. i yield back, mr. chairman. >> thank you. >> mr. quigley? >> thank you, mr. chairman, i strongly agree with those remarks. ms. roth, i understand your concern about sharing the appraisal numbers with the 17 people watching on c-span right now. let's talk about something we perhaps do want the public to know about. the federal real property profile. i saw that gao had found the issues with the database, questions of reliability. i understand, huge database and conflicting information coming from different sources, but it

also raised questions about the property reductions and the associated cost savings being overstated as a result of those inaccuracies. can you talk about that? just how serious that problem is and what you're trying to do to overcome it? >> sure. just to separate the two and the real property database as you point out, congressman, does have a lot of sources that it pulls from, and there are steps we've taken to work with our federal partners in terms of improving the integrity and quality of that data to the extent of ensuring that very senior level individuals in those agencies are seeing the data as it's being submitted as well as doing some mandatory drop-downs as well as smart assessments of information that is entered into the database from year to year. this is something we're rolling out this year if they -- square footage, for example, on a property is drastically different from one year to the

next. the database would actually flag the agency to deal with those discrepancies. when it comes to disposal, itself, however, we have more accuracy around the actual activity that's occurring. so when we're actually going through a disposal process with an agency, we're spending more time hands-on with that property, itself, so it can confirm the dispose l activity and what we're actually disposing and the savings, therein. >> but the data available in the federal real property profile is not available to the public, not available online. i guess there's summary reports which are kind of excel spre spreadsheets. you know, several of us have been trying to address these issues of excess property. it's hard to know what we have. i'm not sure anybody in the government can put a summation on this and what their value is. i think we need to get that in order and begin to talk about how to make it more available to the public. >> yes, sir.

wholeheartedly agree. we have been works with a lease of properties that are under gsa's management to enhance how we're making that data sets available even to the extent that we have now a website that shows a map where you can sort of hover over the locations and get a pretty good snapshot of data as well as click into it and get more information. we want to be a resource for federal agencies as they work to make data more available and have formats and platforms that they can pull from pretty quickly. >> let me ask you to touch on one more thing quickly. gsa has some responsibility or helps to a degree helping federal workers gain access to childcare facilities. especially here in d.c. we're hearing the availability, especially on the hill, is long waiting list for such things and exorbitant costs of this sort of thing. to the point we actually hear

people making career decisions and family decisions based on the fact that there is no affordable childcare. your thoughts on this? >> well, i will be happy to follow-up with your office regarding what role we play and if there's anything we can do to support even to the extent of information. as a mother of a young child myself, the idea of not having childcare that is affordable or easy and accessible is, i can understand, very problematic. so we will do everything we can to support that effort. >> in the meantime, have you heard at all from staff, workers, other people in gsa just about what the lists are, the cost and so forth here? especially on the hill from my own staff, for example? >> i can't say that i have directly but i will definitely follow up. >> i appreciate that. thank you, mr. chairman. i yield back. >> thank you. i want to ask you about the $3.1 billion fund for the i.t., but let me just finish up with the

fbi. just so you'll understand, we're -- we're pretty much, as said, in the dark, if you come in and say we have a building that's worth "x" dollars and we're going to build a new building that's worth "x" dollars, that sounds like a fair trade, but i don't know, somehow we got to know where you got the numbers and where you get the number to say we missed it by $1.8 billion. say it costs $2 billion to build a new building but we got a building that's worth $2 billion, then that works, right? >> we. >> but if somehow there's almost a $2 billion discrepancy, that means either "a" that the building you had wasn't worth what you thought it was or the building you're going to build, you can't build what you thought it could build. we got to know that. in particular when you walk in and say we need another $1.8 billion to finish our project but we don't have any other numbers. so somehow we got to work

through that. want you to tell all the free developers what the numbers are, but everybody's got an idea of how much it costs to build a building and everybody has an idea of how much a building's worth. so as soon as we can get that, it will make it a wheel lot easier for us. >> and i appreciate it, mr. chairman. we want to work very closely and we'll continue to work very closely with the committee. obviously we are asking for your support and want you to feel confident about this effort. so we'll definitely look forward to continue to follow up with you and have discussions. obviously, this is a different project with a different scope at this stage in terms of a full consolidation and understanding of the requirements and is really having the impact. absolutely, sir, i understand the position the committee is in. >> thank you. now, the $3.1 billion, you got $3 billion in mandatory, $100 million in discretionary. how's that -- where did that idea come from?

did the agencies request i.t. upgrades every year? $3 billion is a lot of money. all of a sudden. how does that work and why is that mandatory versus discretiona discretionary? >> well, let me say this effort overall, the i.t. modernization fund, really is a -- grew out of the cyber security national action plan that the president presented. you're aware, last year we had the cyber sprint, and out of that discussion and out of that evaluation it was clear that part of the major vulnerability or major need for federal agencies was in the area of i.t. legacy and supporting the replacement of i.t. legacy. and so as such, the idea of this modernization fund, specifically, is to support thattest. as agencies look to replace legacy systems, the highest costs is really in that initial upfront cost. the ideas for this fund to be a revolving self-sustaining fund that agencies can apply to payback over a five-year period,

the cost of the investment overall. but it also has the benefit of helping us see across government. sometimes agencies are trying to deal with a legacy issue in a silo in terms of its agency, itself, when actually the solution actually may be something that either multiple agencies can utilize or multiple agencies have already involved for. so we are seeing it both from both perspectives, both the business enterprise perspective of how do we rationalize and have smart investments around our i.t. that can support everyone, as well as helping to see and support what agencies are faced with on a regular basis. the reflection in the request will reflect that, and as you pointed out earlier, the legislation involving this request should be to you and your other members in the next couple weeks. next few weeks. >> there will be some

authorizing language, i assume. are you going to have to hire some more staff to administer this fund? >> yes. there will be additional staff. it would have a programming office. the staff and the focus of the office would be really to evaluate the investments, themselves, to give -- >> is that all included in the $3.1 billion? >> yes. >> the omb oversees all the compute erls of everybody in the federal government. i can't remember what the number -- billions of dollars we spend on computers all across the federal government. we had mr. donovan say if they coordinated all the, i guess, buying of computer equipment, they might be able to save as much as 50%. so is that something you've talked to omb about about how all of this would work? >> absolutely. this is actually annest we've been working very closely with omb. this is an outgrowth of the federal cio. obviously a part of the senior team at omb. so this is very much in conjunction with them. gsa's role is really, obviously,

as an administrative arm, it makes sense for this to be coordinated through gsa, but we've worked very closely with other agencies on their i.t. needs in general. >> how do you decide we want $100 million from discretionary but want $3 billion out of mandatory? >> it really goes hand in hand. >> how do you decide we want this $3 billion? you know, you're not really appropriating that. so you say, well, we only asked for $100 million, but somewhere the $3 billion, how did you decide to put that as a part of mandatory spending? >> it was the preference of -- we worked closely with omb in terms of how that request came through. ultimately, since it is a one-time request, and i believe the thought is that we can define it as a one-time request and have it come forward then have it as a revolving fund. >> it just seems like it'd be one way you can use mandatory funding to circumvent the

regular appropriations processes because you'd have to be a little more strict where to spend it, the $3 billion, that comes from mandatory. i don't know where we're going to spend that. that's something to be thinking about, too. mr. serrano? >> it's amazing, mr. chairman, how we always end up talking about computers and i.t. i don't know if i was being sarcastic or profound when i suggested doing the rollout of obamacare and all they had to do was go to a college dorm and get a couple kids who would take care of the problem in about 30 seconds. you know, instead of doing everything else that happened. you know, one of my issues on this committee for years has been purchasing versus leasing. i think our government spends too much money leasing. and at the end of the day, owns nothing. maybe there are people much smarter than me, i'm not being

sarcastic, who can argue that leasing is much better. has that changed at all? because this committee made an effort to get people to say stop leasing for so much money and purchase some of the places that we need in our government. pretty soon the government will be leasing and leasing and leasing and no purchases at all. has that changed at all? >> yes, sir. i will say that the committee support of consolidation funds has been a tremendous effort for our portfolio overall. we have been able to see savings year over year since the support of that effort as well as the reduction of our footprints in particular. we have very much a value on the own property. we believe the own property is the best use of the american taxpayer dollars and want to maximize our presence in the properties that are owned by the federal government. so the funding that the committee has given us, i think over the past three years, in

particular, we had -- i had it written down, 1.4 square feet of savings -- reduction in square footage. over $100 million in savings on lease avoidance. that's having a definite impact on the bottom line. >> okay. let's -- let's move on to another area that's also of great interest to me. and it is our territories. it seems that the territories always get left behind, and i take personal interest because i was born in one of them and i represent the bronx which has a lot of folks that were born in the territories. does gsa make a special effort through staffing patterns and problematic patterns to make sure that the territories are being treated as fairly as the constitution allows which is thoroughly fair? because in many cases, you'll

hear where they're waiting for a building but, you know, three or four times the amount of time that one of the states has to wait. you wonder, you know, they're federal buildings, they're being used to service american citizens, so why not the same time or something close to it? >> yes, congressman. i know that you've had discussions and we've had discussions over the recent past regarding projects in particular in puerto rico and we have -- we've needed to ensure, and we have, we're at a much better place now, that we have boots on the ground as well as hands-on efforts with any of the projects in the territories. and i think what we've seen in the turnaround in the projects, in particular, we're doing that.

prompt and that we're keeping the same discipline across our portfolio, expectation of turnaround as well as project management and schedule. >> well, i would appreciate that, and you'd be not surprised, but you'd be happy to know that this committee does not disagree that we want people treated equally and that sometimes because they're not a state, they don't get treated equally. let me ask you a question here. the omnibus bill -- in the omnibus bill, gsa is requesting 17% less construction, acquisition that was provided in the fiscal year. i'm sorry, i got it wrong. you're asking for 17% less than provided in the omnibus 2016. that may be understandable given you received over a billion increase in construction in fy

2016. there have been concerns from some about your ability to handle such large increases in one year. how are you managing that many projects? the fy-2016 bill. and did they impact what you requested in 2017? i believe we must invest in infrastructure across the country and the territories, but i also don't want to set you up for failure by not giving you a staff to manage all of your projects. >> sure. i thank withdryou for that observation. i would say -- first, let me start by saying we very much appreciate the committee's support in the fy-16 budget. that has been a tremendous opportunity especially in the area of courts that was mentioned earlier. earlier. for us to meet some of our partnering needs. we are gearing up, we're working very closesly with the courts in terms of evaluating their projects, the timing of those projects and ensuring we're able

to move forward and execute on time and under budget. across the board, we have a volume of needs that really exceed our resources and so what we try to ensure is that we are able to articulate to the committee where the needs are and what's driving our programming going forward and to ensure that we have the staffing lined up to manage what we can see coming forward. so your support has been a tremendously important and we are doing everything from our perspective to line up, we have staffing and support in places where that funding is focused. >> thank you. i know we've touched on it, but how is your i.t. modernization program going? >> the i.t. modernization for gsa overall has been a tremendous opportunity for us as an agency in terms of really rationalizing how we're managing

i.t. in terms of having had a consolidation that we did internally as well as establishing what we refer to as investment review board to look at large-level i.t. investments. really is allowing for usgencie moving in the same direction especially as the outgrowth which was an important effort this committee was involved with. so we're seeing the dividends from that consolidation activity as well as being able to support other agencies as well. >> thank you. and i apologize, mr. chairman. i was looking at my clock and i thought it was going down. it was actually going up. i know, it sounds like the federal budget, but i don't want to hear that comment. >> no comment. mr. yoder is recognized. >> thank you, mr. chairman. i'm going to not take that lay-up that my colleague, mr. serrano, gave me there and i'm going to go back to the administrator. i note in your biography that you have a history of being sort of tech savvy.

and i think you were top 50 women in tech at one point. and i actually noticed the interview you did at one time where you said you had an early commodore 64 and you actually used to code your own video games. >> we. >> that's pretty neat. you have a tech background. obviously you have a love of tech. so i want to talk to you about the real property profile. and i want to associate myself with comments from my colleague, mr. quigley. he and i have long been bipartisan in our efforts to try to resolve the concerns we have, and that continues to be that there is no -- we have struggled to find ways to quantify the property that the federal government owns both in the gsa and all of the property which is a secondary issue that not all the properties with the gsa, so you got two separate problems there. and we really don't have the ability to tell our public what we own, what's vacant, what isn't vacant. what's idle, what's owned in their community in a way that is

usable. so i was just sort of looking at t the realpropertyprofile.gov. is that the site? i was pulling it up on my phone. immediately i note it's password protected. no instructions on how someone can get a password or user name. when i go through something like this -- you know, first of all, as mr. quigley brought up, there's billions of dollars of property, tens of thousands of pieces of property that the gao said before are idle. we would really have no way to verify that. my check box would be, is there public access, is there a mobile app that would allow people to, you know, constituents to drive around once they have it and look at things? i don't know because it's not accessib accessible. is it user-friendly? is it comprehensive? is it fully implemented in a way that people are using it today to make decisions that are informed that will allow taxpayers to save money? i guess, first of all, are there

other standards -- but in terms of those standards, have we met those standards and when will we, if not? >> we have been working diligently to ensure we're meeting those standards with the data that we're putting forward for gsa in particular because of the dynamic nature that you refer to in terms of making it easy accessible, being able to pull it up on your mobile device. if that's not working i will definitely -- >> you can pull it up. it's user name and password protected. there's no description on here. it doesn't tell you. i guess you'd e-mail them and ask them how. it doesn't say. it just says have you forgotten your password, are you a gsa employee? it doesn't say to members of the public on this, at least, how you do it. i completely could be missing something you might pull up on a desktop. >> and that's not -- that's not as productive as we want to be, right? we want people to be able to access our data in the way that they're used to with all other data in the public sector. >> why is it even log-in

password protected? the whole idea is to make this accessible to the public. >> yeah. >> when does that happen? >> the idea it's password protected is surprising me as i sit here. two digit place different place data resides -- >> this is realpropertyprofile.gov. >> yeah. we have a -- we have, in particular, what i'm used to seeing is a place where you can see both, especially for gsa's data, the data, itself, as well as, like you said, a map that is interactive. the database that is utilized by -- or a representation of all of government, i don't know if that's private password protected. we want to make it as accessible as possible. >> i brought this up i think three years ago and brought it to up i think yourself last year, your predecessors, every year we're bringing this up on the record and we're still not getting there. one thing i think that would help is if we engage the private sector. you know, if this was a google project, you know, i think this would be -- or any company out

there that was trying to do a mapping project, i bet it would move more swiftly. so i guess what has gsa done to bring out the best mapping and geospatial knowledge base and expertise from the private sector to help with this? >> we actually have been able to achieve geospatial mapping with our data, in particular. it's really the data that is the rest of the federal government which is included in the real property database that we -- that is currently not available in the same format. >> just in general, has the gsa sought advice and worked with the private sector to build the best mapping system? or is it doing this internally and not using private -- >> we have consulted with private sector. i'm not sure to what extent the break happens. we did meet with some members at your recommendation from our last hearing. there was a sit-down with a team there as well. so we have engaged a private sector from an expertise perspective where needed and are also managing internally as

well. >> well, it seems like we have a long way to go and i just know given your tech background if you're on the outside of this looking in, you would say not acceptab acceptable, private sector would have created an app for this years ago and be able to look at every piece of property, be able to compare it, policymakers could utilize it, the public could. the public could assist us by finding property that are unutilized and repurpose them saving us money. whether you're a liberal or conservative, none of us hopefully like to see idle property that could be put to use or sold. it's one of the rare bipartisan things everyone sort of wants. i'm asking you, again, to consult the private sector, do what you need to do but to build a really solid system and an app here people can use would be efficient and effective. i know it's something that you know what i'm talking about what they'll look like. we're not here with this, particularly the fact it's not accessible with the public. i just hope if we meet in this committee again that we'll have great news and that this will be something that, you know, the gsa can accomplish that we can tout that, hey, government can

get things done effectively, efficiently, we got a tech-savvy leader and she's going it make it happen. so let's get it done. >> yes, congressman. >> thank you so much.much. >> thank you. let me ask you about the federal courthouses. we appropriated i think $940 million to build nine new courthouses around the country. they're in different stages of development. some are probably ready to go, some are planning design. and so when we ask questions about the hoover bill, and the cost of new construction, it raises concerns about the kind of handle they have for 3wi8ding nine new courthouses. how do we help you make sure that those monies, nine different courthouses, nine different sites, how can we be assured that there won't be any cost overruns or those numbers

are -- you requested that those are pretty real numbers in terms of getting those projects done on time within the budget? >> what's been very important and will continue to be important there, is working closely with the courts and especially courthouse by courthouse, the requirements related to each of those projects. there have been, and as you point out, some projects that have plans that are on -- that we're currently ensuring we're bringing those four to see how current they are. ensuring that we are focused on the requirements ensuring the requirements are really what's needed to meet the mission, but i think working closely with the courts to ensure those dollars go as far as they can, is really a priority for us. your support both funding that, but as well as keeping each of the projects in alignment, making sure that we get the most

out of each project is under consideration. there will be a spend program coming in mid april. that will be the outline of each of the projects. >> where did you get the 948 million to start with. >> it was based on the original estimates for the projects. >> so we'll see these new prospectus on each one of them and hopefully they'll match up with what the original estimates were? >> yes, sir. >> and you'll work with the judiciary and the u.s. marshalls to make sure they got the right space, the right security and all that stuff? >> that's right. >> one last question about the $35 million we had some design money, i guess it was called a federal civilian cyber security campus. i know that's been talked about, finally put $35 million last year. this year there's not a request for that campus, i don't see it

anywhere in the five-year plan. what happened to that 35 million. where did it get spent or where will it get spent. where does all that fit in long range. >> the cyber project is one we continue to work with the partner agencies to understand requirements. i feel like i've said requirements a few times today, i apologize, but they are a key part of us defining the scope of our projects. and what will be programmed as a part of the projects. and that really has a strong impact on what's needed and necessary as well as the timing of it. we continue to work with those partner agencies, and once we get a better sense of what the requirements are, and the programming for that activitact we would be able to come back with the request. those funds you rewarded at this point would be held for that project. >> are they being used now? >> where is that? what are you doing with that $35 million? >> currently what we're doing with the project overall, is working with the agencies to scope out the --

>> it's not in the five-year plan. it's going to be a campus. you have $35 million last year, you didn't ask for any more money this year. i thought that was a planning and design money. but then if you don't need more money this year, and you don't have it in your five-year plan, and we're spending a lot of money on the department of homeland security, where does this new cyber security campus fit in. >> we'll have a better sense going-forward where it will fit in. >> what are you going to do with the 35 million. >> we would use it for planning of this project. once we receive the requirements. >> where do you get the requirements. >> from the agencies. from the partner agencies. that would be present on the cyber campus. >> you're working, who is it that? >> it was -- it's a number of agencies i would hesitate to name -- i know i can't name them all as i'm sitting here.

it was a number of agencies that would have a presence, and part of it is the question of what would need to be there, and in light, and in some ways, in some respects of the projects you did reference. those would obviously have an offsetting effect potentially for requirements and programming of the cyber campus. those are the pieces we're trying to figure out. >> in the planning and design, you're really not there yet? that 35 million for planning and design, you're not spending that yet, because you hadn't figured out exactly -- >> we're not able to spend those dollars yet until we nail down the requirements. >> okay. >> probably be better to have a project, and then say here's the project and here's how much we need to plan it and design, as opposed to saying we need some money for planning design on the project we hadn't finalized yet. >> well, and i believe that it's been some shifting efforts -- i believe the project was in a different place last year, which

is what brought us forward with the requests. but as we get a better sense of the requirements, then we would be in a position to go forward. >> mr. sorano. you have any more questions? >> good morning, mr. chairman. >> after last year's massive breach at the office of personnel management. and the department of interior, there is rightfully more scrutiny regarding government's ability to keep information safe. efforts are still on the way to strengthen those citizens, including gsa's own budget request to start a new i.t. fund. i have some concern that in gsa's budget, you have 5 million to establish the unified shared services management that would promote consolidation of government. shun the we ensure these systems have the highest level of security before we further consolidate government? government efficiency is a goal,

but so is security and information. >> yes, sir. and i appreciate the observation. the shared services office stood up to support both existing shared services, offices that are providing shared services as well as those who may be seeking to go to shared services. this team in particular is really supporting as we look to go to shared services, all the requirements of any system is being met including security requirements. obviously, as we've learned over the past year, we continue to enhance from our learning, the security parameters will and are changing on systems as well, and that would be integrated in terms of the information this office would share. >> that refers to your office, the gsa being able to be involved with other agencies. >> yes. >> into sharing. do you think as it stands now,

you might have to hold back and wait for a while before we go further? or do you think you're ready to go with consolidating. >> the -- just to be clear, we at gsa would not be the ones consolidating any of these systems or the services. we are -- our team would help with the analysis and evaluations and recommendations of which service provider to meet the need of any particular agency. we're looking and gsa has provided shared services in the past. such as our financial management services which we've divested from as well as our hr services. this office in particular, is looking at services -- shared services across federal government and making either recommendations for agencies who are looking to go to a shared service or if there are shared service providers who are looking to upgrade or divest from their efforts. what we have found is that our

shared services has been in place for savings for agencies. but having the support come from a central place would be beneficial for everyone. >> well, i have no further questions. i just want to thank you for your service to our country and for the typical issues you deal with on a daily basis. >> thank you, congressman for your support -- >> i'm not thanking you for having problems every day. i'm thank you for dealing with them. >> yes. do you have any closing comments? >> let me close by thanking you as well. in particular, thank you, administrator and your staff for personally getting involved in a project in jacksonville florida it's been going on since 2007. i'm told that within the next couple weeks the building is

going to open, the coast guard and border control folks will move in. i got involved in 2013, i'm just as excited as you are to see this project come to fruition. you're welcome to come down to sunny florida, i have a chance to look at it myself. thank you for being here today. on friday's program, mark dubowitz will join us. we'll discuss the impact of iran's missiles. and marcus stanley. policy director for americans with financial reform, on how wall street reform is being discussed by presidential candidates. tom de frank, he covereded reagan administration, he'll share his thoughts about nancy

reagan's legacy. join the discussion. >> join c-span friday at 1:30 p.m. eastern for the funeral service for nancy reagan at the ronald reagan presidential library in simi valley california. firstycve lady michelle obama, former president george w. bush and laura bush will be among the dignitaries attending the funeral. mrs. reagan will be buried next to her husband at the library. live coverage on c-span, c-span radio and c-span.org. more than half of the original 23 federally funded co-ops have become insolvent since the rollout. they talked about these programs at a senate subcommittee hearing. they provided details on the oversight process, responded to

allegations of mismanagement and discussed the prospects for loan repayment. this is just over 2 hours. we're going to get started, there's a vote at 11:30, this may make it difficult to get through all the questions unless we get started now. four of our colleagues have

noted they're going to join us today. let's bring the hearing to order. i want to thank senator mccaskill, she's at home attending to some very important health issues. i suggest that we postpone this hearing until she got back. her answer was, no, there's lots of work for our subcommittee to do, and we should allow the senate's business to go on. which is the way she is, i appreciate her attitude. she will be submitting questions for the record, and i want to -- on behalf of the subcommittee thank the staff for their hard work in preparing for this hearing. we're here today to discuss the administration's unfortunate --

the consumer operated and oriented plan, it was really a gesture that favored the political option. under the co-op program, the department of health and human services awarded taxpayer money to 23 nonprofit and health insurance co-ops. as of today of those 23, 12 have failed. these 12 collectively received about $1.2 billion in taxpayer money that is almost certainly lost. we can talk about that later in the q & a. their collapse caused 740,000 people in 14 states to lose their health insurance provider and have to scramble to provide coverage. over the last nine months. our subcommittee has carefully investigated these failures.

we wanted to know whether hhs when it played the role of investor made good or bad decisions with taxpayer money. unfortunately, what we found out is that a lot of bad decisions were made. in a majority staff report released today. we detail those findings. this report is here and you all should have it. we detail findings that hhs was aware of serious problems concerning the failed co-ops enrollment strategies. before the department ever approved the initial loans. once the co-ops got going in 2017, things got going in a hurry. the failed co-ops ultimately wracked up $376 million in losses in 2014. more than a billion dollars in losses in 2015. despite getting regular reports that co-ops were hemorrhaging cash, hhs took no corrective action for over a year.

worst department approved additional loan awards to three of the now failed co-ops. this happened in 2014. this was despite clear warnings that these co-ops did not have plans for turning things around. the majority of the staff -- let me give you a few highlights. when hhs approved start-up loans for the failed co-ops, it asked a reputable firm to evaluate the loans and business plans. we have reviewed the analysis. here's what we found. you will probably hear from our witnesses that deloitte gave the co op's a passing score. it was based on a grading scale. and deloitte warned hhs very specific concerns with the failed co-ops. it foreshadowed the problems we'll talk about today, the problems that were to come. they said among other things, many of the failed co-ops could

not identify their failed leadership team. seven had serious enrollments in their strategy. many of them submitted budgets that were incomplete, not reasonable, not cost effective or that didn't align with the co op's own financial projections. deloitte warned that several co-ops relied on unreasonable projections about their own growth. co opportunity, a co-op for iowa and nebraska had a target profit much lower than the industry benchmark of 4.8%. that was an understatement. co opportunities stated target and profit margin was zero percent. nevertheless, hhs approved all failed co-ops to the tune of $1.2 billion. after they entered the marketplace in 2014, the health deteriorated rapidly.

they received key financial information from the co-ops, including monthly reports and audited quarterly financial statements. starting almost immediately, the failed co-ops experienced severe financial losses that exceeded the worst case scenarios. cumulatively by the end of 2014, they failed by $263 million, which is four times above the projection. the co-ops enrollment numbers were no less problematic, according to the 2014 monthly report submitted to hhs. five others overshot their projections by wide margins. both errors can cause serious financial losses. excessively high enrollment was greater. despite having that information at your fingertips, hhs did not

step in. the department's loan agreements with the co-ops, entitled it to invoke a number of accountability tools. hhs chose to take a pass inexplicably for over a year. the agency took no corrective action. in order to put any co op on enhanced oversight. five of the 12 were never subject to corrective oversite. five of the 12 failed co-ops were never subject to corrective action by hhs. and hhs waited until september 2015 to put five others on corrective action or enhanced oversight. 12 months later, all 12 co-ops had failed. hhs had the power to stop disbursing funds. it never did. instead, over the course of 2014, hhs dispersed money to the failed co-ops, even as they lost more than $1.4 million. that's about 1.65 in losses.

1.65 in losses for every dollar that hhs gave them. more unbelievable near the end of 2014, hhs approved more loans for having insufficient capital. despite clear warning signs that those co-ops could not turn things around. hhs asked deloitte to complete a revi review. according to deloitte hhs truncated this review. deloitte did not evaluate the likelihood that the co op would achieve the facts outlined in the business plan. the new york co-op and the kentucky co-op did not have sound footing. they received $355 million in

additional solvency loans from taxpayers. all have failed by the way. the kentucky co-op collapsed after suffering losses in 2014. another $115 million in 2015. at the time of co opportunities closure, that company is operating losses exceed $163 million. and most staggering of all. after the hhs gave $90 million rather than allow it to scale down. they went on to lose another $544 million in 2015. those statements show that none of the failed co-ops have repayed a single dollar. principle or interest. of the $1.2 billion of federal loans they received. it's unlikely they will receive any repayment. the failed co-ops none loan liabilities exceed $1.13

billion. which is 90% greater than the reported assets. on top of that, they owe $1.2 billion to the federal government. we shouldn't hold our breath on repayment. the american taxpayer is not the only one to lose. failed co-ops have more than $700 million in unpaid medical claims. by the policyholders of other insurance companies, who have to pay increased other insurance companies, have to pay increased premiums. this is going to go back to our con sit u ends. to the taxpayer. doctors, hospitals and individual patients suffer out of pocket losses. we'll talk about this more in relationship to the new york co op. these failed co-ops were a costly experiment gone wrong, and real people got hurt. including more than 700,000 americans who lost their health plans.

today i plan to ask hhs whether they accept responsibility for the taxpayer waste. at this point i'd like to ask my colleagues if they'd like to make opening statements, all of you are welcome to do so. you've done a lot on the issue of co opportunity. and its effect on constituents in nebraska. >> thank you, chairman for your leadership and for holding this important hearing today. i'd like to acknowledge our colleague and ranking member senator mccaskill. we wish her well and a speedy return to the senate. today's hearing is about the families who lost their health care plans. it's about the taxpayers swindled. the bureaucrats who mismanaged the program. and local governments who had to cut budgets from firefighters and schools to make up for

washington's failures. everyone in this room, republican and democrat has a duty to our constituents to get the whole story. the 23 not for profit health insurers used loaned from the taxpayer. less than a year into operation, the financial condition of many of these co-ops was unstable at best. deloitte warned this was the case. since then, 12 of the 23 have gone out of business, representing a co op failure rate of more than 50%. 740,000 americans covered by these 12 defunct insurance companies were given $1.2 million in so called loans from the taxpayer. the subcommittee's reports the loans will never be paid.

unfortunately, the mess caused by this program began in my state. the opportunity was headquartered in iowa, and operated in nebraska and iowa, the newly created insurer was given a total of $145 million of taxpayer funded loans. things seemed to be going well at first. when they announced they had signed up far more enrollees than anticipated. despite ample funding and more than enough enrollees, on december 16th, 2014, as people were signing up for their 2015 coverage. the iowa insurance commissioner placed opportunity under a supervision order. the iowa insurance commissioner said that rehabilitation of opportunity would be impossible. and he sought a court order for liquidation. after one year of operation, 120,000 enrollees had their coverage cancelled and were forced to find new ensurers.

co opportunity owed millions of dollars as the chairman has mentioned to doctors and hospitals for claims for its enrollees that will not be paid. to address the insurer collapse. the state of nebraska pays claims in the event of insurer collapse. such as co opportunities and the guarantee fund is financed on other insurance companies. prices that were at market rates. unlike what co opportunity offered originally, and that's why they had far too many enrollees. to help pay for co opportunities unpaid claims. insurers were assessed fees totaling $47 million last year alone, it should be noted this sum was not enough to cover their losses, and the guarantee fund had to take out a loan. as co opportunity has no remaining assets. it's improbable that the guarantee fund will ever be repaid this $47 million. it will be assessed into other insurers into the market. these insurers had to pay co

opportunities outstanding bills, there's no reason to believe co opportunity will ever pay any of this money back. nebraska tax revenues will be decreased by $47 million, because these insurers are subsequently able over a five-year period to reduce their tax liability to the state. this means that my state will have much less revenue to pay for priorities like education, roads, firefighters and other issues. they're going to have to pay for the co opportunity failure again, first as individuals became uninsured and now as taxpayers have to bail out co opportunity. on top of the $145 million they as taxpayers made in federal loans. as previously mentioned, 11 other co-ops have now failed. likely initiating variations on the same story. moreover, depending on the remaining co-ops, it could happen in the states in the years to come. in the 11 co-ops that remain in

operation. cms has placed 8 of the 11 under corrective action plans. updated financial reports show conditions here have gravely worsened for four co-ops with data available from the fourth quarter of 2015. despite this mess, cms has to date offered very little in terms of substantive information for the problems. i've been questioning the department since last may about all of this, after only one failure, we have 12 and potentially more on the horizon. i sent four letters to your agency and have been working alongside chairman portman. hhs owes all co opportunity enrollees and particularly taxpayers an answer. i look forward to this hearing. i hope for new and stantive answers from the witness panel today. thank you. >> thank you, senator. >> i want to thank the chairman for holding this important

hearing, i do not have an opening statement. >> we'll call our firstcmsanel f witnesses. angie is the acting administrator before becoming acting administratorp he served as principle administrator. he year saw the delivery of clinical, technical solutions. the marketplace chief executive before joining cms, he served as ceo of connecticut's health insurance exchange. i appreciate both of you for being with us this morning, we look forward to your testimony at this time i'd ask you to stand and raise your right hand.

do you swear the testimony you're about to give before the subcommittee will be the truth, the whole truth and nothing but the truth so help you god? >> yes. >> having heard in the affirmative, i appreciate your being here again. your writteny2ç printed in the record in its entirety. we request you limit your oral testimony to five minutes each. >> thank you. members of the subcommittee, i want to offer my best to ranking member mccaskill as well. thank you for allowing us to participate on this hearing. i know you're all aware of the challenges the co-ops have faced. 12 having closed their doors. prior to the end of 2015. i understand the questions you have about how cms provides oversights to co-ops. and cms's level of accountability when a co op closes. as you know, the affordable care act allocated $4 billion to start the program.

the idea to stimulate new local competition in an industry that has a history of being difficult for small companies to enter. some entering markets that hadn't seen a new competitor in decades. let me first collar phi our oversight per view. the federal government is not granted authority for the states. analyzing certifying rates and surplus levels and determining who's qualified to offer insurance during open enrollment. cms's responsibility is to award and oversee funds and maximize the likelihood that taxpayer funds are returned. co-ops were selected and the remaining 15% of funds who were awards during 2015 loans were made through an evaluation process. by the time i took this job in

2015, having come out of the private sector. all the loan funding had been obligated and my principle focus was to ensure we had the best possible oversight practices, one of the first things i did was hire an independent consulting firm to do a risk assessment of all the companies fresh. our approach was driven by three unique challenges. first, the challenges co-ops have had should not be viewed as a co op problem. but as a small business start-up problem in a very difficult industry. i hazard to say that all the small companies experience similar challenges. co op and nonco op. while we were making loans with companies to 30 to 50 employees, they are competing with companies with multiple thousands of people and worth tens of billions of dollar s in capital. trial and error is a part of creating success. in this situation, with the limited capital available, and

competing against giants. the co-ops had very little room for error. second, as mr. cumaha there will elaborate, during 2014, there was very limited actual performance information available. for the co op oversite team to evaluate co-ops. unlike every other business. in insurance you get to make pricing decision per year, and you live to see the outcome. this is why our decisions were largely made prior to the third open enrollment period. finally, all of the loan funding had been granted. our strongest remaining tool is to call the loan. which we can tell you, we did not take lightly. as it had ramifications for disrupting consumers as you know, and would certainly not have increased the availability

of co op loans. we set up an extremely active oversight process. we created other oversite tools. new methods of gathering information, and focused decisions around key events. the best way to maximize the opportunity for federal loans to be repaid is if the co op makes it through the start-up stage, when most failures occur, and reaches a point of stability. absent that, i have expected our team to be sober in their assessments and make difficult judgments. and they have. making recommendations to withhold funds to place co-ops on corrective action plans. and to shut down operations when that's what the analysis suggested. knowledgeable and capable an executive as there is in these matters. he and his team hasn't hesitated

to make important calls. we too go through after action review to see what we would do differently and can improve. ultimately, our goal at cms is to make sure the programs were charged with are working as they should for american families. more than 90% of americans have health coverage, even in states where co-ops proved unsuccessful, the overall uninsured rate decreased by 20%. and has continued to improve. challenges like the ones we're discussing today are part of every program we must always be ready to work with them transparently. and the best interest of taxpayers and consumers. thank you, mr. chairman for allowing me these few minutes. we'll be pleased to take your questions.

>> the team at cms has been charged to specifically oversee the federal loans made to these start-ups with the goal of maximizing the return to taxpayer funds, supporting the co op so the consumers have access to uninterrupted competitive insurance coverage and providing information to state departments of insurance so they can make the best possible decisions about the future of the co-ops in the state. like andy, i came to cms from the private sector. i've overseen four successful health insurance changes. leveraging our experience we worked with the teams to build and improve the oversight operation for the co op loans that includes tailored oversight protocols, a formal risk committee, and enhanced monitoring process. reviews from independent firms, and utilize the knowledge of top professionals and actuaries.

the life blood of any oversight process is data driven decision making. i will pick up on something andy said. our oversite team at cms makes the best decisions they can, based on the information available at the time. i think it's important to explain more about the information available to the co-ops, to the state departments of insurance and cms. in insurance, you know your revenues relatively quickly. what you don't know for some time are your real claims costs, because of the back weighted nature of how care is consumed in the year, and the lag time in how claims are submitted, processed and paid. due to the lag in claims data. as we neared the end of 2014, meaningful and complete data from the first and second quarters of the year was all that was available. the first reliable financial information on the co-ops, 2014 performance from actual claims

only became available in the middle of 2015. this was well after pricing decisions for plan year 2015 were made by the co-ops, well after funding decisions needed to be made by cms and well after certification and licensing decisions needed to be made by the state departments of insurance for 2015 open enrollment. even when information is not readily available, we aggressively gather and analyze the information we can on program performance and early warning signs. we used each of the oversight tools at our disposal to support and correct the co-ops on issues identified. in 2015 we conducted 27 financial and operational reviews, 16 in person visits and had 43 communications. not to mention hundreds of phone calls with the co-ops. this work is done in close collaboration with the state departments of insurance who have the full authority over all insurers in their state. as andy said, we have several

oversight tools, short of calling a loan, including corrective action plans and using the leverage of cash disbursements when possible. to push for performance improvement. approximately 1/3 of the time, we have withheld some or all of the requested disbursement until the company's more clearly demonstrated the need or took some other action. this tool had limitations as not funding a cash disbursement would cause a company to be out of state compliance. ultimately default on their loan. even with the oversight and support provided by cms and the departments of insurance. having operated insurance businesses, i can tell you that the outcomes of these companies are very much in their own hands. more so than either their regulators or lenders. for the existing co-ops, we are now reviewing their fourth quarter financials. and the results of the most recent open enrollment period.

plan year 2016 is a critical year for these co-ops. they must move from start-up to stability. for the co-ops that are in the wind down process, we are working with the department of justice to use every tool at our disposal. at the request of doj, putting a hold on tens of millions of funds as the process plays out. c m s will continue to work closely with this subcommittee to provide the best outcome. we appreciate the subcommittee's interest and i'm happy to answer any of your questions. >> thank you, we will have a number of questions. i appreciate your both being here and your testimony.

some of what you said confuses me. you talk about not having much information. hhs had monthly financial data to work with. you received the quarterly financial reports. q 1 by mid may. q 2 by mid-august. i don't think that's accurate. it's interesting also when you say our strongest tool is to call the loan. you have a lot of other tools, and mr. cunahan laid out some of those tools to deal with those co-ops. we talked about enhanced oversight plans. these are all very valuable tools and i know you're using

them now more frequently. throughout 2014. hhs did not use the tools at all. five of those 12 we talked about, were not put on corrective action despite the fact you were receiving these regular monthly and financial quarterly losses. by the end of the year, 10 of the 12 had exceeded their worst case scenario offices. by at least 300%. 263 milli$263 million i just do it's accurate to say you didn't have information. and there was a lag time that made it impossible to respond. the loan agreement says enhanced oversight plans should be used when the plan performs

inconsistently to the agreement. how could underperforming by 300% not be considered underperforming? >> these are very appropriate questions, and questions i have asked myself to go back and look at 2014. a lot of this is before my time, you may remember that 2014 in the exchanges got off to what i might char itably call a slow start. open enrollment had to be extended and so member ship didn't start to come in until late. the way health insurance works, there are deductibles. you don't really get an accurate picture. i've been in this business a long time. certainly in my view, the question i ask is, did the

people, on the co op team have enough information to shut down a co op or call a loan? because if they did not disburse it. they would put the plan out of compliance. the situation we had in nebraska and iowa. as i look back, about things we would have done differently, i will say that co opportunity should never have been allowed to go into the 2015 year. i think that's a fair criticism in looking back, i think that's something -- i look at the co-ops, the evaluations, many of them were ahead of their business plan, some were behind. i can tell you that the expression that once you have your first customer, it's very true. in this case, the team did the best job they could, in

evaluating the information they had. three, six months into the start-up. when i look at it, and this is a reasonable person could reach a different judgment. i find it difficult to criticize them with the exception of co opportunity for not closing those -- for letting those co-ops move forward into the 2015 open enrollment year, reset their prices, which was allotted to them. they also thought they should move in, and to move forward and see what happened in 2015. looking back on judgment today, we have information we didn't have then about how the claims developed. i think these are fair questions. >> i guess what i would add is based on my experience. start-up insurance companies are high risk, over half of them fail, they take 3 to 5 years to stabilize and mature. you know, it's seductive to look

back and say, look at what happened after a certain amount of period, and say, you should have done something here it takes -- if you look at open enrollment, when it ended. it took us until october and november to have any credible experience. there's modest utilization, it continues to get better in the fourth and fifth and sixth months. er you'vers set their rates for 2015, they were setting their rates on manual rates not based on experience. 2016 was the first year in which issuers had credible claims experience. a lot of different factors, it's dynamic and complicated. >> i know you weren't there, i think it is totally inappropriate for you all to say they did the best job they could with the information they had. and this is a problem with start-

start-ups. we're talking about taxpayer money. 700,000 people losing their health care. and somehow you guys seem to be saying that's fine. in terms of start-ups, these co-ops failed at a much higher rate. they did that despite the fact that no start up has. millions of dollars in subsidized government loans. you've been in business a while, won the you have loved to have those millions of dollars in subsidized loans. let's talk about that, by march 2014, two of the co-ops, this is 2014, co opportunity already exceeded their projections for the year. they exceeded their scenario by more than 150% within the first month of enrollment. new york co op had more than doubled. there was plenty of information out there, and again, you

weren't there, i'm not blaming you personally, for hhs not to take some responsibility. were there any objective standards for deciding, when a performance would trigger an enhanced oversight plan? >> yes. >> what were those. >> it depended. there was a serious chairman, what those could be. >> what were the objectives. >> let me tell you something we gave you guys this report to look at, and we're trying to be fair here. it's a thorough report. you gave us some comments, we took your comments, here's what we heard. she told the subcommittee there was no standard. no standard, no objective standard. she said there isn't an objective standard by the way. to say there is and was an

objective standard for deciding an oversight plan, that's not what we learned. as manager of this portfolio, don't you think it would have been good to have some kind of metric? >> thank you. and the thing i would say, i think what the team does goes a level further than just having a standard land. they get into these businesses because they're at an early and precarious stage. we sent our teams out into the field not just to evaluate but to provide technical assistance and the best advice we can. i will tell you even when we put a co op on an enhanced oversight plan. it's not a silver bullet. the co-ops themselves have to perform they have to price right, they have to sell, they have to service. and the departments of insurance

are watching them every step of the way to make sure that they are doing it right, i think everyone watches with a set of nervousness, because these are such early and precarious operations. it is absolutely -- i can speak more to the time since i've been here and kevin's been here. very intense activity. >> we're talking about 2014 into 2015. and i don't know what the level of losses needed to be. you did not have standards in place that enabled you to react quickly enough to be able to save this taxpayer dollars hemorrhaging and all the patients who lost their health care. senator sass, i'll turn to you. >> before i go to my questions, i want to acknowledge something mr. slavitt said a while ago.

>> more broadly, as far as distinguishing between different regulatory responsibilities at hhs and state departments of insurance, i understood in your opening statement, you said many of these issues are failures of state departments of insurance. and i think you said the primary responsibility of hhs was to maximize potential repayment of loans to the taxpayer, is that correct? >> i wouldn't use the word failures, but i think you have the sense right, there's a delineation of responsibilities. >> let's distinguish between co opportunity which you've acknowledged was the failure of oversight, should never have been able to go from 2014 to 2015. the next 11 that failed and the 11 that remain. if one of your primary responsibilities is to maximize repayment to the fisk and the taxpayer, do you expect there will be any repayment to taxpayers from co opportunity? >> i think it's too early to

say, let me walk you through how we're approaching this. that's the fairest way to answer your question. >> the place is insul vant. . >> there's three sources of funds that we look to. and the department of justice is in the lead on this, they would be happy to answer your questions on these more specifically. and because i do want to maximize these recoveries, i don't want to say anything in this hearing. briefly, three things that we look at, first after the co op, they're going to do through the first six months of the year, there's this lag effect. all the claims are still coming in. second, there are a series of receivables that we have -- and mr. cunahan said, we've just put a hold on some funds that are -- that the co-ops have been expecting, that's a second source of funds. >> what are those? >> who -- i mean, the

receivables for things like the reassurance payment, things like that. >> risk assessment. okay. >> that's the second source of funds, and then the third source of funds, there are lawsuits and judgments both with contractors and vendors, and in many of these situations, and i -- again, i don't want to venture into someone else's fight. co-ops have felt poorly served by some of their vendors in terms of providing them financial information to see the full picture. that's a source -- that's also a potential source. so the doj is looking at all three of those categories, taking the lead and pursuing the federal government's interest opinion i think it will take some time to play this out in the case of all these situations. obviously we don't expect 100 recovery or close to that. we're expecting between those sources and the strategy they pursue, there will be funding recovered for the taxpayers. >> if you had to guess, what percentage of their $1.2 billion will taxpayers receive?

>> i can't guess. it would be irresponsible for me to guess, i don't want to buy us our opportunities here. >> would a fair bet on over/under be 100 dollars? >> they're not going to repay any of these monies. >> they're not going to take that bait, i want the department of justice as they've asked me to do to let them do their jobs. >> to this point about what state departments of insurance, particularly in iowa and nebraska should have done, if we can look at exhibit book page 35, it reads that the cash on hand. co opportunity health will be assumed to achieve a total enrollment of 26,000 which is 55,000 more than original projections. that's pretty extraordinary. >> page 35.

>> is this what i'm looking at? >> the co opportunity additional solvency loan funding report the second page of that, point 1 is about enrollment. and it says that co opportunity. >> we don't have it? >> i'm not seeing this. >> this chart? >> the overenrollment in co opportunity is extraordinary, both of you having had private sector experience. i've not worked in the insurance space like you all have, but i've never heard of any start-up business overperforming its projected volume of subscriber base by anything like this. i think you're going to say this is a department of insurance in

iowa and nebraska problem, i guess i have two lines of questioning there, were you talking to them? and if not, what basis would your department possibly have concluded they were solvent. we're talking widely across nebraska we have 93 counties and two metropolitan regions. we have a whole bunch of cattle country. pricing in rural cases is complicated. we have a catholic health system, a university of nebraska system. trying to project utilization and rates is difficult. we have a rough sense of how pricing should work, anybody that knew anything knew that co opportunity was pricing way too cheap. they didn't know what they were

doing. you all gave them additional money. so either you should have known they were going to -- >> i'm not going to pass the buck. looking at it, we both should have flown. a couple things as we've done our autopsy on that situation. we do think that underpriced, perhaps. and also that their benefit designs attracted a sicker population, when things go bad, they go bad fast. kevin spent a ton of time talking to them. he can talk through constant dialogue. when things start to go fast,

they go fast in an awful hurry. if someone beats their projections and revenue, some will look at that as a good thing. look at how great i'm doing, more people like our product. others will look at it and say you underpriced your product. they don't have a chance to project it through the year, they have to live with whatever price they set. what do we do about entering the next year, that's a point in time when they should have known. as you pointed out, the situation deteriorated pretty rapidly, i think it became apparent to everybody involved and everybody looking at the data that both the departments and ourselves that we should have feign action. >> the 100 -- and i'll go to you, and then i know i have to yield back to the chairman. 120,000 people who became uninsured in nebraska and iowa, became uninsured with plans they reenrolled in, had knowledge

basically that they were going to be uninsured by the end of 2015. i'll acknowledge that, you have people who were uninsured for the 11 months of 2015, obviously that is a complete regulatory travesty. it begs questions, what kinds of technical assistance was provided to these insurers. >> i think folks got covered, opted for another plan. the other 60% were covered by the guaranteed fund. >> i don't think anybody lost coverage. >> typically born by the insurers, we can talk about the merits and challenges of that. our priority at the time was to set up a team to focus on each individual in iowa and nebraska, and track their cases to make sure that people got coverage. it was disruptive for them i'm not going to excuse that. >> you know, you made some good

insights about the market in nebraska. we depend on the visions of insurance to have that same kind of insight, much more than we're going to have. the rates you actuarily developed. they have to be presented to the actuary in the actuarial departments. they do a pretty good job of trying to understand what the rates ought to be. we trust them. and as andy said, we got intimately involved in that transition. you look back and say you know, could we have done something differently, in retrospect, you bet. but what we tried to do is acknowledge, move on, learn from it and make sure those patients in both states got coverage. >> thank you. >> let me just follow up on one of the questions you had, which is will these federal loans ever be repaid. the answer was we are not going to talk about it, that the department of justice is working

on it. the real answer of course is no. our investigation shows that in the aggregate, the failed co-opco-ops non-loan liabilities, not even counting what they owe the treasury, exceed $1.13 billion which is 93% greater than the reported assets. so just in case you didn't know that, if you get asked that question again, i think your answer is where's it going to come from. we are talking about failed co-ops, non-loan liabilities, forgetting the $1.2 billion we talked about, exceed $1.13 billion which is 93% greater than the reported assets. so i think it's a near certainty that you are going to have a complete loss here in addition to the dislocation that we talked about. let's talk for a second about another issue that was raised briefly but one that concerns me a lot and i think continues to be a huge problem with the way in which this was handled back in 2014 and 2015 and that's the

issue of unpaid medical claims. in certain states, as you know, there's a substantial amount of unpaid claims and give you one example would be new york. health republic of new york currently has $157 million in assets, according to the latest balance sheet it has $379.5 million in unpaid medical claims. so their unpaid medical claims are well in excess of their assets. the shortfall of about $221 million. even if all the assets were devote td to pay doctors and hospitals and clinics and patients that relied on it for their insurance payments, in other states that shortfall might be covered by state-wide guarantee funds and was talked about today, including nebraska, in which other insurance companies basically chip in to cover the losses. or sometimes it's an unfunded mandate on the states. but in new york, the co-op's unpaid medical claims are not covered by a guarantee fund.

i guess, mr. counihan, my question to you is what's going to happen to these claims? doctors, hospitals, patients are likely to go unpaid, right? >> you know, i know the new york situation extremely well. >> what's going to happen? >> in all likelihood, i don't know the complete answer to that question yet. they are still going through a complicated wind-down process. so in all honesty it's premature for me to say. but you're right in what you said which is new york is a state that does not have a guarantee fund for health insurance. they have guarantee funds for many other insurance coverages at present, they don't have one for health insurance. >> the experts tell us that if anything, the year end claims numbers are likely to turn out even worse than they are now. that it's not going down. it's going up. and i just done know how you can imagine that these claims are going to be paid when again, you have a balance sheet that shows $379.5 million in unpaid medical

claims. shortfall over its assets of $222 million. even again if all the assets were just devoted to these unpaid medical claims. >> i don't know that they are. i would like to -- >> are what? >> i don't know that they are going to be paid. i would like to, though, talk a little bit about new york in this context but i also have to say the numbers you quoted me about assets and liabilities, with due respect, i need time to review this report. it was given -- some of our staff got to review it in camera yesterday and i'm not willing to accept that those are accurate numbers until i have had a chance to review. >> with all due respect, you're a smart guy. why should we be having to give you the numbers that are publicly available? get the numbers yourself. >> i have the numbers. >> you should have already had these numbers. you're saying you don't trust our numbers. again, we showed you this report. we gave you the chance to respond to it. that's unusual, as you know. we made all the changes that you suggested. but you are saying you can't trust our numbers. you should know these numbers.

this is your job. not to know what the assets and liabilities are of these companies, let me give you some more numbers because they're accurate. a report points out that in three states with no guarantee fund coverage, no guarantee fund here, failed co-ops are reporting $500 million in unpaid claims and not nearly enough assets to cover them. and we are talking about new york as i said but also kentucky, louisiana. imagine that. you sign up for health insurance, the obamacare marketplace, you pay your premiums on time, you do everything right, you play by the rules, and then your insurance company goes bust. then what happens? the hospital can sue you for your unpaid bill. even though you have done everything right. i mean, i just think it's amazing that you guys aren't more concerned about this. can you give all those patients assurance that's not going to happen, they are not going to get a bill and have to pay twice? >> we certainly are concerned about all these wind-downs. the wind-downs are complicated processes both from the

standpoint of the patient who i think are the first priority, the physicians and hospitals who you discuss in the context of new york, and also the federal government interests. so you know, there are precedents through the course of history of health insurance companies winding down. there are processes that states run, states have jurisdiction over that process. we try to represent our own interests in that process of the federal government, but i will say we have -- and you may criticize us for this, but we have released funds, in fact, we released $30 million of funds last year under my authority to co-ops that were closing down so that they could pay claims for consumers. and you could argue that that was $30 million that could have been in the federal treasury, but we believed it was an obligation. >> $30 million of taxpayer money. it's the same people. these are taxpayers who have found themselves losing their health insurance and now potentially facing claims from

providers because their health insurance company, it was a federally established, federally subsidized health care company, went bust. there's a real human cost. let me tell you what the new york co-oppositi situation is. this is how we got into that mess. it vastly overshot its enrollment targets while underpricing its premiums leading to multiplying financial losses. all this information was available to you guys. in response, it considered scaling down its operations and reducing membership to a sustainable level but hhs gave the co-op $90.7 million so you talk about giving them more money, which it used to scale up and add about 58,000 enrollees in 2015. okay? so you made it worse. the resulting losses led to a $544 million loss, sent those enrollees scrambling for new coverage and again left doctors, hospitals and patients with medical costs worth hundreds of millions of dolla+0r(t&háhp &hc% that's what happened. and so as you give out more

taxpayer money, i hope you will look at that example of new york and who did that help? at the end of the day? it certainly didn't help those individuals, those families who are now facing this prospect of having to pay twice and undergo the dislocation we talked about. >> i would like to try to respond and in doing so i want to make sure that in the course of saying i want to review your numbers, the more important point isn't lost that if there are individual cases where individuals are in difficult situation, not getting covered, we have a unit that sets up -- that set up that looks at all these kind of cases. i want to know of any of these specific cases because that will be a very high priority for us. in the whether or not your numbers and our numbers match, that's less material to me in making sure i communicate if there are situations you hear of in any of those states. new york is an interesting situation and mr. counihan will be able to talk about this because he spent days and days and days on end in multiple

trips to new york. we conducted separate special audits for new york. what's interesting about new york is when the original loan was made, as i look back on the reports that were before my time, new york had scored over 90%, i think the highest if not one of the highest scores, and even when i hired an independent auditing firm, when i took the job in february, new york was not identified as high risk, and so there was a narrative or a belief, again, based upon the fact that claims hadn't come in yet, from many independent sources that new york was doing really well. we saw some early warning signs and kevin and i ordered an independent audit and sent auditors up there in i believe the third quarter, and presented to the state and to the co-op that they were going to see losses they hadn't yet expected. i think what happened in new york if i can get into the specific example, is their financial systems weren't as accurate and so the reports that they were sending us around the

profitability of that large book of business wasn't accurate and it wasn't until we did this independent audit and you can correct me if i have gotten this in any way incorrect, that we realized that this was a situation that was going to come back and hurt them. we spent a significant amount of time on the situation to try to prevent the damage that we are talking about right now, but kevin, you can -- >> i think you said it well. >> well, if there had been proper oversight back in 2014, we would have been able to address this issue because they did overshoot substantially their enrollment targets and again, underpricing premiums, overshooting enrollment targets leads to this multiplying effect we talked about and that's exactly what happened. then we gave them more money and it created even more problems. that's the reality. i want to give senator sasse an opportunity to ask a question. i will come back for one more round. >> thank you. i would like to look at the

report. i know that you said you haven't had a chance to read all of it in detail but i want to point to two pages that i think are fairly self-explanatory. the main report, can we go to pages 56 and 57. roman numeral iv, misconceptions concerning the co-op program. when i asked a few minutes ago if you really thought that any of these 12 failed co-ops were conceivably ever going to repay the taxpayer, you said potentially their accounts receivable would become a source of some of the funding that might come back to the taxpayer. i asked what that meant and you said the reinsurance program might be yielding funds for some of these failed co-ops. if you go to page 56 and 57, i would like, again, as the chairman said, these are publicly available numbers. i would like you to just walk me through what this table means. i think what it means is that the co-ops had much healthier populations than the overall obamacare or affordable care act marketplace. if that's true, this means that

on net, our co-ops paid in $116 million to the reinsurance program. they're not getting any money back. i mean, here and there you may have one. the arizona example, meritus health partners, they say they will receive $2 million of reinsurance payments but on net, these insurers including co-opportunity in my state, if you look at co-opportunity on page 56, entry three, they on net paid in $6.4 million because they had healthier populations than the insurance marketplace as a whole. which i think humbly contradicts the entire line of answers you gave in our last exchange. >> that would be bad if it did. i think the confusion, these are complicated programs, is between risk adjustment which you're referring to and reinsurance. >> you're right. i should have used the term risk adjustment. let's go forward with that. >> risk adjustment is one source, one potential source of

receivable. so is reinsurance. and so is risk corridors because no one really has a good feel for how much had corridors are going to pay in coming years so those are reserved separately. all three of those are potential sources of funds and as i mentioned, we just put a hold on tens of millions of dollars of receivables to co-ops that they have been expecting from those sources. so those funds are available. >> okay. tens of millions. we are talking about $1.2 billion, though. let's have our numerator and denominator right. how much are we talking about? $30 million? >> i don't have the exact figure. >> that's 2% of the total we are talking about today. say your tens of millions is $90 million. we are still at less than 5% of the real question here, right? >> from that particular hold. correct. >> okay. there are other sources? >> that hold doesn't represent the entirety of what the receivables would be. i know it would be helpful if i could give you an estimate and i

understand why you would want me -- why it would be helpful to give you an estimate and i hope you understand why i am reluctant to start negotiating publicly some figure and i also think it's irresponsible because i will be wrong almost no matter what number i say. but to your general point, we are not -- do i expect we will recover 95% or 100% of these loans, no, i don't. >> do you really expect we will recover 10% of these loans? you don't? >> i don't know. >> what's the universe that could ever get us to 10%? >> i think i went through the categories. i don't know that i could be more specific. but i would be happy -- >> i know. but i don't want the categories. i want the tax payers' money. >> i would be happy to follow up, go through this report, which i have not had a chance to go through, i'm sure there will be things in there that will be helpful to us. we do have our own sets of numbers and sit down and try to see how much information we can provide you. >> okay. your distinction between risk adjustment and reinsurance and the risk corridors is important technically, obviously that's

true, but it's still based on the underlying premise that maybe the co-ops failed because they had a much sicker population. i think what the risk insurance numbers on page 56 and 57 show us is that the co-op enrollees were actually healthier than the average population. so the broad idea that these co-ops failed because they sort of accidentally attracted a much sicker population, i don't think we have any evidence that shows that to be the case. >> i don't think i made that claim. if i did, certainly that would be a sweeping generalization that i wouldn't make. i also don't know that they had a healthier population because of the risk adjustment. i think the co-ops would tell you that they had a sicker population but they weren't able to get their numbers submitted for risk adjustment appropriately and kevin can walk through that if you would like. >> sure. i would love to hear that. >> okay. well, essentially, senator, the risk adjustment program is highly sensitive to claim coding. so -- and diagnostic codes.

and if they're not done properly or thoroughly, that can have a real impact on the financials of that co-op and on the risk adjustment. we clearly have a terrific example with one of those, who has subsequently corrected that. again, no heroes or villains. we are all learning. >> in a nutshell, their financial systems were behind at the time -- >> understood. but i'm not looking for villains. i'm thinking we need to acknowledge the utter incompetence of trying to plan a program like this. i'm not asserting that anyone here is evilly motivated. but whether or not anybody is competent to oversee this program, i haven't seen any evidence of that yet. so humbly, i'm not asserting villain. i'm just saying that the more you look at these numbers, the less plausible it is that anybody knew what they were doing when they looked at these co-ops when one of the sort of core answers for why this subsegment of the larger affordable care act population marketplace could have failed would have been because the co-ops attracted an unusually

sick population. it doesn't seem like we have any evidence that suggests that. it would appear again, just based on the snapshot we have from the risk adjustment market, that a net pay in of $116 million isn't a net zero and isn't a net pay out. i think your evidence would suggest these are healthier than average which makes it even harder to understand how we wouldn't have recognized that we were going to have a failure rate of more than 50% among the co-ops. >> thank you, mr. chairman. >> thank you, senator sasse. we are in the third round here, mr. chairman. i don't want to catch you unaware but if you are interested in asking a question i would like you to go before me since i know you have other hearings to attend. let's follow up on new york. because mr. slavitt, you indicated that you spent a lot of time looking at that and in particular you said mr. counihan had spent time. you made a statement that said that you thought that your team

again had done the best job they could with information that they had. when hhs awarded additional solvency loans to these three failed co-ops, kentucky, new york and co-opportunity when they were in danger of missing their capital requirements, you had to know they were in financial trouble and at risk of being shut down by state regulators, yet you invested hundreds of millions of additional dollars in taxpayer dollars. in your written testimony, you confirm what you said today, you say that in evaluating additional solvency loan applications quote, cms undertook a rigorous review process to substantially similar to what was conducted for the initial rounds of loans. that's your testimony. let's explore that for a minute. let's take again, new york as an example because you both talked about that earlier, how you spent a lot of time on that. like all co-ops its initial loan application involved third party review of its business plan by deloitte. we talked about that earlier. which included extensive discussion of the reasonableness

of proposed budgets, finances and business plans. let's turn to the first page, page one of the hearing exhibit package. that's this package. on page one of the packet, you see the analysis done of the new york co-op's application for additional solvency loan. right at the top, the first sentence reads, quote, deloitte will not provide an opinion regarding the reasonableness of the proposed changes to each co-op's business plan, nor provide an opinion regarding the likelihood of each co-op achieving sustainable operations based on the revised business plan, end quote. so this notion that it was substantially similar to what was conducted in the initial round of loans is just not accurate. deloitte did not provide the analysis. i'm told, by the way, by some of your people, that they said you guys didn't give them enough to

do time to do it because you wanted to get the money out the door. but deloitte did not do that analysis. in light of that, do you stand by your testimony that this review was rigorous and substantially similar to the review provided to initial loan applications which did include again, this third party analysis of whether the co-op's business plans were reasonable? >> i know i don't need to keep stipulating it was before my time. >> i understand that. in your testimony, you were making the statements that are important for this hearing, because we are talking about again, this question of competence as we said earlier, but also accountability and what can we learn from this. if you are saying everything was done right, we did the analysis, just as we did with the initial loans it's just not accurate. >> it's a fair question, absolutely. i think the way i interpret that statement is that they are not ultimately accountable for these decisions. we are. that's absolutely krkt. the purpose -- >> wait.

they're saying they didn't provide an opinion. period. period. not that here's our opinion but you guys are ultimately accountable. they did provide opinions on the initial loans. we talked about that. we talked about it. you guys set up the standards and i talked about the concerns they raised in each of those where there should have been a red flag but here, they didn't even do it. that's the point. >> you know, i think the team, what they were doing, the risk committee was getting multiple sets of eyes and i think what the deloitte team is saying is hey, you can't count on what you're seeing from us to be what they're warranting, at least the way i read this, they're warranting that they shouldn't -- we shouldn't count on their analysis in making this judgment. i think -- >> they didn't do an analysis. that's the point. so here's my question to you. who did do the analysis? who did do the analysis when additional taxpayer dollars were given to new york? who did the analysis? we have asked you all this, by the way, for several months now. we can't get an answer.

that's one reason i'm asking you, because we don't know. >> i believe they did do analysis. i believe they did render an opinion. >> who's they? >> deloite? >> look at the document. this is page one. page one right here. this is from deloitte. will not provide an opinion regarding the reasonableness of proposed changes, nor provide an opinion regarding the likelihood of sustainable operations. >> are you saying because they didn't render an opinion they didn't do analysis? >> yeah. >> did they? >> yes. >> why wouldn't you provide us that analysis? >> that's what it is. that's what this is. this is analysis. they provided analysis and what they said is use this analysis, make your decision, we are not providing an opinion. >> you are saying they didn't provide opinions for the initial loans? >> no. not saying that. >> that's what your statement says. rigorous review process substantially similar. you think substantially similar means in one case there's an

opinion, in other case there's not an opinion and those are substantially similar? >> i think -- >> you wanted to get the money out the door. that's what we're told. so look -- >> i think i would find the work substantially similar enough that i would stand by that statement. regardless of the fact that they said hey, we're not willing to say that this is an opinion. i think the work is substantially similar. i understand you don't think that it is. >> well, look, you probably had some internal experts analyze the question and therefore, you felt like you didn't need deloitte to do it which is probably what you are more, you know, accurate answer would be. my view is you needed the third party analysis and the third party opinion. again, let's recap what happened in new york. health republic of new york applies for additional sol veinsj loan. it was projecting a loss of $68.2 million in 2014.

$23 million in the next year. so we know the co-op's original business plan wasn't working. the original projections were wildly off the mark. the losses were 14 times greater. yet you awarded the co-op an additional $90.7 million without having any third party opinion as to whether its new business plan was reasonable or likely to work. the consequence was that the co-op lost $77.5 million in 2014, $544 million, more than half a billion dollars in 2015. again, we talked about the consequences of the human toll which is families, individuals, not just having to be dislocated but now facing the possibility that these claims that have not been paid to doctors, hospitals, clinics, could come back on them. so they paid once, they paid their premiums, they did everything they were told to do and now they have this risk. so i guess i would hope that you would say if you had to do it over again, you would actually ask for that third party analysis that -- and opinion

that you had in the initial loans that you say was substantially similar. with that, let me turn to chairman of the committee who has joined us and thank him for his help with regard to -- generally but specifically this investigation. >> thank you. i appreciate you calling this hearing. apologize i couldn't be here earlier. i had senate foreign relations business meeting which had some important resolutions we had to be passing. i missed a lot of the detailed testimony, questions and answers. i really don't want to hop into where some other people have tread. so let me kind of pull back and let's go to the obvious. mr. slavitt, your background is in the private sector, correct? >> that's correct, senator. >> you came from optima, a division of united health? >> yes, sir. >> what was the average profit margin of united health? after tax?

>> 4%, 5%, 6%, perhaps. >> relatively low. on average, public cooperations have pre-tax about 10%, after tax about 5%, correct? not a wildly profitable or outrageously profitable type of industry, correct? >> that's correct. >> from your standpoint, i know you are new to the position, wouldn't you have kind of real concerns as a private sector insurer under the old system that when the government set up a bunch of these co-ops, that they were going to subsidize them with these risk corridors and reinsurance plans? weren't you a little concerned that maybe these co-ops might try to gain market share by underpricing their premiums? >> so you know, you ask a really good, difficult question. >> i would like just a basic obvious answer to it. from the private sector. isn't that a real legitimate concern? isn't that exactly what happened?

>> well, so these companies entered markets that had not had new competitors in many cases in decades so of course i think you are correct, the companies would not like to see someone come if and offer -- >> i'm saying what was the natural result of what was going to happen with these government-run co-ops? they were going to come in and try to gain market share, they were going to underprice their product based on what their loss ratio would be, correct? and isn't that exactly what happened? isn't that exactly why the american taxpayer on the hook for about $2.5 billion now in loans? >> these were loans to local non-profit companies who i don't think had as a goal, i wouldn't imagine they had as a goal to price themselves out of business. i think they clearly -- >> that's exactly what happened, though, correct? >> that's correct, in many cases. yes. >> did you in the private sector, did you ever believe for a moment president obama's insurance that if under obama care, the cost of family insurance would decline by $2500

a year? would you ever think that was possible coming from the insurance industry where you know that the profit margin is about 5%, there's about $1 trillion of the $2.8 trillion we spent annually in 2012 runs through insurance companies. the average after tax profits of the top seven is about 4.4%. so again, that's about $45 billion to $50 billion of profit out of $2,800 billion a year market. did you ever think for a minute that this magic, this government-run health care system would actually deliver health care costs, $2500 less per year per family? >> so the way i interpret that $2500, maybe i'm not interpreting it correctly, is that would be the reduction in health care cost trend under the affordable care act which -- >> do you think that's the way the american people heard that? >> i think that's how some people heard it. >> you think that's what the majority of americans heard when they listened to president obama and supporters of the bill

promise that if you pass this wonderful bill, that the average cost for insurance per family will decline by $2500? you think people thought that will just be as you go up higher by $2500? >> when i look at the text of that statement, that's how i interpret it. also that 20 million new people have health insurance. we have an uninsured rate below 10%. i think all of those things, i don't think anybody could have perfectly predicted the outcome of a new law of this size and complexity and i think there is sr certainly some very good things and certainly some challenges. we are talking about one of the biggest challenges today. >> did you ever participate in high risk pools in different states? >> i'm aware of them. sure. >> okay. another promise obama made and other supporters of the bill made is if you like your health care plan you can keep it, period. again, coming from the private sector, understanding how the high risk pools, by the way, we had one in wisconsin, about 22,000 people were getting coverage that they liked, they

could afford. coming from the private sector looking at obamacare, you knew in the private sector, those high risk pools would be gone, correct? the people that were being insured under the high risk pools would not have access to those health care plans, correct? did you have any doubt those things would survive? in other words, did you believe president obama's repeated insurance and promise that fu like your health care plan, you can keep it, period? did you ever for a minute believe that claim? >> well, what i believe was that there would be guaranteed coverage in the marketplace so that everybody could get coverage. whether or not -- >> you did not believe president obama's claim that if you like your health care plan, you can keep it? >> i think what happened was there were folks that had coverage that was below a standard that the affordable care act set and some of those people did in fact lose their coverage as you well know. >> you also understand insurance products change as networks narrow. >> sure. >> people might lose, if they lose a health care plan, let's face it, if they lose a plan

they could afford that they liked in a high risk pool, that gave them access to a doctor, if they were forced on to a different plan, maybe a comparable plan, maybe one with better deductibles although that hasn't happened, that being forced into another health care plan might cause them to lose access to a doctor they trusted, correct? >> the affordable care act created a higher standard. >> so president obama's repeated assurance that if you liked your doctor you can keep that doctor, period, was incorrect, wasn't it? >> here's my perspective. >> no, i just really want an answer to the question. >> i think hospitals and physicians have been moving in and out of health care networks for 20 and 30 years. i don't think anything in the affordable care act changed that fact. yes, i guess is the answer to that. >> my point is those promises by president obama were ruled politicfax 2013 lie of the year. had you made those kind of assurances to your policy holders, you think your company would still be in business, had

your business, had you as a ceo or senior manager as one of those businesses conducted that level of massive consumer fraud, what would have happened to a private sector business? you wouldn't be around, would you? you would be facing enormous number of lawsuits. >> i think our interpretations are a little bit different but i understand your point. >> so again, getting back to the issue at hand, the part of this hearing, is that cms' loan $2.4 billion, $2.5 billion to co-ops that obviously were not going to be able to survive, we continued to pump money into these co-ops knowing they would never be able to repay them, you have not done the due diligence, the review of these things have not been rigorous. it was obvious they were never going to be able to pay them back. now the american taxpayer will be on the hook for about $2.5 billion and that's assuming you don't continue to pump money

into these failing enterprises. anybody want to refute that? >> i guess what i would suggest and i don't know that i won't repeat a lot of the things we said so far today, but clearly starting up a small insurance company is one of the biggest challenges imaginable particularly because as you said, they face significant entrenched competitors with years of history, thousands of people and these are small enterprises. i think it's very fair to say the risk of failure of these co-ops is quite high. what we have tried to do to the best we can and i think we will accept our share of responsibility and criticism, certainly, is to oversee these programs, to maximize the opportunity, to get these co-ops through the early three to four year startup stage to the point where they can be stable and the taxpayer can get its money back. in some cases we have not been able to do that. in some cases, those companies have not put forward strategies which have succeeded in those markets. i would certainly acknowledge that. >> that's great you are

accepting the responsibility but the american taxpayer will be on the hook for the $2.4, $2.5 billion. that's unfortunate. thank you, mr. chairman. >> thank you. again, gentlemen, thank you for coming today and giving us your perspective. i want to just end if i could on two points. one is there was a discussion earlier about the state's role here. i just want to be very clear about one thing. i'm happy to hear your response to this. to shift the blame to the states i think is inappropriate. hhs had authority and sole authority to be able to stop the disbursements when it became clear the co-ops were not likely to be financially viable and sustainable. we have talked a lot about that today. it's not the states. the loan guarantee doesn't give that power to the states. it haze hhs, quote, has sole and absolute discretion, end quote, to terminate a loank and hhs had the power to with hold these disbursements when the co-ops didn't perform under the corrective action plans we

talked about which were not put in place for five of the 12 failed co-ops they were never put in place. never. for another five, you waited until september of 2015. so i just want to be clear in the record here and i'm happy to hear your comments on this, that shifting the blame to the states is not where the appropriate accountability ought to be here. it was hhs despite plenty of warnings that watched these co-ops lose on net about $1.4 billion even as they failed to take corrective action for more than a year and in some cases, again, not at all. any comments? >> sure. you are correct. there's no question that we had the discretion to hold back cash to disburse from these co-opes. in about a third of the cases when the team had a request for cash, the team didn't make that disbursement.

but i think the challenge that we have and it's an important question is ultimately, if we don't disburse the cash at some point to a startup co-op, we are most assuredly putting that co-op out of business and most assuredly putting some of their consumers at risk. so the team has to make very tough choices. if they fund the co-op they are certainly not going to be any guarantee the co-ops are going to succeed. if they fund the grant that's already been made. if they don't fund it, they are almost certainly putting them out of compliance and putting them out of business. i would suggest for a second that the team made every decision the right way. i would suggest that it's not as if the team was turning a blind eye and that there were lots of good choices in this oversight process, as you very well know, overseeing a small company in a complex environment is challenging. i would say that in my defense of the team, it's not a defense of every decision they made. it's to certainly not to point fingers at the state.

it's to say as i go back and continually tried to ask the questions with the information they were made available given the two choices they had, and i think notwithstanding the fact we can put them on an oversight plan, at the end of the day if we don't withhold cash, you can't force an accident. once we withhold cash, people don't get paid, claims don't get paid and the loans never come back to us. that's the difficult challenge that we faced and recognizing that your report suggests you think we could have done a better job. >> well, again, there were plenty of tools including the corrective action plans we talked about and the enhanced oversight plans, short of even terminating but reality is, over 700,000 consumers now find themselves not just dislocated but some of them facing the possibility of paying twice, once with their premium and now for claims that were never paid to health care providers. that's a tragedy. we thank you for your testimony today. appreciate it. we will go to the second panel. thank you.

thank you for being here. we are going to move ahead quickly because we have a vote coming aun and we have lots of

questions for you. dr. scott harrington is the allen b. miller professor of risk management and business economics and public policy at the university of pennsylvania wharton school. he is also the chair of the health care management department. he's a senior fellow with the leonard david institute for health economics and adjunct scholar at the american enterprise institute and was president of the american risk and insurance association and risk theory society. his recent policy research focuses on the affordable care's impact on insurance markets and insurance financial regulatory issues. he's a true expert and we appreciate his input to our report and his being here today. we look forward to your testimony. it's a custom in the subcommittee to swear in witnesses so if you wouldn't mind, please stand and raise your right hand. do you swear the testimony you are about to give before this sub committee will be the truth, the whole truth and nothing but the truth so help you god? >> i do. >> excellent. let the record reflect the witness answered in the

affirmative. your written testimony will be printed entirely in the record and we would ask you try to limit your oral testimony, i think we initially asked you to do it in ten minutes. if you can do it even a little shorter that will be great because i know we will have questions for you. again, thank you for your input today. we look forward to your testimony. >> thank you, chairman portman and chairman johnson. i publish widely on insurance pricing and price regulation capital and insolvency risks, the causes of insolvency and state guarantee funds. i have done some prior work on co-ops' financial conditions. i have not read the majority report. i have not seen anything about corrective action plans. i did review a lot of documents for preparing my testimony, especially for iowa, nebraska, new york, south carolina and tennessee, including business plans, feasibility studies, pro forma financials, pricing analysis, additional funding questions, deloitte reviews and some financial information provided to sub committee staff.

as we know the co-op program ultimately awarded $2.44 billion of low or zero interest federal loanses to co-ops, $3 million for startup loans, $2 billion for solvency loans to meet state regulatory capital requirements. 12 have closed. the longevity of the 11 co-ops still providing coverage in 2016 is uncertain. future closures seem likely. eight of the 11 are reported to be subject to some cms corrective action plan. the close co-op's ultimate resolution will depend on the resolution of claims and the final tally of what the came costs are. as i elaborate, very little if any of the federal loans will be repaid to those -- from those closed co-ops. at least several will be unable to meet their obligations to enrollees and health care providers and some will require significant state guarantee fund assessments. the co-ops did face significant

operational challenges and the aca 2014 reforms posed major challenges and risks associated with pricing and utilization of the previously uninsured in transition of previously insured people to aca compliant plans. the co-ops were inherently vulnerable to unpredictably high claim costs including from many adverse selection from established carriers renewing their 2014 plans, especially if enrollee growth outpaced projections. they had little ability to diversify pricing and claims risk across geographies and products. they had none of their own experience and data to consider in pricing. they were plausibly prone to a wirn's curse, pricing too low, generating large enrollment and losing lots of money. pricing uncertainty remained high for 2015 premium rates which had to be filed in the summer of 2014 when the co-ops still had relatively little data to assess claim experience and the adequacy of premiums.

insurers must hold substantial capital to achieve a high solvency probability. academic literature stresses that insurers and other financial firms solvency incentives depend on the amount of owners' capital at risk, on the firm's value as a going concern which could be lost from financial distress, on the sensitivity of customers' demand to insolvency risk and on external monitoring by lenders and other accounting priorities. co-op's financial strengths, growth and potential for underpricing should have been a central focus from the program's inception. co-ops face considerable pressure to capture market share. they had almost no private capital, no going concern value, no financial ratings and it was likely that many potential customers would be insensitive to insolvency risk. very importantly, history indicates that -- have often charged low prices and grown rapidly with inadequate reported claim liabilities, ultimately

producing claim costs much larger than reported. there is also risk that insurers will try to grow their way out of financial trouble, hoping or gambling for survival. this history in context also suggests the co-op's financial strength and potential adverse consequences of rapid growth should have been paramount, especially given slow development of information on claims. the approved co-op award applications included detailed business plans, feasibility studies including projections of growth, profitability and ability to repay government loans. originally, their startup loans were recorded as debt on their financial statements, but to meet state regulatory requirements, all solvency loans were treated as surplus notes, subordinate to all claims and counted as capital for the purpose of meeting regulatory requirements. analyses supporting solvency loan awards and disbursements for pricing, claim costs and enrollment assumptions over a long horizon.

the analyses i reviewed contained what i would consider modest stress tests. they did not combine or consider much higher than projected enrollment combined with worse than expected claim costs. the baseline pricing assumptions however did build in something for potentially sicker population. now, as we heard this morning, some co-ops experienced vastly larger enrollment than projected, greatly increasing their need for capital. this should have been a cause for alarm. those co-ops generally had low premium rates compared with competitors. other co-ops generally with relatively high premiums had very low enrollment in 2014. some co-ops continued rapid growth in 2014, further increasing their need for capital. some with low enrollment reduced premium rates and grew rapidly in 2015. six co-ops were approved for $355.5 million in additional solvency loans in the last four months of 2014. three later closed. the regulatory takeover of

co-opportunity health in late december occurred just six weeks after disbursement of its additional $32.7 million solvency loan award approved in september and following the denial of a late october request for another $55 million. health republic of new york sought an additional $70.5 million in late october of 2014 which was denied following cms approval of an additional $90.7 million in september. the additional solvency loans exhausted the co-op program's $2.44 billion in funding. cms did not have the funds to approve additional requests from co-opportunity health, health republic or any other co-ops with state regulators' approval, however, cms permitted seven co-ops to convert startup loans to surplus notes to meet target capital requirements. five co-ops converted a total of

$82.21 million before their closure. cms also accelerated disbursements of solvency loan funding to many co-ops during 2014 and 2015. couple quick comments on growth and we have heard this this morning. by september 2014, co-opportunity health had over eight times the originally projected number of enrollees for 2014 and 14,000 more enrollees than projected for 2020. it generally had the lowest rates in nebraska and the lowest rates in the iowa small group market and the lowest rates in at least one rating region in the iowa individual market. regarding new york health republic of new york, june 2015 enrollment was over four times the baseline 2015 projection, over three tiemts the projected high enrollment see nar yo for

2014 and more than double the baseline projection for 2020. health republic generally had the lowest premiums in the regions that operated. it received rate increases for 2015 but its rates still generally remained low compared with competitors. i have done some analysis to back out the aca risk stabilization programs just on health republic of new york's june 2015 financials. if they had received their entire risk corridor request at that time they still would have lost $50 a month for their entire 18 months of operation on a per member basis without risk corridor receivables they were losing about $150 per month. updated financials provided to the subcommittee for ten other close co-ops suggest little if any of their federal loans would be repaid. assets were less than other obligations for seven of the ten and only marginally greater than

those obligations in the other three states, colorado and south carolina projects substantial guarantee fund assessments. the co-op programs experience raises a number of key questions beyond the fundamental issue of whether the program made economic sense when enacted which while difficult to do should be evaluated without the benefit of 20/20 hindsight. i will conclude with these. first, was it appropriate and prudent to push for the co-ops to begin operations in 2014 as opposed to waiting a year or two before selling tens of thousands of policies in an uncertain environment. second, why were the low premium rates charged by some co-ops not viewed as a signal of potential trouble from the get-go, especially when their plans and rate filings anticipated relatively high provider reimbursement and administrative expenses. third, why were some co-ops permitted to enroll far more customers than their projections as opposed to having some formal or informal speed limits imposed by cms and/or state regulators

and fourth, why didn't cms delay solvency loan disbursements or possibly terminate loan agreements when confronted with enrollments far greater than projected and early evidence of operating losses. my time's up so i'm happy to take questions. >> thank you, dr. harrington. you were right on time for what we asked you to do. you have asked key questions, many of which as you know have been discussed today with hhs. i would like to go to my colleagues first for their questions and they have come back to the hearing. we have a vote at 11:30 so we will try to keep the questions as short as possible. >> dr. harrington, i really want to go to basic economics on this. let's talk about premiums that real people are paying. we have janice fenniman in wisconsin who before the health care law was implemented was

paying $276 per month. this year she's paying $787 per month. i held a telephone town hall yesterday and i don't have permission to use the gentleman's name but he was claiming that prior to obamacare he was paying $400 a month. now he's paying $1,000 per month. by the way, these are for lesser policies. their deductibles are higher, their premiums are higher. because of the co-ops, again, as i said in my early questioning, to me, the private sector guy, it was obvious what was going to happen here. you used the word inherently vulnerable. it was obvious what was going to happen. so initially, the experience people have already had of skyrocketing premiums, these have been actually constrained because these co-ops, correct, in the marketplace? they are underpricing their premiums which puts pressure on the other health insurers so if anything, premiums have not skyrocketed to the point they are going to. would you agree with that? >> i would agree that at least in 2014, and 2015, the co-ops

had a restraining influence on premiums. i'm not as sure about 2016 because i haven't reviewed the filings. >> kind of the game is up right now, but going forward, we know how these losses are going to be recovered. certainly the american taxpayer lose the loans but also, the providers, these losses are going to be spread over other insurers and states and their reaction is going to be what? >> i think the big issue is that it is becoming more apparent that the cost of the new risk pools under the affordable care act is higher than anticipated and that that will produce higher premiums and that the rating restrictions in the affordable care act are going to lead to especially high premiums for certain cohorts. >> describe that in greater detail. what do you mean, certain cohorts? >> i think one thing that's happened is that prior to the affordable care act rating restrictions, people in say

their 50s and 60s that were in relatively good health were able to get premiums on a risk rated basis, guaranteed renewable coverage so their rates wouldn't go up with deterioration in their health status. under the new regime, if you are not eligible for any kind of subsidy you now have to buy insurance in a risk pool that limits the amount that can be paid based on your age but nonetheless, is based on a risk pool that includes lots of unhealthy people. i think more and more evidence will show that healthy people that try to buy coverage outside of an employment-based market going forward, if they are in their 50s and early 60s probably are going to face quite a bit higher premiums than what they would have prior to the affordable care act. so that's one of the cohorts. the other cohort would be very young people that are facing higher premiums because of the rating restrictions. >> we have already seen that first year, i think in wisconsin, 27-year-old male on average experienced like 127% rate increase. 27-year-old female, little under 100%. dramatic increases.

let's talk a little about adverse selection and the gaming of the system. we have heard anecdotal reports of this, people -- one of the reasons you need a high level of participation in dental insurance, for example, is otherwise people will just delay getting dental care until they have one month's worth of premiums to go in and get all their care, then they stop coverage. isn't that also what's going to happen with obamacare? to a certain extent? you can't totally predict but you can certainly time certain medical procedures and people game the system, correct? >> yes, to a certain extent. the evidence is that is occurring not only in open enrollment but in special enrollment periods. >> our committee staff did a pretty good job looking at the fact, president obama said trust me, no illegal immigrants are going to be qualifying for obamacare but the way they set up the system is cms is forced

to enroll individuals without documentation of eligibility. so what's been happening is people sign up, they get the subsidies, they get the prepaid premium tax credits, they also get some tax credits or subsidized deductibles and that type of thing as well. our committee report showed about $750 million of prepaid premium tax credits were paid on behalf of individuals who in the end were unable to prove their eligibility. just speak a little bit to that in terms of again, those are totally predictable, correct? >> i haven't studied the particular issue. i'm familiar with the reports. i think any time you impose a gigantic program with mind-numbing complexity, there are going to be many slippages and unintended consequences. >> let me finish up, because i know one of the big reasons

people passed obamacare is they just hated the idea of anybody making a profit off of health care. i just kind of want to go through the actual figures. this is in 2012. america in total spent about $2,800 billion. i'm just taking a look at the profitability of the top seven companies in health care for 2012. after tax profit is about 4.4%. of the $2.8 trillion, about $1 trillion of that is paid through third party payers, basically insurance companies. so take 4.4% of $1 trillion, that's about $45 billion of profit out of an industry, sector of the economy that is $2.8 billion large. does that seem like a grotesque level of profit to allocate pricing efficiently and do all

the things a free market system actually does? is that out of whack? >> no. >> what's the result of having government come in there and try to stamp out literally 1.6%, that's what that profit represents, 1.6% of total health care spending was profit of insurance companies, in order to wipe that out which is really the goal of obamacare, take a look at the dislocations. we have again, janice paying $276 before obamacare, now paying $787 for a lesser policy. in the end, you think this is' pretty foolish law, pretty damaging law to real people? >> i opposed the law when it was enacted. i think there were better ways of promoting the growth of insured people in the united states than passing this particular law. >> i would agree with that assessment. thank you, mr. chairman. >> thank you. chairman johnson. senator lankford? >> thank you, mr. chairman.

i appreciate you being here and bringing some of the facts to bear in this. like others on this panel, i would tell you that person after person i talk to in my state of oklahoma talked about the same issue. they are spending more on health care than they ever have, their deductibles are high, all their premiums are going higher, they have fewer options than they had before, the hospitals i talked to now have more benevolent care than they have had in the past because though they have quote unquote insurance when they walk through the koor, they cannot afford to use it. we have failed state exchanges around the country from states that try to start their own exchange that have gone through the process and that is millions of dollars that has been lost in that process. and then we walk no tinto the c issue and one more piece of this process, the original design, there would be these nonprofit institutions that would stand up to go compete. in theory they would be nonprofit insurance institutions that were created to compete in areas where there wasn't good insurance available or wasn't

enough available. so my initial question to you is, did you find the co-ops in their distribution around the country to be in places where insurance wasn't available? >> that's an excellent question. and i haven't studied that. >> what i have seen is that they weren't competing in areas where they weren't available. they were trying to start up in places where there was a good market already. if there's a good market already, there were other companies that are already available in that area. we put out loans that they expected to have a 40% loss rate, which by the way, cfbb is aggressively going after pay day lenders with a 40% loss rate and 40% interest rate they are putting down and for whatever reason, they thought that was a good idea at the beginning to do this with the co-ops which is baffling to me. but then they seem to also have this unique challenge in places that they were in that i'm trying to determine what happened here. when the co-ops came in and gave arbitrarily low amounts that were not business possible and that's been proven now by more

than half of them already failing and the rest of them struggling, they put out a pricing strategy, other companies in the area, their insurance companies in the area had to try to compete with thos costs on it that were clearly not sustainable, which forced them down, which i believe some of the insurance companies have now left those markets. we have many states that have fewer insurance options now, not only the co-op leafing but other companies leaving as well. is it too early to know whether co-ops in those markets were driving prices lower, forcing other companies to have to try to compete with them and then now they have since left the market as well, giving even fewer options to the consumer? >> that's an issue that needs to be subject to high quality investigation and research. clearly in principle, low prices can have a negative effect on the market overall when they're written really well below what the consensus estimate of costs

is, and i think we'll find out more over time as people start to dig into this. there's a lot of variation in 2014 among the 23 co-ops. some had relatively high prices. they sell very little business. so in those cases, any negative spillovers from pricing weren't there. but in a few cases where would have this enormous explosive growth during 2014, i think it's at least plausible that there were adverse effects in terms of pricing in the overall market that could have contributed to poor results in the overall market. but one thing we know for sure is that when you have a new entrant with no experience that comes in with a very low price, someone should be paying very close attention to their early enrollment and getting whatever data they can about early claims and really asking the hard question of when is enough enough? shouldn't we be putting some sort of speed limit or break on this enrollment so they can't

run up and enormous tab that they won't be able to pay? >> so if they were trying to get private lending from private equity groups would they have been able to get these loans in your suspicion based on this model? cms testified only 16% of the applicants actually got the loan, which gives the impression, we were very limiting 84% we returned away. so we were really getting the cream of the crop. obviously the cream of the crop, more than half of them are out of the business. my question is, of the business models that were presented, could they have gotten private funding or are these individuals presenting a business model that only government would have actually provided a loan for them? >> that's an important question. the business models that i reviewed i think it would have been really, really difficult to make a sell to any private investors with those models. do you have something here that we really think is disruptive

and beneficial that will allow you to have a better model going forward. and i think it's highly unlikely we would see that. it's likely some significant money has gone into health insurance start-ups and some of them have reported a pretty large losses for 2014 and 2015. so private investment doesn't have a monopoly here on any kind of wisdom. >> private investment is tracking day to day operations. are we going to keep dumping money into this or are we going to keep forcing changes internally to stop being successful? >> private investment in these sorts of situations, the money will be paid out over time based on clear evidence that the performance is being met. and if there are warning signs that things are problematic, the spigot gets shut off. >> instead of saying you can use this money and count it as capital and assets and the rules change in the middle of this, they're not going to do that? >> no. >> let me ask you another

question. the class act was a long-term care insurance program created by obamacare. at the very beginning it was in the law, do it. secretary sebelius came out and said this is totally unsustainable at the very beginning and said if we try to implement it cannot be done under this current model. congress agreed, 2013 pulled out the funding for that. that program went away. they saw immediately that the long-term care insurance that was put into place is not sustainable, studied it and pulled it. the co-ops aggressively went after, started it, and put -- well, $2 billion into something that we're not discovering is just as totally unsustainable. what's different about the class act and their research behind the scenes and the co-ops? >> that's a very difficult question. i think one thing that's different as i recall is with the class act, you had various

independent government agencies doing the actual projections and recognizing that the program had to be financially sustainable in order to go forward. in the co-ops case, it may have been much more uncertainty in the short run. feasibility studies by actuary firms that were putting out scenarios that suggested they might be viable. >> thank you for helping us try to figure out how this happened. i think you raised a lot of questions about whether this should have happened or not. should they have launched this at a time when there was so much

regulatory uncertainty or should they have waited for a year or two? >> there was a real concern that if you missed 2014, you were going to miss the boat. i'm very product to be influenced by hindsight here. but my opinion is it would have made more sense to wait at least a year if not longer. >> kwa. it was a lousy time to start a health start-up in any category. certainly in the insurance sector. you talked about enrollment being a key determinant of health insurers fm performance. if you wouldn't mind just talking about that for a second. i think you said in your testimony there were some speed limits at least in place incredibly sharp deviation from what they projected, both under and over. we talked earlier about this about the over enrollment. it multiplied the problem. then to have this massive overenrollment compared to protections. and yet, there were no red flags apparently. at least there was no reaction by the federal government pulling back at the taxpayer's

support. can you explain why that's so important? >> it's very important given the history. the lames don't come home until a little bit later, you have to really be on your toes in order to guard against this underpricing and rapid growth. it makes sense to be on top of enrollment. i was very puzzled by the lack of public discussion, the lack of commentary about insolvency risk whatsoever in this market. it's as if no one understood that insurance companies do fail and those who fail often are underpriced and grown rapidly. that background, that context, as well as the lack of incentives for safety and sound bness given this type of government funding should have overall made the environment be one of much greater caution about how these things would be permitted to grow.

>> there was information including unenrollment. the underpricing and overenrollment and other fwiz factors were problematic. there were reports and plenty of data. why do they keep putting money out the door and not take the obvious step, which is to cut the losses to the taxpayer and, you know, cut the losses to all these families who ended up losing health care insurance, some of whom now are facing the risk of actual facing providers, somewhere claims against them. even though they paid their premiums, the providers weren't paid because these companies went insolvent. now these consumers are told they might have to pay for what the company did not pay when they were required to do so. how did this happen?

>> i think in part what happens is even though you're getting information, the accuracy of the information about client claim costs would have been there. i have to speculate, but there was a strong -- it seems there's a strong commitment to the co-op program. it will work where insurance companies are making excessive process in excessive administrative costs in markets not sufficiently competitive. it seems to me there was an ideological commitment to the program and the success of the program. having said that, i'll also point out that once you get information that a company might be in trouble, there always has been a fine line that regulators have to draw about doing something that definitely will put the company over the edge, or giving it a little more runway to try to work things out. in those scenarios, when you

give a little more runway to let companies try to work things out, you want to make sure if they grow, if at all, at a very orderly pace. you want to make sure you have the speed limits. the last thing you want to do is to provide more funding to enable greater growth, especially when you've got maybe soft information about claims experience at that point in time. a. >> given your academic background here and lots of experience, i respect what you're saying and i think you're right. there was an ideological commitment, your quote, and i think it blinded some of these folks who otherwise would have seen these warning signs. and as you say, it was a commitment, maybe to co-ops or maybe against the insurance companies who thought, as you said, were making excessive profits. i think it also was to get enrollment numbers up under obama care, which is part of the desire by the white house at the time and continues to be. so i do believe that we have to

learn from this. we have to come up with ways to ensure that we aren't going to lose any more, hemorrhage even more taxpayer dollars. a minimum, $1.2 billion appears to be lost. we talked earl yr about that. we couldn't get hhs to auk knowledge that, but the companies who have to repay that actually haves sets far lore than their liabilities, even taking out the loans. forgetting the money that they owe the federal taxpayer. and not a single one has paid a penny in principal or interest. i appreciate your focus on this. i hope you'll continue to work with us on trying to figure out moving forward how we avoid this problem growing even further. and how to deal with this problem in some states where you have consumers who act sklly might get tagged with additional costs. ultimately they have now found

health care. they're now looking at the possibility that these claims might come back on them. do you have any final comments before we go to our vote on that or other topics. again, i want to thank for your willingness to come before us. any final thoughts? >> thank you for allowing me to testify. >> thank you. thanks for your good work in this area. it's been helpful to have you. we're now going to -- do you have any additional questions? what this underscores is literally what a spectacular failure this ideological effort was. you had states that know how to do these things, know how to regula regulate, no how to prevent, insures getting in too much trouble. . if they start getting in trouble, they know how to resolve these things. you have the arrogance of the federal government, spending $1.5 billion, probably $2.5 billion in support of these things. this is an incredibly important

hearing. we're just not getting the press attention to what a spectacular failure obama care is, how couples lost health care plans in high risk pools that they could afford. the premiums have skyrocketed. so i hope this hearing gets a lot of i a tension and i hope your testimony gets a lot of attention. i hope we actually learn lessons. excellent hearing. i want to thank senator mckas skip and her work on the subcommittee. we look forward to her return soon and her good health. i will say we talked a lot today about how this money was lent to these dozen co-ops that failed. others, as i have said are in big trouble. at a minimum, we're talking about $1.2 billion of taxpayer

money that's going to be lost. it will be more than that in the end, we all know that. while this happened, there was not corrective action taken. in some cases, not at all. in other cases, it took more than a year. what we're looking for today is someone to take accountability for it. this was not the fault of these consumers. this was not the fault of the states. this was the fault of hhs, the way the program was structured. the lack of adherence to the basic requirements in these load agreements. so i would hope that we will learn from this and that we can avoid further disruption in this case to over 700,000 consumers in addition, again, to them having the possibility of actually having to pay out of pocket more than their premiums. there are claims that could be brought against consumers, which would be, you know, adding an additional insult to the

taxpayer taxpayers who have spent so much money. with that, we're adjourned.

>> former republican presidential candidate ben carson is planning to endorse donald trump for president. we'll take you to palm beach, florida, with a press conference friday morning at 9:00 a.m. eastern over on c-span 2.

and in the evening, we'll go to summit, illinois, for a campaign rally with democratic presidential candidate bernie sanders. live at 9:00 p.m. eastern. >> this morning, we talked about campaign 2016 and where candidates stood on healthcare reform. this is about 45 minutes. >> allison kojack is here to talk about what the candidates have proposed for health care. let's talk about donald trump's proposal. first of all, he's going to repeal the affordable care act. he's going to allow insurance to be sold across state lines. allow individuals to fully deduct premium placements, allow health savings accounts, require

price transparency block grant medicaid to states and allow consumers access to safe imported drugs. how is this splar to what we have now? how is it different? >> it's different than what we have now. et ice sort of a greatest hits proposal for what a lot of republicans have been proposing for a long time. the proposal to block grant medicaid had been something governors have wanted and republicans in congress have wanted for a long time. the idea is that if you give them a fixed amount of money they'll have more incentive to save. health savings account, they already exist exactly as mr. trump is proposing. so people already have that option. in terms of the reimportation of drugs, that's more controversial. there are a lot of people who really think that would be a great idea. the pharmaceutical industry doesn't like it one bit. and economists are mixed about

whether that would save money or drive up costs. one thing that's interesting about trump's plan is how it's being received differently by conservatives. the tax credit, or tax deduction, it's a matter of how that's interpreted. he calls it a tax deduction, which largely just ben it ifs high income people. however, if it's a refundable tax credit, meaning no matter how much money you make, you get a certain amount of money towards your health care premium, that's more equalizing and would allow lower income people to have some extra money to buy insurance. that's quite popular among mainstream republican candidates and republican thinkers. the tax deduction, a littleless so. it really only benefits high income people. >> so what would be the reality of getting this passed through congress? >> the one big roadblock is what happens to all the people who

already have insurance through obamacare? there are the people who actually bought insurance through the exchanges about 10 million, 11 million of those. and those people would have to figure out something else. and nobody's given a sort of obvious, what happens to those health care plans. then there's the expanded medicaid. then there's the kids, young adults who have insurance through their parents. all of that is part of the aca. when people say we're going to repeal the whole lot, they're taking away awe of those things. and that's the biggest barrier, i think. the other thing, if that ever were to happen, the other ideas aren't so revolutionary that they couldn't be passed, i don't think. >> a wall street journal headline recently said as the number of uninsured falls, potential fallout to repealing the affordable care act grows for republicans. >> there are certainly people out there who are not happy that they have to buy insurance. and those people it might not be tough for. but there are a lot of people who wanted insurance and now have it.

>> what the impact of donald trump's plan on reducing the cost of health care? >> that's a mixed bag. if you go to a health savings account where people have to comparison shot, perhaps people would be less likely to get an mri. the price transparency, there's debate about that. right now, people don't know what they pay or what things cost, largely because their insurers, they negotiate discounts and lower deals and get doctors to accept lower payments. so that's not out there because companies don't want that out there. the retail price is not really important. >> candidates want to get rid of so-called obamacare.

what else would they do? >> well, ted cruz has absolutely nothing on his website under the headline health care plan. he does say he wants to repeal obamacare and has talked about the medicaid block grant. marco rubio, it's the greatest hits. medicaid block grant, refundable tax credit. then he say he's going to put in place market forces to reduce health care costs. but they were very nonspecific and their campaign has never responded to me about what those would be. john kasich has a very different approach. he wants to appeal obamacare, but wants to first put in place a lot of systems to reduce cost. and a lot of those he's doing in ohio but he's doing through programs funded by the affordable care act. that's a whole other approach that's a little bit different. instead of saying on day one i will repeal obamacare. >> we'll get to the democrats in a minute. let's get some calls.

fayetteville, north carolina, independent. you're up first. good morning, question or comment? >> caller: my question is what happens to the pre-existing condition clauses with all the changes. and these people who have pre-existing conditions, what have mechanism of care is there for hem them? and the insurance companies having to go and mark their stuff through different state and they load that in with a lot of junk policies that don't actually pay the benefit that are needed to pay a potential hospital bill. >> that's a really good question. the pre-existing condition issue is a major one. i haven't seen it addressed in write by a lot of republican candidates.

marco rubio does talk about creating high-risk pools, which would be insurance pools specifically for people with pre-existing conditions or risks. those would, by definition, end up being more expensive. so i'm assuming there will be a subsidy for that. donald trump says we'll keep the pre-existing clause in place, but it's not in his proposal. it's hard to figure out. that's why there's a mandate. get people who are healthy to offset the cost of people with pre-existing conditions. some republican existconomists people should continue having insurance, even if they change policies and that would cover the pre-existing condition, but it would prevent people from getting sick and then buying insurance, which is what drives up rates, largely. >> sandra, a democrat, hi there.

>> caller: thank you for taking my call. i want to speak out on people that are retired. and i was put on disability at the age of 60. i was self-employed from the age of 23. and 30 years i had renal failure, which bankrupted me. i had in the hospital for quite a long time, over two months. fortunately my kidneys started to function again by the grace of god since then i went back to work and still was self-employed. again, i became sick. i was put on disability. i had stents in my legs. i had one kidney functioning with an aortic bypass and a stent and i'm unable to work.

i am now 68, will be 69 this year. and i receive $845 a month. it's barely enough to pay my electric, my water bill and my house payment, which is only $438 a month. it's a crying shame that i have worked so hard that, you know, i cannot go out and even buy myself any clothing or what have you. >> sandra, are you on medicare? >> i am on medicare and medicaid. and it has bankrupt me. the last operation i had was last august as an outpatient that was almost $50,000. i went and at 6:00 a.m. in the morning and was released at 10:00 that night. >> and how much did the government pay of that?

>> they paid almost all of it, but the thing of it is is i stilg -- it's not paying for all of my medicine or what have you. >> okay, allison? >> that's actually a big issue these days, not just on medicare, but people are pretty surprised of how much cost sharing there is on medicare. there's been a lot of research showing that in the last several years, five or ten years, the amount that individuals have to foot, pay out of their own pockets, even if they have good insurance is pretty high, and it's growing. and we just did a story about this on npr and talked to somebody in a very similar situation. she was on disability and medicaid and was bankrupted last year. and we talked to some older people on medicare who are sort of drawning under the co-pays and cost sharing that they have to deal with. >> we're talking about what the

2016 candidates are saying on health care. this came up at last night's debate in florida between the two democrats here's that exchange. >> what secretary clinton is saying is that the united states should continue to be the only major country on earth that doesn't guarantee health care to all of our people. i think if the rest of the world can do it, we can. by the way, not only are we being ripped off by the drug companies, we are spending far, far more per capita on health care than any other major country on earth. you may not think the american people are prepared to stand up to the enshurinsurance companie the drug companies. i think they are. >> this is a very important point in this debate, because i do believe in universal coverage. remember, i fought for it 25 years ago. i believe in it and i know that

thanks to the affordable care act, we are now at 90% of universal coverage. i will build on the affordable care act. i will take it further. i will reduce the cost, but i just respectfully disagree between the republicans trying to repeal the first chance we've ever had to get to universal health care and senator sanders wanting to throw us into a contentious debate over single payer. i think the smart approach is build on and protect the affordable care act, make it work, reduce the costs. >> all right, let's break down those two different proposals. where do they stand? is there that much difference between the two of them? >> i think philosophically, there's probably not that much different. other countries guarantee health kir to people, they do it at a cheaper rate, they pay less for drugs. what hillary clinton is trying

to do -- he's trying to revolutionize health care. she's trying to go evolutionarily, if that's a word. she's basically saying the political reality is this isn't going to be able to happen. and she's probably right. people want to repeal obamacare and go back to where we were. she wants to at least preserve obamacare and move forward. they both say they want everybody covered. hillary clinton is taking the realistic view. >> as you were talking, we're showing viewers the highlights of her proposal. what she said there in the debate last night is i want to expand, i want to get even more people covered. does she do that by expanding access to health care, regardless of immigration status by supporting new incentives to encourage medicaid expansion? is that how she builds on obama care? >> yeah, she builds sort of incrementally like that. there are a lot of people who

aren't eligible for obamacare because of their immigration status. that would be an enormous number of people who would have the opportunity to buy insurance if they were eligible. there are about half the states who did not expand medicaid. that was an enormous boone to people. if the states expanded there would be a lot more low income people covered without any cost to them. >> and bernie sanders, senator from vermont ants to do the same thing. in addition to a federally administered single-payer health care program, would give coverage to anyone, including undocumented immigrants. remove co-pays and deductibles and paid for through changes in income tax rates. what do you make of these different proposals. >> i tell you what greta, what is it with people that don't understand -- and i plead to

these people to open their eyes, open their ears, all right? bernie sanders has got the right idea. i don't want to hear about the republicans this and the republicans that. what we need to do is we're america. we need to have health dr case for all. it's very important. we don't have healthcare for all. if you go in the hospital -- >> can we afford health care for all? >> caller: did you hear what i said, greta. if we don't have healthcare for all, the ones that don't have it, the hospital ain't going to turn them away. who pays for that, we all pay for it. what's point in going through all this? and these drug companies, what

hypocrites, putting 5,000% increase on the drugs. they ought to be shot. >> well, i don't know if they ought to be shot. but he's got a good point in terms of the high cost and the rising cost. it's drowning a lot of people. it's very hard to overcome. when you talk about can we aforit? right now people are taking money out of their paychecks every week, every two weeks to pay for their own health insurance. companies are spending as much as 15% of their payroll on health insurance. i don't know if anybody has done the math, but if you look at that total spending and were to turn it into a government program, bernie sanders says he can cover it with 2.5%, or 2.2% tax on individuals and a 6% tax on companies. we call them premiums. that that would basically create the equivalent government program. i' not sure the numbers work out. there's a lot of debate among liberal economists whether they do. but people are spending a lot of

money already. >> so also to the caller's point about cost of drugs, this is "the washington post's" front page this morning. drug defies a rare form of ka cancer and logic. it was $26,400 a year and it went up to $120,000. it soared. the u.s. wholesale list price for a year supply of that little orange pill has soared to more than $120,000. >> glrt. so glevec is season interesting case. it really made a difference in adult forms of leukemia. in the last several years, the price has gone up dramatically, however, they went off patent last month. and a generic went into -- on to the market literally the beginning of february. so what we're seeing is a lot of companies, as they face the idea of going off patent, they start jacking up their price in hopes

of making all the money they can before the drug goes off patent and facing competition. i'm expecting glevec's price over the next year or so will start to fall again as these generic forms of the drug come on to the market. >> johnny in houston, texas, independent. >> caller: yes, ma'am. i'm calling concerned about the schools back in the days like the truck driving schools and stuff, back in the 1980s and '90s. there were very, very crooked. they got people, they put in the schools, they get a loan from the bank or so and then the government gets involved. it's like a government loan or whatever it is, and they turn around when the school is right there, they close them down and the they squeeze the people in them schools and you can't even get into jobs or anything. then they come back 25 years later hunt you down, trying to

take you to court saying that something that you supposed to p pay, they filed bankrupt. so they turn around and taking money for me for yields. every time i file, i couldn't get the money. so to say the claim went into defauld default. now they hunt you down 20, 25 years ago and try to take you to court for something you couldn't afford then and can't afford now. >> i think he's talking about for-profit colleges. >> okay, talking about health care this morning with health policy reporter allison kojac who works for npr. >> caller: hi, good morning, thank you for taking my call. i'm glad you're talking a little bit about this. i've always wondered in these debates that no one really has talked about the pharmaceutical

companies, how they've really abused their powers. many of them certainly get grants from the u.s. government to do their research. they're being funded by taxpayers' money, and yet they turn around and charge people extravagant prices on these drugs. and like, as your guest was s saying earlier, they even jack up their prices when they realize that the patent is going to be fading away. so we all call for transparency. i think that these politicians, they should ask that from pharmaceutical companies. what is the basis for charging people such horrendous amounts, the high cost of drugs? >> so what is this doing, if anything, about prescription drug costs and what are the candidates proposing? >> there's a lot going on in congress right now. there's been a lot in investigations and hearings looking into why companies are raising the prices of their drugs and what is the justification behind it.

there have been a lot of different -- though some is r&d. some is a hedge fund buying the drug company and raisesing prices just to get profit. one thing a handful of congress is looking into is something called in the reach-in rule. basically if a company has gotten a lot of its funding for basic research that leads to a drug from the federal government, then the government can go in and say we're taking away your patent protection or exclusive marketing if they think they're being abused. it's never happened before. there's some members of congress who are really pushing for this right now. as a way to -- it would be like the nuclear option. it's a big hammer and they never used it. there are people talking about it pretty publicly. >> what does donald trump want to do? >> he's look for transparency in drug prices, which i think would be helpful. if people knew what they were paying and what other people

were pay, the retail prices are never really what people pay. then hillary clinton is looking at removing the ability of these companies to remove their marketing and requiring that a certain percentage of their revenue goes back into r&d, which would reduce the amount they could make in profit and spend on marketing. right now it's about 20% of their revenue goes to r& d. 80% goes elsewhere. >> whatever goes to marketing they can deduct off their taxes. does marketing matter? >> it matters quite a bit. there's marketing to doctors. and that is probably quite effective in terms of going to doctors, spending money, telling how great your drug is, paying them for speaking fees, that kind of thing. and then there's direct consumer marketing. we all see the ads on tv. you can't even figure out what they're about. and people go to the doctor and

say i want this drug, i don't want the generic version. or they would say i didn't even know that was an illness. but i have that kind of pain and i want something for it. it's very effective. >> patricia, republican, you're next. >> caller: good morning and thank you for taking my call. i always had on my mind for several years now a way that everybody in the united states could be covered with insurance. when you would go to work when you graduate from high school, when you go to work, you have to pay social security. so why wouldn't we have a situation where every employee would be paying into medicare from the time they started working instead of waiting until they're 65. this money would go into their own account and then if they got sick, they would be covered and it would not be this kind of worry that goes on all the time in this country.

when i was 18, i came down with pneumonia and pleurisy and i had no insurance. if it had not been for my employer after three weeks of me working continuing to pay for my wokely allowance that i got at work, i would have been in debt for many, many years. so that's my idea. and i just wondered if anyone has ever thought about or even mentioned anything like this. >> in fact, they have, actually. right now in your paycheck you do have a deduction for social security and a separate deduction for medicare, but it does not go into an individual account for you. it just goes into the whole program. so it was time in the '90s, decided to break it out so people could see. it would be a transparent percentage that goes to the medicare fund. but that is not an individual

medicare account or an insurance for your own health care. >> daly city, california, kent, kra the. welcome. >> caller: good morning. good discussion. i've got a question here. a lot of these shows on tv, why do we never hear about our neighbors to the north who have a health care system single-payer health care system up north. they seem to be doing fine. are canadians smarter than us? or is it that they don't have the same pressures from defense contractors who spend trillions, with a t, a trillion is a thousand billion dollars. on wars. what's the deal. why can kaubd canada do it but not as smart as canada. >> i want you to hang on the line and show you and the others what's happening on c-span3

right now. coverage of the first official visit of the new prime minister of kund justin trudeau. he has arrived at the white house for the arrival ceremony on the south law. you can see the prime minister there along with the president. there will be an official dinner to flight also for the prime minister and several other events as the two will be talking about several different issues. i'm not sure if health care is on the agenda per se, but as we watch, allison, why don't you talk about the difference between the canadian system and america's. >> if you listen to bernie sanders' speech you are going to hear a bit about canada. canada does have a single payer system. i don't know how much they pay per capita, but it's less than the united states. part of this whole reimportation of drugs debate, the exact same medications sold in the u.s. are sold at a much lower price in canada. i don't know that they're smarter than we are. we've thought of this. but the political reality is

that in the united states there is a large, probably half, of the population that truly believings in the free enterprise private system and not in a large government system. eand to move to a single-payer health system, we would have to actually eliminate an entire industry, and that is the medical insurance industry. and there are a lot of people who don't want to do that. they think that the government shouldn't be that deeply involved in your health care. and so, canada's system works very well. canadian people are as healthy or if not more healthy that americans. they spend less per capita on health care, which are all true. but we have a system in place that works and a lot of people and industries make their livings of this system. and there are a lot of people who want to keep it in place. >> rhett, you're on the air in pennsylvania. independent. >> yes. thanks for taking my call,

greta. what i'm going to say has been mentioned by a few previous callers. number one, yes. if there are other advanced and functioning societies that are able to do it, we should be able to do it also. it's a human right, not a business opportunity or a profit motive where stockholders are thought of before the people that need health care. a developed society needs health care. we also have, as individuals, a great responsibility to look after ourselves. i mean, if you're going to eat junk food, if you're going to eat way too much soda, if you're going to drink too much alcohol and smoke cigarettes, well, there's consequences to that. and the companies that profit off of those industries should be very, very, very heavily taxed so that that tax money can go to help the people that sicken themselves.

>> those are let's comments. joe in mississippi, independent. what do you think this morning? >> i just think that he should for the care act that obama already has in place. i listened to bonnie. bonnie has a lot of things. they are not going to pay for all this stuff a bunny are trying -- we can see the congress and senator we have up there, they're not going to pay for all the stuff that bern 23450e is tabernie is talking about. >> allison? >> what he says about bernie's plan, it's a little unrealistic perhaps politically. and also there's a lot of debate on how much it's going to cost. he says it's -- the numbers are just enormous. like $13 trillion more a year. others say it's $25 trillion more a year. he thinks he can cover it with those taxes. but if the estimates are a higher level, then those taxes wouldn't cover it.

>> lonnie in texas, independent. you're on the air. what's your question or comment? >> i was curious if your guest has read "america's bitter pill." >> i haven't. i'm sorry. >> why do you ask. >> i haven't read the book myself, but i go on youtube and listen to some of the interviews he's had and it's very interesting. he said the affordable care act has made healthcare available for more people but it did not lower the cost of health insurance due to lobbyists from pharmaceutical companies, medical device companies going in and saying do not lower the cost of health insurance or health care. >> well, there are things definitely that happened during the affordable care act's passage that evented the government from being able to play hardball and really negotiate with some of these companies. medicare can't negotiate on drug prices. they just have to go with what's the average price. they depend on private companies

to negotiate lower prices and then get the benefit from that. there's a lot of things that are true in that sense of in order to get the law passed they had to take away a lot of the power of the federal agencies that are some of the biggest spenders in health care in the country. >> john, republican. hi, john. >> caller: hey. hi. i just want to enlighten people. i'm a 40-year insurance broker here in central illinois. the gentleman made a comment and bernie goes around making comments about single-payer and all that. part of the reason why the canadian system works as well as it does, and it's not the greatest, is because 70% of the people in canada live within 100 miles of the border of the united states. i've gone to mayo clinic and had some treatments done. and i can tell you, it's filled with canadians up there because the waits in canada are long. for things that we consider to

be needed, they consider them to be, well, you can wait. they're routine. i agree we've got a lot of fat in the system, but i will tell you this, the affordable care act has been one of the biggest mistakes. customers cannot stand it. it's been basically a medicaid system and then everybody else gets to pay a heck of a lot more and horrible deductibles. >> john i'm going to get suzanne as well into this conversation in new york. a democrat, excuse me, alice, a republican in signal mountain, tennessee. then i'm go to suzanne. go ahead, alice. >> caller: hi. i have a friend in england who found a lump on her breast so she went through the national insurance medical care and the wait period to look at that lump was nine months. so luckily they have money and

they went, what they call, they went private. she was in to a doctor within two weeks and it was the same doctor she would have seen in nine months. i don't call that a really great system. >> two very similar calls there about waiting. in other countries that have universal health care. >> there's definitely a lot of evidence that people don't get the care immediately that they want or need in some other countries. i don't have statistics on this, but generally overall the research shows that the u.s. population is not healthier than populations in england or canada because of our greater spending on health care. that's not to say that this woman who had a lump in her breast and couldn't get -- she couldn't get a mammogram for nine months wouldn't have been

worse off than she was because she could pay for her own. our population isn't measurably healthier because of our extra paying. >> suzanne, new york, democrat. >> caller: i just have a comment about the canadian health care system real quick because i am from long island and my brother who was living in canada playing hockey when he was younger wasn't a citizen there, but during a game discovered a massive, massive lump. and within 24 hours, it was out. and the doctors in canada coordinated with the doctors in new york and i mean, there was no waiting. you may have to wait every once in a while if you need knee surgery or elective surgery. sure, there might be a wait in line because everybody needs to be taken care of, but there is definitely a systemic way of doing things. if it's serious and if this is a life-threatening situation, they will take you when you need to be taken. and, you know, the difference is i've seen the treatment of his cancer in canada and in new york

and the stress that you get from just dealing with the insurance companies in new york, it adds to the sickness. your whole family gets sick because of that stress. in canada they take care of you. they take care of you on one, two, three who's more important basis. and i think the american people really have a false idea about how it works. they say oh, it's terrible up there but it's not. >> and take a look at this map. the u.s. stands alone among developing countries, nations that lack universal health care. just take a look at that map there as we go to jim in cookville, tennessee, a democrat. >> caller: good morning. i believe we should have sing single-payer. i don't know if your guest is familiar with a program called office of attending physician. and this is something that the congressman and senators and the supreme court and other people

have that work in government and they pay $503 a year for the best health care on the planet. if they get -- you know, they come down with a little problem, they can go to the mayo clinic and spend months up there and not pay a dime. >> jim, do they have better insurance coverage, better medical coverage than others? >> well, they did. they had very good insurance. now many of the congressional offices actually have insurance through the obamacare exchanges. members of the senate and members of the house may -- i'm not familiar with the office of attending physician, but they may have better insurance themselves because of this office. but many of the congressional offices now get insurance through the exchanges.

john, springfield, illinois, independent. >> yes. this is sort of like what happened with the azt and the avrs over there in india offered them. eventually offered them for free. and then in retaliation, the big pharma companies came back from their trip and reinforced the patent laws you were opening up earlier. and then to the second point between bernie sanders and hillary clinton, i think when clinton comes back out and says, well, we don't want to have this argument, well, i don't think there's going to be too much of an argument when bernie sanders wins and gets the money out of politics and the legal bribery from big pharmaceuticals so that -- it might be a lot easier to pass certain amount of legislation than hillary clinton is leading on to be. >> okay, all right, john.

we'll go on to paul. good morning. welcome to the conversation on health care. what do you think? >> our people are misinformed about prescription drug prices. >> why? >> caller: well, i worked for 35 years for major pharmaceutical company and they have no idea what the costs are to get your drug online versus a vaccine, hepatitis a vaccine takes 57 weeks to get it onka market. >> so paul is talking about

research and development and what goes to putting out these life-saving drugs. is there a correlation to increased price in prescription drugs and timing when companies started advertising directly to consumers. >> i wish i knew the answer to the second question, i do not. it also correlated to a lot of great drugs coming out on the market. we all talk about the rising prices of prescription drugs and theorizing. it's still cheaper than being in the hospital and getting surgery or long-term care. if you had, you know, high blood pressure and were constantly dealing with hospitalizations or getting stents or any number of things, your quality of life would probably be worse and shorter. and that care is more expensive. so there's a tradeoff. we make these companies into villains.

but there are some miracle drugs out there that are doing wonders for people. let's just put that on the table. one of the things with r&d is it does cost a lot to get a drug on the market. there's actual research and development, the studies you have to do and the application. that's because we don't want drugs on the market that end up having crazy side effects and that's .haed in the past. just several years ago, there was the whole issue with viox causing problems. we need to be sure that the drugs are safe and that they're not going to cause other problems. the industry cost about $2 billion to put a drug on the market. that is an average that includes all the failures. >> one last phone call here. lansing, michigan, a democrat. >> caller: i'm wondering whether or not the affordable care act really mae the drug costs go up

or did the insurance companies because they could raise the rates? >> i don't think there's any evidence the affordable care act caused drug prices to go up. i think the affordable care act, actually even before that, the medicare drug benefit made it clear the government wasn't in a position to negotiate lower prices. but drug prices are going up because they can. i believe, and because it's expensive to come up with new drugs. >> allison kojak, you can follow her on npr@twitter. thank you very much for being with us for this conversation. appreciate it. >> c-span takes you on the road to the white house as we follow the candidates and c-span, c-span radio and c-span.org.

>> mario rubio on the march? joining us is david sherfinski following all of this for the washington tiels. thank you for being with us. a lot of polling in florida showing trump has a double digit lead. some polls showing that marquee rubio is slice into that lead. what can you tell us? >> the thing i can tell you about the poll today is that it was conducted monday through wednesday. it's very recent. some of the other polling that's been done showing donald trump with a larger lead has been older. either way, it seems like marco rubio is going to have an uphill

climb as he has pledged to do. he plans to win florida. at this point, i think his camp is more of the mind b that it's sort sort of a 7, 8, 9-point race, which is doable but not great right now. >> according to this suffolk poll, donald trump at 36% and marco rubio at 27%. the rubio super pac has a new tactic, telling voters that if you vote for senator cruz or governor kasich you're essentially voting for donald trump. explain. >> that's the message that's going out. because in the winner take all states of ohio and florida you won't have these proportional distribution of delegates that we've seen so far in the campaign. march 15th is the first date where states can move to winner

take all format. so if there are still four candidates and donald trump is at 30% and the other three are all at 20, it's likely that donald trump would win all of florida's 99 delegates. so basically, what senator rubio and his allies are saying is if you -- if there's a vote that's not for me it's effectively going toward donald trump and helping him. >> let me ask you about tonight's debate because you know senator rubio is going to be asked maybe the first question, are you going to stay in this race. so how does he get his message out there? there's a big cloud as to whether or not he will even stay in through tuesday? >> sure. absolutely. i mean, he and his team have had to beat back reports of sort of unnamed advisers, sort of hinting that he might be thinking about dropping out

before tuesday, before florida even votes. i think he has to sort of come out and be as aggressive as he can without sounding desperate, if you will. because that's been the storyline this week. every single day it's been rubio camp beats back rumors of dropping out. i think if he gets out of the way quickly, and as you say, that could be a question that's asked very early on in the debate, and pivots to something else it could work for him. he has a home court advantage tonight, with the debate being at the university of miami. so it could be a friendlier crowd than the past few times. >> and with regard to that cnn debate, david sherfinski, what do you think the tone will be tonight? any difference from what we saw

last week in the fox debate? >> that's a really good question as well because you've seen donald trump in these evening press conferences on election nights start to adopt not necessarily a more conciliatory tone but you can see him try to pivot to a general election type tone. he said he hopes it can be sort of a softer debate, a nicer debate because as we saw in houston last month when marco rubio really started getting aggressive in his attacks on donald trump, i'm not sure that donald trump wants to see that happen again. he just wants to sort of play out the string, he is the front-runner, the status quo benefits him. so if he isn't forced to defend questions about trump university

or, you know, his past support for abortion rights, things like that, it's better for him i think that marco rubio knows this is sort of his last stand. might be in a more aggressive mode than he has been on the campaign trail recently. ted cruz will probably mix it up a little bit with donald trump and marco rubio. john kasich, you know, really has kind of been in his own debate in a certain sense the past few times, sort of staying out of the mud and talking up his own record. so it should be interesting. >> finally let me ask but today's developments in florida. endorsement by senator mike lee, republican of utah. the first sitting senator tone doris ted cruz, his colleague from texas. this follows the carly fiorina endorsement yesterday. how significant is this for the cruz campaign? >> that is a big gut for the

cruz campaign. especially doing the announcement in florida. head of the debate tonight. marco rubio's turf. possibly assuring it will come up at the debate because donald trump has frequently said, you know, here's ted cruz, here's a guy who hasn't won a single endorsement from any of his colleagues, how can he get along with anybody. and that talking point is kind of over now. inasmuch as it will sway votes ahead of tuesday, i'm not sure how much of an impact it will have. but certainly, i mean, michael is close to ted cruz and marco rubio. certainly sends a signal that he thinks cruz is the guy to take on donald trump one on one. and marco rubio's campaign might be coming to an end soon. >> david sherfinski, political reporter for the "washington

times." his work available online at washingtontimes.com. thank you for being with us. >> thank you. >> last year a terror attack in paris killed 130 people. the french interior minister will be in washington, d.c. to talk about the fight against terrorism at george washington university. live at 9:30 a.m. eastern here on c-span 3. the zika virus and u.s. preparedness is the focus of a discussion friday hosted by the bipartisan policy center. we'll have live coverage at 11:00 a.m. eastern on c-span. >> the head of the general services administration, denise turner roth, visited capitol hill last week to discuss her department's 2017 budget request. she met with members of a house appropriations subcommittee, who asked her about the relocation of the fbi's headquarters and

information technology updates. this is an hour and 15 minutes. [ room noise ] >> well, we're going to get started. the hearing will come to order. welcome to everyone. i'd like to welcome the general service administrator, denise roth. the hearing today.

last year you were here after just a month on the job. now you've been on the job for over a year. so we're happy to welcome you back. everybody knows this is a leap year, right? so today is leap day. and with that in mind i think we should jump right in. i wanted to see if mr. serrano was paying attention. >> can you say that in spanish? >> no. the budget request today is for $10.18 billion for the federal building fund, which is less than 1% below enacted. so that's less than last year. but while your request appears to be flat, it spends $371 million more in rental income from agencies than it did last year. so i caution the gsa from growing overzealous in its request. in the 2016 omnibus gsa received an unprecedented 215% increase

for construction and acquisition for numerous construction projects, and this was a significant increase, but this level of spending should not be viewed as the new norm. therefore, i look forward to discussing gsa's request for -- 1 million-square-foot facility in the greater washington area. it was my understanding when gsa started to pursue such a complicated property exchange of unprecedented size that gsa was convinced that the value of the hoover building would be more than enough to pay for a new fbi headquarters. however, as we all know, the value of anything is whatever the market will bear. the value has spoken so far and

the val yoouft hoover building is $1.8 billion less than what gsa expected. so today in addition to the $390 million provided in the omnibus the administration is asking the subcommittee for 759 million and another 646 million from the commerce, justice, science subcommittee. so that concerns me a little bit about the size of the request and i still wonder whether the gsa has the expertise to execute such a complicated transaction. we'll have a frank discussion about that today. today the congress has appropriated 1.6 billion in full consolidation -- for full consolidation of the department of homeland security headquarters at saint elizabeth. that request includes another 267 million for 2017. as gsa moves forward with its enhanced plan for saint

elizabeth i hope to hear more about the gsa's continued effort with the dhs to decrease construction cost and increase efficiency. the budget also seeks to establish a $3.1 billion information technology modernization fund within gsa to replace legacy i.t. systems all across the government. now, as the subcommittee that oversees the office of personnel and management, we know as well as anyone about the numerous cyber security and operational risks that using an old system poses. we have been continually supportive of funding i.t. upgrades as part of the agency's annual budget request. however, i question the proposed 3 billion in mandatory funding and 100 million in discretionary funding. for what exactly, we don't know because the administration has not formally transmitted legislative action to the congress. what i do know is that agencies should be requesting funding for -- to refresh their i.t. systems on a regular basis as

part of their regular budget request. the irs is a good example of an agency that chooses to spend less and less on rudimentary i.t. and is experiencing more and more hiccups. so now in the fiscal year 2016 omnibus the committee provided gsa with construction funding to address long-standing needs and dire conditions at federal courthouses all around the country. the funding provided is important to maintain an open, accessible and well-functioning judicial system. today i hope to learn more about how gsa will work with the judiciary branch to ensure the court's needs are best met while also safeguarding the investment of the american taxpayer. and finally, i want to emphasize this committee's commitment to shrinking the federal footprint through reductions in gsa's inventory of leased and owned space. over the past several years this committee has provided significant funding for gsa consolidation activities, and i hope to hear today how gsa is

using those resources to reduce space, lower rental costs, serve your customers, and ultimately save the taxpayers' dollars. once again, welcome administrator roth. appreciate your service. i look forward to your testimony. but first let me turn to the ranking member, mr. serrano, for any opening remarks he might make. >> thank you. and a happy 29th day of the month to you. so somebody who's been today celebrates yesterday or tomorrow? >> don't ask me. but i do know it takes 365.2926 days to go around the sun. >> mr. yoder, you should have warned me not to ask. >> thank you, mr. chairman. i'd like to join you in welcoming the administrator of the general services administration. before our subcommittee. you were confirmed by the senate last year after our hearing with

you. so i want to congratulate you on transitioning to this role more permanently. gsa placed a critical role in making sure our government is running efficiently and effectively, that it is open and transparent to our citizens, and that our federal agencies have the resources they need in order to succeed. you combine a variety of roles in one agency, landlord, project manager, procurement specialist, real estate agent, i.t. specialist, the list goes on and on and on. although you don't see the gsa's name mentioned as much in the media and the press, this variety of roles shows just how critical you are to our government -- how our government operates. i think the subcommittee recognizes that as well. last year, this subcommittee, this committee included significant new funds for the construction of new federal buildings, including several

courthouses. i'm interested to know how these projects are moving forward and whether the large increase has been a problem in terms of ensuring appropriate personnel to oversee project management. your budget request this year is slightly smaller but really only in comparison to last year's final numbers. your budget includes funding for several construction projects as well as numerous important repairs and alterations which will help reduce the federal backlog in both areas. you also include funding for several new initiatives, two of which i imagine we will spend some time discussing today. one project the gsa has completely changed positions on is the fbi headquarters. last year the subcommittee was told that the general services administration planned to use their exchange power to raise funds to purchase a new fbi campus in either maryland or virginia. we were specifically told at

last year's hearing that no appropriated funds would be needed for this project, that this committee had no role to play. well, something has clearly changed since your budget request this year includes a request for $759 million in appropriated funding for the construction of a new fbi building. combined with the fbi's request of $646 million for the same project we are facing the exact problem that chairman crenshaw and i mentioned last year. the expectation that the appropriations committee is going to clean up the mess when the exchange authority doesn't raise the funds that are necessary for this project. the building hasn't even been sold yet and this request already tells us that whatever the proceeds are, they won't be near enough. on top of that, it has not been made clear to this subcommittee what the scope of this project is and whether the funds requested this year are

sufficiently -- sufficient to fully construct the project. it is also somewhat troubling to receive this request when we appear to be years away from potentially breaking ground unless there is an imminent announcement that we are unaware of. i expect we will have a lot of discussion about this issue today. a new initiative requested is the i.t. modernization fund. i fully support efforts to modernize our government i.t. systems but this request has not yet been authorized leaving us with requests for money the gsa cannot do anything with if we actually appropriate. i would be very open to conversations about how to make our i.t. procurement system more nimble in response to changing technologies but i'm not sure if this particular request is the way to do it. that said, i support by and large numerous efforts gsa is

making to ensure the federal agencies are accountable and effective organizations. i look forward to discussing these and more details with you today and this should be a very interesting hearing. thank you, mr. chairman. >> thank you. now, i would like to recognize administrator roth for your statement. if you could keep it in the neighborhood of five minutes. your full statement will be inserted into the record. so the floor is yours. >> good afternoon, chairman -- [ inaudible ] . thank you for inviting me to today's hearing on the -- pardon me. should i start over? good afternoon, chairman crenshaw, ranking member serrano, and members of the committee. thank you for inviting me to today's hearing on the president's fiscal year 2017 budget request for the general services administration. first, i would like to thank the committee for the robust funding provided to the general services

administration in the fy '16 appropriations bill. we will continue to ensure that gsa utilizes these funds wisely and efficiently as befitting the trust you have placed in our agency. overall, the president's fiscal year 2017 budget builds on last year's progress of prioritizing agency real estate consolidations and infrastructure investments to maximize space utilization, improve security, expand trade, and spur economic development within communities across the nation. in addition, this budget request seeks to enhance the cyber security and efficiency of the federal government's i.t. infrastructure by modernizing i.t. legacy systems. within the federal buildings fund, i would like to highlight three important projects that will strengthen our national security infrastructure and benefit the american taxpayer. first, gsa seeks $759 million to support the construction of a new headquarters facility for the fbi.

this new facility will consolidate fbi employees from 13 lease locations across the national capital region within a new, modern, and secure facility. gsa's fy17 budget request in conjunction with the fbi $646 million request will allow gsa to award a contract for design and construction of a new fbi headquarters by the end of this calendar year. second, gsa is requesting $267 million to continue executing the enhanced plan for the consolidated dhs headquarters, which will bring fema to the st. elizabeth's west campus, completing nearly 80% of this project. the enhanced plan for st. elizabeth's when completed will reduce the federal footprint by nearly 10 million square feet and save more than $4 billion through avoided lease costs. third, gsa is requesting $248 million for the second and final phase of the calexico west land port of entry modernization which will improve the security

of our nation's borders as well as promote expanded commerce and trade and support local economic development. all of these investments have a significant impact on the communities in which these projects are located. gsa recognizes its role as an economic catalyst in these communities and works with stakeholders to align investments with community and economic development efforts. we also must use the federal buildings fund for our partner agencies and combat the growing costs of real estate. through consolidation and innovative space solutions, we have reduced the lease inventory by more than 3 million square feet, rentable square feet since 2012. with the projected reduction of 3 million additional rentable square feet by the end of fy 2017. gsa has also partnered with agencies to accelerate the disposal of excess property in fy-2015 we helped agencies

dispose of 172 properties, generating $56 million in proceeds. beyond our brick and mortar infrastructure is our information technology infrastructure in which the government and the global economy depends. reliable i.t. is vital to all of the services the government provides. however, many agencies are not able to effectively have i.t. infrastructure, emission writ call systems due to large upfront capital investment needs and increasing share of costs that maintaining these older systems occupy in technology budgets. to address these issues, the budget includes requests to establish a $3.1 billion information technology modernization fund, which would be used to retire and modernize legacy and information technology systems to improve cyber security and the delivery of services as well as reduce costs. in closing, gsa has made significant progress in fulfilling our mission to deliver the best value and real estate acquisition and technology services to government and the american people.

the president's fy-2017 request will enable us to move forward along this trajectory of providing more efficient and effective services at a lower cost so that agencies can focus on their crucial mission. thank you for this opportunity to be with you today and i look forward to answering your questions. >> thank you very much. and let me start the questions. i think you probably figured we would ask questions about the fbi. mr. serrano mentioned in his opening statement, as did i, when we met last year, we had a pretty lengthy discussion about the whole concept of this exchange swap. and a couple of questions, i guess to start with, what were you thinking last year was going to be the value of the hoover building? did you have any idea what that might be? and did you have any idea what

it might cost to build 2.1 million square feet? >> sir, we did have ideas that we have been working from. we've been avoiding talking about specific costs related to both the value of hoover as well as the project overall. primarily because we're in an active procurement process currently. >> how did you find out the hoover building is worth $1.8 billion less than you thought it might be? >> let me say, just in stepping back, the project itself and what we have before both this committee as well as the other committee from fbi is really a reflection of where the project is in terms of trying to achieve the full consolidation as well as fbi's requirement. and i would say that over the past year, we've gotten a better understanding as the project is coming into its maturity of what the costs reflect. so we believe with the funds we received from this committee in fy '16, as well as the requests

that's pending as well as any costs we receive from its value would be reflective of what's needed for the project. >> last year when we talked, there was indication, i think $291 million was appropriated for the omnibus. was it 391 million or 291? i can't remember. but anyway, i think we were told that that would be it from the appropriations standpoint. that would get things started, whatever. now it's like you add up those two, it's about $1.4 billion. so i guess you can understand why we're a little surprised, can't you? >> absolutely. this has been an evolving project. and the part that i would point back to, in particular, is really what we're going to learn both from how the market values this project, but as well as the further understanding of the requirements of the project. we received clear indication

that full consolidation for this project was supported in something that we needed to ensure was a priority as we brought this project to bear and the requests are really reflective of that. >> how confident are you that now the valuation has been put on the hoover building? how confident are you that that's correct? >> we have worked very closely with fbi in terms of just -- and this is really going to the requirements overall, but in terms of the valuation, itself, we are really looking forward to what the market responds to. and we have the responses due back from the developers by this summer. that's really going to be the first indication of how they're valuing the project. and we're going to -- >> i mean, how do you know today that it's, like, $1.8 billion less than you thought? >> really because of the requirements. as we start to build out what the cost of the requirements are, and the way we've worked very closely with fbi over the past year, that really has given

us a sense, as well as -- >> do you have an appraisal of the hoover building? >> we have -- the appraisal we have on record is actually an older appraisal. we will likely do appraisals as we go through the process this year. really what we're looking for, what we've stood up is compared between the requirements we have today from fbi and having worked closely with them what we know about the sight themselves and having gone through the environmental evaluation of them then what will see see in june as we get those responses back from the developers. that's really what we're lining up. >> were you not sure -- i guess there's two sides of the equation. if you're going to do a swap or exchange, you say what's the hoover building worth, right? >> yes. >> and how much is it going to cost to build this new 2.1 million square feet? it sounds like you didn't have a very good idea of what that was.

if you missed it by almost $2 billion, right? >> i believe that what -- the effort was really about an exchange to offset any requests for appropriations. i mean, ultimately to use the tool of the exchange and to be able to give the full project would have meant we didn't have to have an appropriations request. i think really having a full consolidation on the table, as the requirements as we understand them to really meet the mission of fbi, is reflective of the change that you're seeing. >> did you ever think about just selling the hoover building? >> sure. and one of the things that we know is with the exchange, we can ensure that the proceeds from that project go into the new hoover location. >> you're not going to -- you're going to do an exchange, right? >> yes. >> do you think about the fact that if you're going to exchange the building, then the developer is going to have some carrying costs while he builds the

building which might -- did you think about whether you should just sell the building, put the money in the bank, then go ask somebody to build a new one? and use part of the proceeds for that from what you -- i mean, how did you decide it was better to do a swap or an exchange than just sell the building and then hire somebody to build you a new space? >> oftentimes we have sold the properties and used then our budget requests to go forward with a new project. ultimately, there's a couple of aspects of this proposal that are different and unique. one of them is the fact that we're talking about the hoover, which is on pennsylvania avenue. a rare place to get an opportunity to develop. i think that that was part of bringing developers to the table and being interested in this project. ultimately, if we were to do a typical disposal, we would have to come back and ask for a larger appropriations request, certainly, as well as then go through the process of a new building overall. and really, having the exchange as a part of this can offset what we have to ask this committee for. >> is this the biggest exchange you have ever done? >> this would be the largest. >> has gsa ever done any other

exchanges? >> we have done other exchanges of varying scales. i think the exchanges we've been talking about in the recent past are the largest that we've seen in some time. >> you got any idea how many exchanges you've done the last ten years? >> in terms of this scale, we have not done any exchange of this scale. >> are you still comfortable -- last year we questioned whether or not -- this is pretty complicated. is this something that you have in-house capabilities to do? or is this something you're contracting with some outside folks? how are you handling this? >> sure. as a part of our projects, we'll definitely bring in expertise to help with various aspects. anything from evaluating the requests -- the proposals themselves, to doing traffic studies -- >> for instance, last year had you brought anybody in to kind of give you an idea what numbers we might be talking about? because, again, we missed it by at least $2 billion.

for instance, and along that line, i mean, how do we know you asked for another $1.4 billion, how do you know what this new $2.1 million of office space is going to cost? i mean, do you know that yet? where do those numbers come from? and why is half of it from gsa and half of it from fbi? >> what we do know is having worked with fbi much closely -- very closely over the past year, having a good sense of their requirements, that's giving us a sense of what the costs are. just really how they're programming the space and how they plan to utilize it. and this really has been very much a shared effort between us and fbi. we worked intensely over the past year and it's part of the reason you're seeing the requests come from both. because this is a shared effort. as well as the number, itself, would be large overall and definitely didn't want to overburden either budget request. but at the end of the day, what's really going to tell us what we have for the project are

those various pieces. what the requirements are and really setting the cost, ensuring we're receiving a full consolidation as part of this request and trying to both with the appropriations and the '16 funding and the offset of the value of hoover really bringing the project to bear. >> so do you have -- where do you get the $1.4 billion for the appropriation request this year? >> part of it is set by the requirements of the full consolidation. >> and who looked at that and decided it was going to cost $1.4 billion? >> we do use a team of experts to support our efforts. >> you got that laid out. is it 2.1 million square feet, is that right? >> yes. yes. >> now somebody said that's going to cost a little bit more than we might have thought. either you missed it on that side or missed it on the value of the hoover. i mean, i hope you'll appreciate

our concern is, when you come in and say look, if we had $300 million, we've got a very valuable piece of property downtown, we can exchange it, somehow build us a building and that's going to be great. and then still ask you what's the value and nobody seems to know yet other than the new estimate is we missed it by $1.8 billion. it's going to be $1.8 billion less than we thought or somehow the office space is going to cost more. i think as stewards of the taxpayers' dollars, we have to have a better handle from you on where the hundred is going to go. so that's -- i mean, other members might have questions as well, but i did want to bring that up because i think that's something that we're going to have to really work through. >> sure, mr. chairman. and it's not that we don't know what the project scope is. it really is a reflection of not wanting to overburden our request. ultimately, if we had a project for full funding, full consolidation as we do now, it will have a large burden on our other projects as this will. but it's still a high-priority project. the idea was for the exchange to

offset the cost overall and offset what we would have to request and how we were actually staging the project. but we're talking in terms of where we are today full consolidation and requirements very much reflective of where fbi and where this project is today. >> and last -- just that was your idea, it was a great idea, but it wasn't based -- doesn't sound like it was based on reality unless we can find out more about where these appraisals are and all those kind of things. i think we're concerned about that. mr. serrano? >> thank you, mr. chairman. you know, administrator, some pundits would say it's very easy to confuse members of congress. well, this may be an example of one where we're innocent of being easily confused. it's just very confusing. we're trying to get to the bottom of it. based on your budget request it seems in addition to the $1.5 billion in appropriations, gsa

will still need to give the hoover building to the developer. in last year's hearing, you would not tell the committee how much the hoover building was appraised for. but there is no way for us to analyze your appropriation needs without knowing what you and the developer are assuming the hoover building is worth. can we get the current appraised amount today? >> the current appraised amount is actually from an old appraisal. as a part of this process, we will do an appraisal of the project. but in terms of both the estimates and costs that are going -- the estimates that are going into the project, it is much better situation for the government to be in to wait for responses from the developers. before we are talking about any of the numbers and getting through awards. i mean, ultimately we have three developers that are competing. they're running estimates on the various sites, as well as the overall project, as well as the value they will give us on hoover and to talk about those numbers as a part in an open

setting really will undermine our efforts. >> okay. except for the military, an open setting is a public hearing and we usually like to get the information. i'm not going to press you on that. could you at least give an idea of the appraisal value to our staffs at the minimum? i mean, they're sworn to secrecy. >> we'll definitely follow-up with the staffs. and again, it really is just the integrity of the procurement process that i'm focused on. we are right in the middle of the procurement and really just want to make sure we get the best deal out of it that we can. >> i understand that, but you know, the chairman has to respond to people, to members who for their own reasons and

for their beliefs don't believe in spending certain amounts of money. i, on the other hand, want to be helpful in investing in the future, as they are too. so you don't help us by telling us i can't tell you that in public. i'm trying to be helpful here by saying can you at least tell us in private so that we have an idea what we're dealing with? because that's what we do as appropriators. we appropriate. but we're not going appropriate in the dark. no party's going to do that. and it doesn't matter who the administration is, we're just not going appropriate in the dark. we need to ensure that we're getting the best price for the government for the hoover building, administrator. is there a chance the building is being undervalued as part of

this exchange and would bring in a higher price if sold on its own? >> i think what's unique about this exchange in this process overall and part of what's brought the interests to the table is the fact that hoover, itself, is on pennsylvania avenue and, you know, it's america's main street. and ultimately to be able to have access to that property, i think it's part of what makes the package overall attractive. so taking the exchange out would have an effect, i think, on the project overall. >> well, there's one part i totally don't understand, and it might be that i didn't pay attention to what the chairman was asking. why is the developer getting the building? i come from a city where the developer are always getting -- people think the developers are getting more than they should. why is the developer getting the building? why is the developer -- refresh us again. what is the developer giving us in return for getting the

building? >> part of utilizing the exchange tool, we're giving the building itself, the hoover building in exchange for a new building that will service as the headquarters for fbi. >> all right. are the fbi and department of homeland security headquarters being treated the same? specifically, i want to know what the gsa request is going to be used for, versus the agency's request. my understanding is that gsa provided, and gsa appropriation was used for the interior. is that the same with the fbi's headquarters? >> it is the same. the requests that are before you and fbi's request is for construction. >> okay. i'm sure mr. yoder has some questions. i did learn something, mr. chairman. i thought america's main street was river avenue where yankee stadium was located, but i guess not. michigan and chicago? i should have stopped while i

was ahead. >> i'll turn to mr. yoder now. >> thank you, mr. chairman. i do represent the heartland which is the main street of the whole country. you're welcome to come at anytime. welcome to the committee. appreciate your testimony today. i wanted to ask you about your understanding of the gsa's role of the banister federal complex in kansas city, which is a former facility that's closed. i want to know about where it's going. i first want to talk about where it's been. if you are aware, the banister federal complex in kansas city made a variety of things. made airplane engines during world war ii but later they began making components for nuclear weapons. and after many folks dedicated their career there, it became aware they were exposed to significant amounts of radioactive material. there's been some $55 million paid out to these workers at a former gsa facility. but the vast majority are frustrated and they haven't been paid. some live in my district, some

live in emanuel cleaver's district where the facility's located in kansas city, missouri. the types of claims that have been uncompensated are pretty significant. you have hundreds of people with skin cancer, beryllium sensitivity, female breast cancer, asthma, kidney cancer, bladder cancer. the list goes on and on and on. so i know this is a real tragedy that's occurred here, and these constituents are coming to me asking why their claims haven't been paid, only a fraction have been paid. i'd first like to know, can you provide me information about what the gsa's role was in that situation in terms of informing them what they might be exposed to and what are the general policies on that today for workers who may be being exposed to materials that can affect their health? >> yes, congressman, thank you for the question. this has obviously been an

ongoing item for the agency and one that we will continue to address as concerns are raised. my understanding, and i spent just a little bit of time with this item, is that we did have situations in which there were individuals who were concerned about illnesses related to the environmental health of the location. at this point, we have not made -- gsa has not found that there's a connection between the environmental health of the footprint that is gsa. obviously there was another activity on this site overall. we continue to be open in listening to any requests that are brought forward. but at this stage, we don't have any that we have identified where there was an illness and relation to the illness that it was connected to the environmental health of the footprint managed by gsa. >> so you're saying the facilities weren't managed by the gsa?

>> no, the footprint that is part of gsa's footprint. there's another agency -- >> so what was the portion that the gsa was responsible for? >> i can't -- i don't know the property well enough as i sit here to talk about specifics of the separation of the site, itself, but there is a portion of the envelope that is gsa and a portion that's managed by another agency. >> and to your knowledge, there's no overlap in terms of individuals that would be exposed to radioactive material that would be gsa employees or gsa-controlled space? >> not to my knowledge, as i sit here, but we will definitely work with your staff and work very closely with any concerns that have been raised to your attention as well. i would like to deal with those. >> i just have hundreds of constituents in my district that feel like their claims aren't being heard. many of them suffering from devastating cancers. 554 people are deceased. some of their claims have been denied. the approval rate for cases

involving former workers at the plant is particularly low, 23%, less than half the national average. so it's a problem that, you know, my heart breaks for these folks and i want to make sure the government is doing them justice and doing them right. i would like your help to advocate for these workers to ensure that they were -- are being property compensated. i guess my follow-up is, two follow-ups. one, what are the measures the gsa is going to take going forward to ensure these types of things don't occur in the future for properties gsa manages? what are safety measures? then there's a timeline for clean-up of the facility for disposal and cleanup. can you clarify your agency's involvement in that process? >> sure. just to be clear, there were items that needed to be investigated by gsa and we have

done so and we will continue to investigate any items that are brought to our attention. there has -- there's a number of things happening at that site because of the size of the footprint. we actually are expanding some presence there. on certain parts of the site. and it would probably be worthwhile for us to come back to the committee staff and talk through the aspects of the site. but overall, we take the environmental concerns of our properties very seriously. obviously we have a number of properties that we manage in really the environmental health of the employees that work there and the safety of those employees is something that is of high concern to us, so we will continue to -- and we do with each of our sites, watch and monitor closely, try to ensure that we have an understanding of vulnerabilities there and follow up as appropriate. whatever steps here are necessary here to respond to your constituents specifically and the project overall that we continue to do that. >> i appreciate that. we need to make sure we do everything we can to make sure that doesn't happen and make

sure they're aware of it. protect them and then when things do go wrong and we do have health outcome, we do everything to compensate them and make it right. i yield back, mr. chairman. >> thank you. mr. quigley? >> thank you, mr. chairman, i strongly agree with mr. yoder's remarks. ms. roth, i understand your concern about sharing the appraisal numbers with the 17 people watching on c-span right now. let's talk about something we perhaps do want the public to know about. the federal real property profile. i saw that gao had found the issues with the database, questions of reliability. i understand, huge database and conflicting information coming from different sources, but it also raised questions about the property reductions and the

associated cost savings being overstated as a result of those inaccuracies. can you talk about that? just how serious that problem is and what you're trying to do to overcome it? >> sure. just to separate the two and the real property database as you point out, congressman, does have a lot of sources that it pulls from, and there are steps we've taken to work with our federal partners in terms of improving the integrity and quality of that data to the extent of ensuring that very senior level individuals in those agencies are seeing the data as it's being submitted as well as doing some mandatory drop-downs as well as smart assessments of information that is entered into the database from year to year.

this is something we're rolling out this year if they -- square footage, for example, on a property is drastically different from one year to the next. the database would actually flag the agency to deal with those discrepancies. when it comes to disposal, itself, however, we have more accuracy around the actual activity that's occurring. so when we're actually going through a disposal process with an agency, we're spending more time hands-on with that property, itself, so it can confirm the dispose l activity and what we're actually disposing and the savings, therein. >> but the data available in the federal real property profile is not available to the public, not available online. i guess there's summary reports which are kind of excel spreadsheets. you know, several of us have been trying to address these issues of excess property. it's hard to know what we have. i'm not sure anybody in the government can put a summation on this and what their value is. i think we need to get that in order and begin to talk about how to make it more available to the public. >> yes, sir.

wholeheartedly agree. we have been works with a lease of properties that are under gsa's management to enhance how we're making that data sets available even to the extent that we have now a website that shows a map where you can sort of hover over the locations and get a pretty good snapshot of data as well as click into it and get more information. we want to be a resource for federal agencies as they work to make data more available and have formats and platforms that they can pull from pretty quickly. >> let me ask you to touch on one more thing quickly. gsa has some responsibility or helps to a degree helping federal workers gain access to childcare facilities. especially here in d.c.

we're hearing the availability, especially on the hill, is long waiting list for such things and exorbitant costs of this sort of thing. to the point we actually hear people making career decisions and family decisions based on the fact that there is no affordable childcare. your thoughts on this? >> well, i will be happy to follow-up with your office regarding what role we play and if there's anything we can do to support even to the extent of information. as a mother of a young child myself, the idea of not having childcare that is affordable or easy and accessible is, i can understand, very problematic. so we will do everything we can to support that effort. >> in the meantime, have you heard at all from staff, workers, other people in gsa just about what the lists are, the cost and so forth here? especially on the hill from my own staff, for example? >> i can't say that i have directly but i will definitely follow up. >> i appreciate that. thank you, mr. chairman. i yield back. >> thank you. i want to ask you about the $3.1 billion fund for the i.t., but let me just finish up with the fbi.

just so you'll understand, we're -- we're pretty much, as said, in the dark, if you come in and say we have a building that's worth "x" dollars and we're going to build a new building that's worth "x" dollars, that sounds like a fair trade, but i don't know, somehow we got to know where you got the numbers and where you get the number to say we missed it by $1.8 billion. if you say it costs $2 billion to build a new building but we got a building that's worth $2 billion, then that works, right? >> we. >> but if somehow there's almost a $2 billion discrepancy, that means either "a," that the building you had wasn't worth what you thought it was or the building you're going to build, you can't build what you thought it could build. we got to know that. in particular when you walk in

and say we need another $1.8 billion to finish our project but we don't have any other numbers. so somehow we got to work through that. want you to tell all the free developers what the numbers are, but everybody's got an idea of how much it costs to build a building and everybody has an idea of how much a building's worth. so as soon as we can get that, it will make it a whole lot easier for us. >> and i appreciate it, mr. chairman. we want to work very closely and we'll continue to work very closely with the committee. obviously we are asking for your support and want you to feel confident about this effort. so we'll definitely look forward to continue to follow up with you and have discussions. obviously, this is a different project with a different scope at this stage in terms of a full consolidation and understanding of the requirements and is really having the impact. absolutely, sir, i understand the position the committee is in. >> thank you. now, the $3.1 billion, you got $3 billion in mandatory, $100 million in discretionary. how's that -- where did that idea come from?

did the agencies request i.t. upgrades every year? $3 billion is a lot of money. all of a sudden. how does that work and why is that mandatory versus discretionary? >> well, let me say this effort overall, the i.t. modernization fund, really is a -- grew out of the cyber security national action plan that the president presented. you're aware, last year we had the cyber sprint, and out of that discussion and out of that evaluation it was clear that part of the major vulnerability or major need for federal agencies was in the area of i.t. legacy and supporting the replacement of i.t. legacy. and so as such, the idea of this modernization fund, specifically, is to support thattest.

as agencies look to replace legacy systems, the highest costs is really in that initial upfront cost. the ideas for this fund to be a revolving self-sustaining fund that agencies can apply to payback over a five-year period, the cost of the investment overall. but it also has the benefit of helping us see across government. sometimes agencies are trying to deal with a legacy issue in a silo in terms of its agency, itself, when actually the solution actually may be something that either multiple agencies can utilize or multiple agencies have already involved for. so we are seeing it both from both perspectives, both the business enterprise perspective of how do we rationalize and have smart investments around our i.t. that can support everyone, as well as helping to see and support what agencies are faced with on a regular basis. the reflection in the request will reflect that, and as you pointed out earlier, the legislation involving this request should be to you and your other members in the next

couple weeks. next few weeks. >> there will be some authorizing language, i assume. are you going to have to hire some more staff to administer this fund? >> yes. there will be additional staff. it would have a programming office. the staff and the focus of the office would be really to evaluate the investments themselves, to give -- >> is that all included in the $3.1 billion? >> yes. >> the omb oversees all the computers of everybody in the federal government. i can't remember what the number -- billions of dollars we spend on computers all across the federal government. we had mr. donovan say if they coordinated all the, i guess, buying of computer equipment, they might be able to save as much as 50%. so is that something you've talked to omb about about how all of this would work? >> absolutely. this is actually an effort we've been working very closely with omb. this is an outgrowth of the

federal cio. obviously a part of the senior team at omb. so this is very much in conjunction with them. gsa's role is really, obviously, as an administrative arm, it makes sense for this to be coordinated through gsa, but we've worked very closely with other agencies on their i.t. needs in general. >> how do you decide we want $100 million from discretionary but want $3 billion out of mandatory? >> it really goes hand in hand. >> how do you decide we want this $3 billion? you know, you're not really appropriating that. so you say, well, we only asked for $100 million, but somewhere the $3 billion, how did you decide to put that as a part of mandatory spending? >> it was the preference of -- we worked closely with omb in terms of how that request came through. ultimately, since it is a one-time request, and i believe the thought is that we can define it as a one-time request and have it come forward then have it as a revolving fund. >> it just seems like it would be one way you can use mandatory

funding to circumvent the regular appropriations process because you'd have to be a little more strict where to spend it, the $3 billion, that comes from mandatory. i don't know where we're going to spend that. that's something to be thinking about, too. mr. serrano? >> it's amazing, mr. chairman, how we always end up talking about computers and i.t. i don't know if i was being sarcastic or profound when i suggested doing the rollout of obamacare and all they had to do was go to a college dorm and get a couple kids who would have taken care of the problem in about 30 seconds. you know, instead of doing everything else that happened. you know, one of my issues on this committee for years has been purchasing versus leasing. i think our government spends too much money leasing. and at the end of the day, owns nothing. maybe there are people much smarter than me, i'm not being sarcastic, who can argue that leasing is much better.

has that changed at all? because this committee made an effort to get people to say stop leasing for so much money and purchase some of the places that we need in our government. pretty soon the government will be leasing and leasing and leasing and no purchases at all. has that changed at all? >> yes, sir. i will say that the committee support of consolidation funds has been a tremendous effort for our portfolio overall. we have been able to see savings year over year since the support of that effort as well as the reduction of our footprints in particular. we have very much a value on the owned property. we believe the owned property is the best use of the american taxpayer dollars and want to maximize our presence in the properties that are owned by the federal government. so the funding that the committee has given us, i think

over the past three years, in particular, we had -- i had it written down, 1.4 square feet of savings -- reduction in square footage. over $100 million in savings on lease avoidance. that's having a definite impact on the bottom line. >> okay. let's -- let's move on to another area that's also of great interest to me. and it is our territories. it seems that the territories always get left behind, and i take personal interest because i was born in one of them and i represent the bronx, which has a lot of folks that were born in the territories. does gsa make a special effort through staffing patterns and progr programmatic patterns to make sure that the territories are being treated as fairly as the constitution allows which is

thoroughly fair? because in many cases, you'll hear where they're waiting for a building but, you know, three or four times the amount of time that one of the states has to wait. you wonder, you know, they're federal buildings, they're being used to render services to american citizens, so why not the same time or something close to it? >> yes, congressman. i know that you've had discussions and we've had discussions over the recent past regarding projects in particular in puerto rico and we have -- we've needed to ensure, and we have, we're at a much better place now, that we have boots on the ground as well as hands-on efforts with any of the projects in the territories. and i think what we've seen in the turnaround in the projects, in particular, we're doing that. and that we're keeping the same discipline across our portfolio,

expectation of turnaround as well as project management and schedule. >> well, i would appreciate that, and you'd be not surprised, but you'd be happy to know that this committee does not disagree, that we want people treated equally and that sometimes because they're not a state, they don't get treated equally. let me ask you a question here. the omnibus bill -- in the omnibus bill, gsa is requesting 17% less for construction, acquisition that was provided in the fiscal year. i'm sorry, i got it wrong. you're asking for 17% less than was provided in the omnibus for 2016. that may be understandable given you received over a billion increase in construction in fy 2016. there have been concerns from

some about your ability to handle such large increases in one year. how are you managing that many projects in the fy-2016 bill? and did they impact what you requested in 2017? i believe we must invest in infrastructure across the country and the territories, but i also don't want to set you up for failure by not giving you the staff to manage all of your projects. >> sure. i thank you for that observation. i would say -- first, let me start by saying we very much appreciate the committee's support in the fy-16 budget. that has been a tremendous opportunity especially in the area of courts that was mentioned earlier for us to meet some of our partnering needs. we are gearing up, we're working very closely with the courts in terms of evaluating their projects, the timing of those projects and ensuring we're able to move forward and execute on

time and under budget. across the board, we have a volume of needs that really exceed our resources and so what we try to ensure is that we are able to articulate to the committee where the needs are and what's driving our programming going forward and to ensure that we have the staffing lined up to manage what we can see coming forward. so your support has been a tremendously important and we are doing everything from our perspective to line up, we have staffing and support in places where that funding is focused. >> thank you. i know we've touched on it, but how is your i.t. modernization program going? >> the i.t. modernization for gsa overall has been a tremendous opportunity for us as an agency in terms of really rationalizing how we're managing i.t.

in terms of having had a consolidation that we did internally as well as establishing what we refer to as an investment review board to look at large-level i.t. investments really is allowing for us to support other agencies who are moving in the same direction especially as the outgrowth of atar, which was an important effort this committee was involved with. so we are seeing the dividends from that consolidation activity as well as being able to support other agencies as well. >> thank you. and i apologize, mr. chairman. i was looking at my clock and i thought it was going down. it was actually going up. i know, it sounds like the federal budget, but i don't want to hear that comment. >> no comment. mr. yoder is recognized. >> thank you, mr. chairman. i'm going to not take that lay-up that my colleague, mr. serrano, gave me there and i'm going to go back to the administrator. i note in your biography that you have a history of being sort

of tech savvy. and i think you were top 50 women in tech at one point. and i actually noticed the interview you did at one time where you said you had an early commodore 64 and you actually used to code your own video games. >> yes. >> that's pretty neat. you have a tech background. obviously you have a love of tech. so i want to talk to you about the real property profile. and i want to associate myself with comments from my colleague, mr. quigley. he and i have long been bipartisan in our efforts to try to resolve the concerns we have, and that continues to be that there is no -- we have struggled to find ways to quantify the property that the federal government owns both in the gsa and all of the property which is a secondary issue that not all the property's with the gs, so you've got two separate problems there. and we really don't have the ability to tell our public what we own, what's vacant, what isn't vacant. what's idle, what's owned in their community in a way that is usable.

so i was just sort of looking at the realpropertyprofile.gov. is that the site? i was pulling it up on my phone. immediately i note it's password protected. user name and password. there's really no instructions on how someone would go about getting a password or user name. when i go through something like this -- you know, first of all, as mr. quigley brought up, there's billions of dollars of property, tens of thousands of pieces of property that the gao has said before are idle. we would really have no way to verify that. my check box would be is there public access, is there a mobile app that would allow people to, you know, constituents to drive around once they have it and look at things? i don't know because it's not accessible. is it user-friendly? is it comprehensive? is it fully implemented in a way that people are using it today to make decisions that are informed that will allow taxpayers to save money? i guess, first of all, are there

other standards i should be looking at? but in terms of those standards, have we met those standards and when will we, if not? >> we have been working diligently to ensure we're meeting those standards with the data that we're putting forward for gsa in particular because of the dynamic nature that you refer to in terms of making it easy accessible, being able to pull it up on your mobile device. if that's not working i will definitely -- >> you can pull it up. it's user name and password protected. there's no description on here. it doesn't tell you. i guess you'd e-mail chris kinneany or stephanie klause and ask them how. it doesn't say. it just says have you forgotten your password, are you a gsa employee? it doesn't say to members of the public on this, at least, how you do it. i completely could be missing something you might pull up on a desktop. >> and that's not -- that's not as productive as we want to be, right? we want people to be able to access our data in the way that they're used to with all other data in the private sector. >> why is it even log-in password protected?

the whole idea is to make this accessible to the public. right? >> yeah. >> when does that happen? >> the idea it's password protected is surprising me as i sit here. i could be thinking about two different places where the data resides, which would be a challenge as well. so i will ensure that we -- >> this is realpropertyprofile.gov. >> yeah. we have a -- we have, in particular, what i'm used to seeing is a place where you can see both, especially for gsa's data, the data itself, as well as, like you said, a map that is interactive. the database that is utilized by -- or that is a representation of all of government, i don't know if that's private password protected. we want to make it as accessible as possible. >> i brought this up i think three years ago and brought it to up i think yourself last year, your predecessors, every year we're bringing this up on the record and we're still not getting there. one thing i think that would help is if we engage the private sector. you know, if this was a google project, you know, i think this

would be -- or any company out there that was trying to do a mapping project, i bet it would move more swiftly. so i guess what has gsa done to bring out the best mapping and geospatial knowledge base and expertise from the private sector to help with this? >> we actually have been able to achieve geospatial mapping with our data, in particular. it's really the data that is the rest of the federal government which is included in the real property database that we -- that is currently not available in the same format. >> just in general, has the gsa sought advice and worked with the private sector to build the best mapping system? or is it doing this internally and not using private -- >> we have consulted with private sector. i'm not sure to what extent the break happens. we did meet with some members at your recommendation from our last hearing. there was a sit-down with a team there as well. so we have engaged a private sector from an expertise perspective where needed and are also managing internally as well.

>> well, it seems like we have a long way to go and i just know given your tech background if you're on the outside of this looking in, you would say not acceptable, private sector would have created an app for this years ago and we'd be able to look at every piece of property, be able to compare it, policymakers could utilize it, the public could. the public could assist us by finding property that are unutilized and maybe trying to repurpose them saving us money. whether you're a liberal or conservative, none of us hopefully like to see idle property that could be put to use or sold.