a difference. i asked at a meeting whether a company that you may have heard of was pleading for leniency. as part of the -- we asked the question, could you give me an example. person after person had been indicted and convicted. i said can you give me an example of one time a ceo of the company in an e-mail, in a speechl, in a talk, in a phone conference said i care that people do their jobs honestly and with integrity and there was deafening sound. it's not a shock to me that the culture at that place was terrible. >> was this assisi capital? >> could be. >> i want to ask the yad a question before i ask you about the importance of general counsels if we could call it up here. how worried about corruption in your company?

very worried, somewhat concerned, not at all? you just mentioned general counsels. what is the importance in a company? do you look for somebody to be a truth in power presence? >> i think generally speaking i think the general counsel a little bit is the conscious of the firm but if the conscious or the firm doesn't have respect, it's not going to matter much. i'll give you another story about the company that was mentioned a moment ago. we although that one of the things that went wrong was they were planning to hire a guy who was known to be -- was suspected of somebody who engaged at insider trading at the former firm. that was vetted and known. the hiring was opposed and it

was overruled. not surprisingly he began to engage in insider trading and was convicted. i have a chief dmounl my office. it wouldn't matter if i had one or not if i didn't bay attention to her advice. i think the person that you're -- and i'm sure this is true when you think about the cno and other people captioning you, on other kinds of risk oonds finances and everything else. i anyany generally leader involves by people who can talk to you like a peer. >> what's your reaction? 90% very worried. 30% not at all. 30% in denial? >> the t 0% who are worried,

come see me afterwards, leaf your number. i don't know who the not at all people are. it's interesting that you would vote not at all even if you didn't think it was a problem. i think a lot of people hedge. you can't always know. there are some companies, and it's great if that's what you're view is but it must mean when we investigate people at certain companies, sometimes there's a lot of surpriseaged sometimes there's no surprise at all. and in the instances where we charge somebody request there was no charge at all. the galleon group are for example. there's not a surprise that there was bad contacted goes vr going on there. the defendant is spending a long time in prison. we arrested roger gupta who had

a different reputation. i'm sure the people around him would have said not at all and told have been wrong. >> you've raised insider trading. you've faced criticism for reaching some of the insider cases. also a sense of prpg some of them in the media. what's your -- >> of course. first, the swrast majorities of inside trading cases we've brought have resulted in convictions and held up on appeal including roger rutnam, roger gupta and many others. matthew a tomei. we argsd that the appeals court in new york changed the law and got wrong. there's a pending case i was at

the argument several weeks agoaged il say there's cautious optimism by the court, if you think of the they will correct what we think was the mistake on insider trading. >> they will reverse it? >> i said there is cautious optimism that will happen based on the question. >> the current supreme court? >> the current supreme court. that's the sense one got from i'm not prejudging or making a prediction or wagering any money on it. there was clearly a deep sense of concern based on the questions you heard of the lawyers out of the supreme court argument that it didn't seem to be right or reasonable. you could be the ceo of a company and if you are not expecting any concrete financial gain in return, there was some

financial benefit in return, you could, three days before releasing your earnings, bequeath it as a gift on your son, daughter, college roommate, knowing they are going to trade and make $10 million, $20 million, $30 million on the trade. that didn't seem to strike people as being prudent? >> what about trying cases in the press? >> we don't do that. i think it is incredibly important in my job to talk about problems you see. first responsibility is to make sure anybody you charge gets a fair trial. i have never spoken anywhere outside of the four corners of the complaint or the indictment. when you have a speight of problems, for example, if you have a gang problem in newburgh, new york, which we have had, i talk about it. when you have a prescription pill problem that is killing more people than traffic accidents and guns these days and more people that are o.d.'ing from prescription pills an dying than from cocaine and heroin combined, you talk about

that problem. when you have assemblymen and senators in my home state of new york going to prison at an alarming rate, you talk about the problem. part of the job is not to just hold people accountable. it is to deter and raise public awareness when you have a public health problem or a corruption problem. that, i do. part of the reason i get invited to speak to prestigious groups like this. wall street traders and also doctors and business students is because people have some interest in knowing how we think about prosecution and what we think the problems are and how maybe the good people can help to solve those problems. i speak at every business school around. i am particularly proud of the fact that i go to harvard business school and every february for five or six years running i speak to the entire class. we talk about ethics and integrity and how they should conduct themselves to avoid problems.

>> i am here. it is not a scared straight program for white collared people. i am not just directing my words to the ears of the two or three of you at harvard business school who statistically likely to commit fraud although i know who you are. it is to direct my words to the vast majority of people, perhaps everyone who has integrity, who is honest and wants to do the right thing and wants to make money or change the world in some way in the correct way, in an upstanding way. the problem is, getting to my basic point that i like to make in front of groups like this is the bad people in your organizations, other people tend to know about them. like i said, it wasn't a surprise when we started arresting people at s.a.c. capital to people who are in the know. it wasn't a surprise what was going on at deep water who are horizon or madoff.

if leaders of organizations can figure out a way to put the right team together and develop the right culture, you be nab these problems much earlier when the fbi gets involved. when the fbi gets involved generally it's too late for you. >> for your favorite question about your future. is there a role for you, would you be interested in a position in the trump administration carrying on your current role? >> i was going to put in for secretary of state. but some guy beat me to it. >> seriously, your interests, could they be aligned? >> so i do my job. i love my job. it is the best job i have ever had and probably the best job i will ever have. i serve at the pleasure of the president. that's true of president obama. that will be true of president trump. if and when a president decides that they want to replace me, i'll ride off into the sunset.

i think the work of the office, separate and apart from me and whoever leads the office, we have been around since 1789 and the office itself is an a political office. i don't serve. i said this to my office last week. i don't serve. i don't get paid to serve the president. i get paid to serve the public and what i think is best in the interest of justice no matter who the president is. that's what we do at our office. as for the kind of work we have been doing, which is very aggressive policing of a lot of things, including albany and including wall street, it seems to me that part of the election on both sides was about whether systems are rigged. i can tell you from cases we have brought there is a lot that is rigged, on the street and in politics. the people in my office in an a political way, democrat and republican, who work there, democrat and republican who get prosecuted, they spend day after day after day doing those kinds of cases. i would like to think that the level of aggressiveness in law enforcement will remain the same

when you are talking about things like keeping the markets fair and keeping government honest. i don't see any -- i don't for see any departure from that unless i am missing something big. >> so you think there could be dangerous politicizing in the role of prosecutions. >> i any everyone has to be careful about that. the way we conduct ourselves in our office has always been a political. you go after the facts and whoever the targets are, no matter who they are, how much money they have, who they are connected to. i think we have a very, very strong nonpartisan or bipartisan record of going after folks that have violated their oaths of office and separate and apart from the financial prosecutions, the other big thing we do, one of the other things that gets a lot of attention, our public prosecution. we simultaneously charged, prosecuted and convicted the senate majority leader, a republican and the senate assembly leader, a democrat. we are blind as to what party people are from.

>> could we have a couple of minutes for questions? anybody of the 9% on the chart want to speak up? right here. >> do we have to give our name and company? >> yes, you do. >> mark wineberger. preet, when you started, you talked about being the ceo of your organization. tone to top matters and so does measurement. sometimes financial return, you get activity you don't like. i too was a regulator of the treasury and know how you measure people in government. a lot of times you are measured on how many convictions you get, how much money in fines you get. really, your job is to bring trust and confidence to markets, not just how many people you prosecute and get done. >> how do you balance that message yourself but rather bring trust and confidence and

the results matters not how many people you convict and how much revenue you bring in? >> that's a great question. it is very difficult. we don't make widgets. some of what i do is talk about the number of trials and what the level of criminal finds has been and how many convictions we have had in particular areas. i'm cautioning them. no metric can measure how well we are doing when you are in the business of something that's supposed to be pure and about doing justice. also, you absolutely have this problem. any business book you read or any leader you talk to, if you start having quotas of how you want people to perform, then people are going to gain the system in a way to give you what you want. the police commissioner used to talk about this all the time, ray kelly and bill bradley, if you start saying there have to be a certain number of arrests

out of a precinct, you look at certain manufacturing things. i don't have a great answer other than to talk a lot about how we care about how we do things in the office. to not have an overemphasis on numbers. if in one year we had 100 public corruption prosecutions and the next year we had 30, well then you have to look at that and see what went wrong. other one year you had 20 and the next year 40 and look at general trends. we don't have profit/loss numbers. the one thing i do like to say, sometimes when people try to take away our budget and don't appreciate there are some parts of got that work really well. my budget for 400 employees is $50 million. depending on the year, between asset forfeiture and criminal penalties and losses, we bring in 50, 60, 80 times that, which is better than any hedge fund i have heard of. >> one more question. >> i have one.

>> right here. >> i want to know if you watch "billions." >> so that's a highly fictionalized show in many, many ways. >> one last question for me. we have had waves of insider trading prosecution, '80s, '90s and then again recently. are we getting better at corporate governs in general over the last 20, 30 years? has a lot of shown be concerned corporate governance? are we any better or not? are we getting better generally? history seems to teach people get better at one thing and bad people teach how to screw it up in another way. what i do feel and understand anecdotally is that what some of our cases have done and some of the regulatory enforcement

actions have done have not necessarily eradicated bad people from places. it has gotten good ceos of companies to look at their fellow folks in the same industry, banks or otherwise, and say, there but for the grace of god go i. what can i make sure this doesn't happen here. how do we have better screening and hiring and better early warning systems to see if people are engaging in bad activity and bad conduct. my sense of things is based on the interest and events that i go to -- for example, we had this issue with expert networks when we part started bringing some of these insider trading cases and i think people's use of expert networks and what they meant has gotten better. it doesn't mean other people aren't trying to figure out ways to undermine things. a lot of folks have done a better job of trying to get on the ball.

>> thank you very much. >> thank you, preet. [ applause ] while congress is on break this week during primetime we're showing american history tv programs normally seen only on the weekends. tonight a look at world war ii. it starts at 8:00 p.m. eastern with spies and code breakers, followed will by the fbi investigation into a nazi spy ring. and world war ii veterans on american resistance in paris and the start of what is now the cia. american history tv primetime tonight here on c-span3. >> sunday, in-depth will feature a live discussion on the presidency of barack obama, we're taking your phone calls, tweets, e-mails and facebook questions during the program. our panel includes april ryan, white house correspondent for american urban radio networks.

my up close view of three presidents and race in america. eddie glaude. how race still enslaves the american soul. and editor david ma ran nis author of barack obama, the story. watch in-depth live from noon to 3:00 p.m. eastern on c span 2. ♪ >> the presidential inauguration of donald trump is friday, january 20th. c span will have live coverage of all the day's events and ceremonies. watch live on c-span and c-span.org and listen live on the free c-span app.

>> u.s. healthcare spending grew at a faster rate in 2015 than government estimates projected. according to the centers for medicaid and medicare services. economists and statisticians with the group presented their findings in this 50 minute event. >> we're pleased today to be releasing a paper that shows the national health spending for 2015. this is part of our ongoing partnership with the cms office of the actuary. they produce as you know the gold standard estimates for historical and projections in

health spending, by service type and the like. for the media in the room you have a flash drive with all of the materials, the press release has a link to the full report. i will remind you now and again the material is embarring owed until 2:00 p.m. today. i don't think it's very complicated to introduce the importance of this material, estimates of health expenditures in the united states are extremely valuable in their own right but obviously at a time when congress and president-elect are contemplating major changes in health policy, having a solid baseline and understanding of where we've been is critical as well as what you will see today beginning to document the spending effects of some of the recent policy changes should give us some incites into the possible effects of changing

those recent policy changes. so we have a team effort on the health affairs side to make this publication work but i particularly today want to acknowledge the team effort on the part of cms. we'll hear today from ann martin and the office of the actuary for the centers of medicaid and medicare services. you'll hear from michael hartman. they're joined by aaron katland and economy also in the national health statistics group they are here as resources as are other resources from cms. let me turn over to ann to begin presenting the results. >> thank you. thank you all for coming today. my name is ann martin, i'm here with other members of the national health expenditure account team to present to you

the results of national health spending in 2015 and the trends ta we will discuss today highlight some of the important points seen in our article. it will be presented as a health affairs web first 2:00 p.m. today and also at 2:00 p.m. all the data will be presented on our website. so to start off with some of the overall findings on national health expenditures, total spending for health care in the united states reached $3.2 trillion, up from $3 trillion in 2014. per capita health spending reached $9,990 per person, from $9,515 per person in 2014. overall rate of growth 2015 was 5.8%. this was faster than in 2014

when spending grew 5.3%. in 2013 when spending grew 2.9%. it was also the highest rate of growth since 2007 or since the beginning of the great recession. health care spending is a share of the total economy or gdp increased to 17.8% in 2015 from 17.4% in 2014. as an acceleration in health spending was accompanied by a slowdown in overall economic growth. on this graph, we are showing the annual rates of growth in national health expenditures compared to overall economic growth as measured by gross domestic product. following the great recession, which extended from december 2007 through june 2009, growth in health spending increased at similar rates each year from

2010 to 2013. then in 2014 and in 2015, after five consecutive years of historically low growth, health spending growth began to accelerate, increasing 5.3% in 2014 and 5.8% in 2015. at the same time, the economy grew 4.2% in 2014 and 3.7% in 2015. in this divergence in growth rates for the two-year period of 2014 and 2015, occurred outside of a recessionary period, and can be attributed to legislative changes closely associated with coverage expansions under the affordable care act. so this graph shows national health expenditures as a share of gross domestic product. in 2010 to 2013 spending was relative flat. however, as a result of health spending increasing faster than

2014 and 2015 would saw in the previous slide, health spending share of the economy increased from 17.2% in 2013 to 17.4% in 2014 to 17.8% in 2015. over the 55-year history of the national health expenditure accounts, largest increase in health spending share of the economy typically occurred around periods of economic recession. the 0.6% point increase in health spending share since 2013 which occurred more than five years since the end of the last recession coincides with major health insurance coverage expansions under the affordable care act, particularly through marketplace health insurance plans and the medicaid program. it also coincided with rapid growth and prescription drug spending. so on both 2014 and 2015, the

faster rate of health spending growth and the increase in health spending share of the economy were largely influenced by increased insurance coverage, rapid growth in prescription drug spending and increased yut utilization of services. coverage expansions that resulted from the affordable care act affected private health insurance and medicaid. it affected enrollment and spending primarily because of the number of people who gained coverage. second, prescription drug spending increased at a high rate of growth in 2014 and 2015, primarily due into creased spending for new medicines, particularly for the new speciality drugs such as those used to treat hepatitis c. next, faster growth in spending was also experienced for hospital care and physician and clinical services and was primarily driven by increased use in intensity of services associated in part with increased insurance coverage.

one of the biggest drivers was coverage expansion which had an impact on enrollment trends in both years. in particular, the aca affected enrollment for private health insurance and medicaid and had an overall effect on the insured portion of the population. just as a note, these categories are not mutually exclusive and therefore not additive. people can have dual enrollment and some people may have previously had insurance coverage but moved to another category. therefore, not all who gain insurance were previously uninsured. enrollment and private health insurance increased by 9.7 million people over the two with year period from 2013 to 2015.

in this category includes employer sponsored insurance which accounts for the largest portion of private health insurance increased by 3 million people over the two year period. it also includes other private health insurance which increased by 6.6 million. other private health insurance is mainly marketplace enrollment but also includes medigap and other directly purchased insurance. it was the net effect of changes among these different types of insurance that yielded a total increase of 9.7 million with private health insurance coverage. for medicaid between 2013 and 2015, an additional 10.15 enrollees were added and 9.8 million were eligible. medicare continued to grow at a steady rate as population ages increasing 3 million since 2013. the uninsured population dropped by 15 million. the insured share increased to

almost 91% in 2015. on this slide we are dividing up the factors that account in per capita health spending growth. in 2015 grew 5% compared to 4.4% in 2014. we are breaking down the factors in medical price growth, age and sex factors and residual use and intensity of services. medical price growth is indicated by the blue section of the bars and includes overall economy-wide price inflation over and above that of the economy inflation. in 2015, medical prices grew 1.2%, which was slower than growth in 2014 when it increased 1.8%. this was the fourth consecutive year where medical price growth was less than 2%. the overall increase in per capita spending was not driven by price.

the age and sex factors, which is the red section account for changes in the demographic and they typical makeup a consistent portion of growth from year to year and they increase 0.6% in 2015. finally the residual use and intensity of services as indicated by the green section of the bars captures changes in the quantities and mix of goods and services used and that increased 3.2% in 2015 up from and it was the primary driver of per capita health spernding growth in 2015. this is a strongest growth that we have seen in over ten years for this category including before 2009 or before growth and health spending was visibly impacted by the recession. growth and residual use in 2015 increased for almost all personal healthcare services but most notably for hospital care

and physician and clinical services. this pie chart just breaks up the distribution of the $3.2 trillion among the healthcare services and these shares tend to stay relatively consonant from year to year and in 201532% went for hospital services which is the largest category. the second largest category is spending for physician and clinical services at 20% and the third category was for retail purchases of prescription drug at 10%. in total these three services accounted for 62% of all healthcare spending in 2015. >> this chart shows the growth in health spending among goods and services for three years, 2013 compared to 2014 and compared to 2015. in 2015 growth was faster for

all services except for prescription drugs, which slowed. however, the rate of growth for prescription drugs was still the fastest growing among all services for the second year in a row. this was largely due to the introduction of the new and expensive special drugs especially those for the treatment of help atie tis c. both continue to experience upward growth that was driven by increased use and intensity of services and that was associated in part with the insurance coverage expansion and increased spending and medicaid. for nursing care facilities, however, growth was driven more by increased medicare spending and for other health, resident and personal care, the rest of the other services were largely influenced by insurance expansion, which again was

mainly through the increased private health insurance and medicaid spending. so looking more closely at hospital spending we're showing the growth rates from 2011 to 2015 and hospital spending accelerated for the second consecutive year, increasing 5 .#% in 2015 to reach $1.04 trillion. the faster growth in hospital spending reflected strong growth in private health insurance and medicaid spending associated with insurance expansions. it was primarily seen through increased use in intensity of services where the quantities and mix of goods and services used. for example, in 2015, hospital ut laization is -- both increased in 2015 compared to 2014. price growth was less of a factor in overall hospital spending growth this 2015 as it

increased at its slowest rate since 1998. here we are looking at spending spending continued to increase in 2015 by 6.3% following 4.8% growth in 2014. reaching $634.9 billion. this was above 6% in ten years. the faster growth was private health care spending and an increase this the use and intensity of services. because of the enrollment growth experiences and private health insurance and including position in clinical services. in 2015 pricing actually declined by 1.1% and driven by the exploration of increases to primary care physicians. as a result the entire increase spending for physician and clinical services was due to an

increase in non price factors. primarily due to coverage expansion. for retail prescription drugs spending reached 324.6 billion in 2015 and increased at a rate of 9% which was some what slower than the increase of 12.4% in 2014 but still much higher than the growth experience in the last two years. the rapid growth experience in 2014 and in 2015 was based on similar factors primarily increased spending on new medicines particularly for specialty drugs such as those used to treat hepatitis c and cancer and auto ill immune diseases. in addition the number of new drugs approved for use in 2015 was the highest in any one year in the last decade there's also price increases for existing brand name drugs and

since 2014 double price increases were reported for 2015. i'll now turn the presentation over the mika that's going to talk about the payers of health care. >> thanks a lot anne. so we're going to take a look at the distribution of health care spending by payer. as you can see health insurance is highest at 74% of the total in 2014. this category is expanded to the right of the smaller pie where we show private health insurance as the largest category at 33%. followed by medicare at 20% and medicaid at 17%. and then va, the department of defense and the children's health insurance plan also accounts for the remaining 4% of health

insurance. moving back to the larger pie on the left. the next largest payer is out of pocket spending and the expenditure accounts includes co-pays and deductibles and does not include any payments for health insurance and finally the last category, the last three categories is other third party payers and programs and investments and the last in total health care spending. on this slide we show annual growth in spending for 2013, 2014, 2015 and you can see that the most recent health care spending trends for all payers just before and during the affordable care act enrollment expansion. with private health insurance medicare and medicaid accounting for 70% of all spending in 2015 we'll discuss the recent trends for the growth in more detail on the next few slides. before we

do, i'll focus on the out of pocket spending that increased 2.6% and close to the recent average annual growth of 2.9% from 2011 to 2013. just following the end of the most recent recession but just before the start of the enrollment expansion in 2014 and 2015. and the increase in high deductible health care enrollment and higher cost sharing for these type of plans. annual growth has not been higher than annual growth in the national health since 1998. as a result the share of the total paid by out of pocket spending has declined steadily from 14.7% to 10.5% in 2015. as you'll note on the slide, v.a. and the children's program are increasing at double digity

rates in 2014. they account for less than 4% of the total and didn't have much impact on the overall trend. trend. and focussing on private health insurance we see the spending increased 7.2% to reach $1.1 trillion total private health insurance enrollment increased 2.6% in 2015 and reflects the net impacts of marketplace expansion of 2.63 million employees and increase of 2.4 million in 2015. the faster growth and private health insurance spending in 2015 was primarily driven by enrollment growth and faster for enrollee this included continued enrollment growth in marketplace plans, a pickup of employer sponsored insurance and increase in most dpz and services including hospital and physician and clinical services and due in

part to the new enrollees, that on average may have been sicker and had higher medical cost than previously insured individuals. looking at the medicare program we see that spending increased in had 2015 and increasing 4.5 percent following 4.8 percent growth in 2014. in 2015 enrollment growth slowed which more than accounted for the difference in the overall medicare program between 2014 and 15. per enrollee growth trends remained almost identical in 2014 and 2015 at 1.6% and 1.7% respectively. the spending includes slower growth for hospital due to reductions in dish payments and continued decline in readmissions. medicare retail prescription drug spending increased substantially in 2014 due in part to new spending on

hepatitis c drug: while that was faster growth for nursing home care due to an increase faster growth for nursing home care and some types of service provided and pick up in utilization for nursing home care. looking at the medicare program in more detail, in 2015 we see it accounts for 68% of total medicare spending while the medicare advantage program accounts for 32%. and as recently as 2011 fifa accounted for 74% of spending. the increase in the medicare advantage reflects the faster enrollment growth as seen on the slide. service spending reached 442.6 billion in 2015 or 1.9% growth. the slow down is being driven by hospital, physicians and retail prescription drug

spending. medicare reached 223 billion in 2016 and it's due to a slight increase in medicare advantage spending. and due to benchmarking the payment rates to be more in line of fifa service costs. turning the focus to the medicaid program we see spending increased 9.4% in 2015 to reach $545.1 billion. overall spending growth was strong in to reach $545.1 billion. overall -- it accelerated in 2014 to however spending per enrollee accelerated from 0.4% to 3.8% in

2015 and some of the reasons for the enrollee acceleration were that many states adopted higher reimbursment rates for some providers, medicaid supplemental payments were increased for hospitals and growth for other health resident and personal care services was strong as nearly every state took steps to expand care in the home and in the community. on this slide we show medicaid spending in total but also divided between federal and state and local spending over time. federal spending increased faster than state and local spending for the third year in a row although the difference between the two levels of spending was much larger in 2014 and 2015 due to the affordable care act expansion in the program. new medicaid eligible categories are established by 100%. state and local spending increased 4.9% following growth

of 1.7% in 2014 and it's due in part to increase payments to providers. at this point in the presentation we'll take a look at the sponsors of health care spending and we give you a sense of the impact of the recent health care spending trends and >> to give you how spending is realigned and run through a couple of examples. for out of pocket spending all of that spending would be move to the household category whereas all health insurance for private businesses is split between the employer portion of the premium and moved to the household category and sponsor and the employer portion of a premium which would be moved to the private business sponsor category. so with that in mind, in 2015 the federal government became the largest sponsor of healthcare at 29%, up from 3

percentage points from 26% in 2013. the share of households, private businesses and state and local governments all remained relatively stable with household and state and local shares declining a small amount in 2014. even with the increase in share, total federal spending growth slowed in 2015 due to slower enrollment growth in the medicaid -- due to the medicaid expansion population under the affordable care act which slowed in 2015. but spending growth accelerated slightly for all other sponsors in 2015 as you can see on the graph to the right. household and business accelerated slightly mainly due to increased spending on premiums from the esi population or employer sponsored insurance and due to increased enrollment in private health insurance. and state growth was faster due to the state portion which increased reimbursment rates of expanded care in the home and

community. so to summarize our presentation, we see that national health expenditures reach 3 at the time $3 trillion in 2015, the spend accounted for 17.8% of the share of the economy, up from 17.4% in 2014. increases of this magnitude typically occur around periods of recession. however the 0.4 percentage point replekts millions of individuals gaining health insurance cover ainl in 2014 and 2015. faster growth occurred in both 2014 and 2015 as the aca through the medicaid program and to a lesser degree in 2015 an increased in employer sponsored health insurance coverage. in all all of the population had some form of coverage up from 86% in 2013. in 2015 growth in nonprice

factors which include utization and intensity and for physician and clinical services. some of this increase was due to faster growth and private insurance picked up. federal health spending growth in 2015 remained high mainly due to the continuation of the increases in medicaid enrollment and all of the newly eligible adults were fully financed by the federal government. and so at that point i'm going to stop here. turn the presentation back over to alan, thank you. we know this is a lot to absorb, but it's your turn to ask questions. the floor is open. we have a microphone. hi. in looking at the historical table of year over year percentage growth i guess that's

exhibit 2 in the health fares article, it looks like the year over year annual growth of 5.8% short of returns closer to what historic norms were before the recession and yet there's obviously been a huge coverage expansion in the last couple of years. can you talk a little bit about if -- if health spending growth had returned to historical year over year growth without the coverage expansion, would we normally expect that to be even higher -- i'm sorry -- i'm not phrasing this quite as artfully as i would've liked but do you understand what i'm asking. >> unfortunately we can't provide estimates of what it would be without coverage expansion because this is what our data came in as and we report what it shows as far as the current law.

so it is obviously lower than we've seen in the history -- the historical accounts but we are coming off of the greatest recession in history, so the health spending was historical low for five years before insurance coverage started to pick up due to expansion and so we did expect to see a bump up in health spending growth, but we cannot parse out what it would have been without the coverage expansion. sorry. >>. [ inaudible ] >> hi kimberly leonard, first of all the share and the percentage of gdp for healthcare is 0.4 percentage points. >> in 2015. >> because there's a part in the

report that says 0.6. >> that's over two years. 2014 and 2015 are unique because we're coming off of growth that was very similar for 2010 to 2013 and they grew essentially the same rates of growth as the overall economy and it was historical low. so we're seeing the pick up in 2014 and 2015 which shows a distinct story of coming with the insurance expansion, so -- so some of the numbers are a two year time period. >> and so can you help me explain why we expect the share of healthcare to be higher during times of recession? >> because during times of recession typically healthcare spending remains at a level that -- that is higher than that of the economy, the economy reacts quick to changes in jobs and the healthcare sector takes

a little time for that to happen and for contracts to be renegotiated, so usually healthcare spending comes down after the beginning of a recessi recession. >> i just want to follow up on this question. i want to make sure i understood you correctly, so are you saying basically that normally you see the gap between gdp growth and healthcare spending growth open up during times of economic recession and not so much during times of economic expansion? >> according to the history that's what we've seen. we've seen the divergence during an around periods of economic recession. >> so this divergence currently does not fit the usual historic pattern. >> correct. >> and my follow-up question was just to confirm, did you say that this 2015 is the first year

that the federal government becomes the largest payer for healthcare. >> correct. >> okay. thank you. >> hi. i had a question about the slowdown in medicare. can you just -- and the hospital growth, can you talk specifically about the readmissions, the -- i think you said the prescription drug rate changes related to the catastrophic spending. >> so overall remain kind of flat but in the fee for service portion we saw the per enrollee expenditures decelerating so growing at a slower rate and so a lot of that was driven by hospital spending, physician spending and prescription drug spending within medicare. and so within hospitals and medicare, we had some overarching themes such as the

reduction in readmissions which brought down spending and also reduction just proportion share hospital payments. there are many other factors such as productivity adjustments, reductions in the health insurance technology, bonus payments so there's other factors but the largest ones are the ones we've mentioned. and then when you get to physicians, there was a smaller payment update in 2015 and then 2014, but the volume intensity of services continued to grow so it's mostly driven by the payment update for physicians and for prescription drugs within medicare. there was -- it's still a really high rate of growth. the fact that it comes down it's just coming off a super high growth rate the previous year. all that high rate of growth is due to the expensive specialty drugs that we've seen in this

hepatitis c drugs. what michael was talking about the largest part of medicare spending in recent years has been this reinsurance part where when the beneficiaries reach the catastrophic threshold, medicare payment kicks in and that's because they've been using more specialty drugs that get them to that point faster and medicare pays more. so that typically has been growing at double digits rates in recent years. it just came down a little bit in 2015. >> because patients per paying out of pocket? >> it's really not anything noteworthy other than the previous year was a lot higher, because of the introduction of hepatitis c drugs. >> hi. i'm going to take another cut at my question here. so i'm looking now at exhibit 5,

i guess, in the article. and here it seems like you're parsing the factors that are accounting for growth in the current period versus the decade earlier and if i'm reading this correctly this shows that a lot of the growth in the 2004 to 2011 period was driven by price increases whereas in the two years, '14 and '15 driven more by residual use and intensity, right? >> yes. >> if one were to look even further back into the past, are you able to say how unusual it is that the residual use and intensity is the largest factor driving overall spending growth? >> i can't recall offhand all of the factors for the previous years but i know that in like the eighties there was a lot attributed to price. so there have been -- there have been years where -- where price is definitely a bigger factor.

this is definitely noteworthy that the residual use and intensity driven by the coverage expansions has played a role in overall health spending growth. i would have to look some of that up. >> okay. >> hi. i'm just wondering if you all can say anything, if we can assess the impact of the shift to value base palts overall? can we say what kind of effect that's having on national healthcare spending? >> that's not something that we can really drill down to in these estimates. we take a broad look at overall spending and if something moves the needle that's going to be the top line and i don't think that anything stood out to us that regarding that topic. we would have to look into that

a little further. >> [ inaudible ] >> i want to talk about the state and local spending jump and i know that the federal government's share of medicaid grows gradually reduces with the medicaid expansion, but i'm wondering why it grew -- so we saw it accelerate by 1.7% in 2014 but then by almost 5% in 2015. is that higher than would be expected and do we know whether some of that might be part of the woodwork effect in medicaid where people are enrolling in the program who would have qualified before the aca? >> do you want to take that?

>> yeah. i need to bring up the growth rates but i do think there was some effect of increased enrollment that was not expansion related across some states. >> so some of the factors that we talked about in the presentation what's going on with medicaid was in the first year of the expansion you had 26 states expanding coverage for the medicaid population. the second year in 2015 we had three additional states, you know, participate with the expansion but some of the other factors that we talked about earlier in the presentation that wouldn't be reimbursed fully at 100% with the expansion was highering reimburntment rates and then there was, you know, the other health residential so trying to provide more care in the home and community so moving that care. so a lot of the shift that we've seen more recently in 2015 is

not as strongly driven by the expansion under the affordable care act as the growth and the expansion was not as strong in '15 as it was in '14 on the enrollment side. >> what are the higher reimbursment rates. [ inaudible ] >> and so at different points in time they try to make changes and to encourage access to care and other measures that they're trying to do state by state and so this was just one of the years where when surveyed this is what states responded that they would be looking to do in 2015. >> okay. >> i'm going to interject with my own question, since we're covering so much ground. i just want to seek some clarification around prescription drug spending. the numbers report here are retail spending. i wonder if you could since there's so much attention being paid to this issue if you could

help us all understand where do rebates fit into the calculation of spending and what share of prescription drugs spending is retail given that they're also other places that drugs are dispensed including in hospitals? >> we do account for rebates. they are subtracted so they're not included in our overall number. so if rebates are high that would bring down our spending level. i'm not sure of the exact proportion of spending over retail drugs versus hospital and physician, but i think it's the majority. >> i think it is a majority but we do not have an estimate of the share that is retail versus those that are provided in institution in other settings. >> our data comes to us strictly as retail and then whatever is provided in the hospital or

physician's office is automatically included in the spending that we report on those categories. >> thank you. yes? >> let's get -- sorry want to get the mic. >> to make sure i'm understanding this. so the growth rate for residual use and intensity, is that -- is it more people having coverage and using the coverage or is it more people also who have coverage using more use of services? >> both. >> okay, both things are happening? >> is that expected in terms of the bulk of the coverage expansions happening in 2014, was it anticipated that the use of services would continue to grow, you know, a year after that had happened and not just in 2014 is that how things usually work? >> it's typically expected in that type of scenario and after the recession there was probably a lot of pent up demand and with

the insurance expansion, it was expected to see more use and intensity of services. >> so any idea if this is expected to be a multi-year effect? >> we have no idea. >> typically does it? >> the way our methodology is constructed, we take the total top spending and we take out the price effect because we get that from bls and we also have national health expenditure deplater so we have a way of measuring prices and we take out the age and sex factors and the rest is -- that's why it's called residual. so it's -- it captured other things like measurement error or -- it can be a mixed bag, in other words, and so it's hard to make a prediction on what would happen exactly to that category.

>> i would just add that, you know, you asked if we typically expect that, so we typically don't have an expansion on coverage on the magnitude that we had as a result of the aca and that in -- there was big expansion in '14 but we also had a number of individuals that gained coverage in 2015 as well, so that's why you see that two year effect on the residual use and intensity and we will be hopefully -- we hope to early next year release our updated projections that will go out ten years where we can look at some of these trends going forward. >> can you explain again how you breakdown -- where you get to the sponsors, right? how you breakdown private businesses and households, because i think a lot of lay people might look at that and think most of that is not household but employer spending on health insurance?

how do you break those things down? >> so everything in the national health accounts is crosswalked into a category of sponsor. so for households, for example, it includes out of pocket spending, the portion of premiums from an employ perspective and for like the federal government, now the federal government is looked at and the state local government is looked at as a part employer on this chart so if the federal government is an employer, then the employer's share of premiums are going to go into there. so private businesses are employers as well and so the private health insurance portion is going to go into private business there. so there's a crosswalk where we take all private health insurance premiums and it goes into the different buckets and so i think mika was just trying to explain the employer/employee

breakout so the employee's share would go into household and the employer would be broken up between businesses and governments. >> so what i'm paying for my employer-provided, my share of my employer-provided premiums is counted as a private individual expenditure. >> in households. >> and is not counted on the employer side? >> correct. you're share is going to be in the households. >> our sponsor estimates are a way to sort of track who ultimately finances the payers and programs that we had discussed previously. so we want to take the premium payments that come from the household, put those into household. us as federal employees, it's same thing. so the federal share of our premiums that the federal government pays on our behalf would stay with the federal government, but the amount that we pay would go back to the household. and that way you can look at things like the burden of health health care. you can start to look at the measures of sponsors for health

care and revenue, state and local governments, see the burden health spending places on those sponsors of care. >> how important as factors are the changes that you mentioned, the age and sex and the level of sickness in patients? >> the age and sex factors are typically the same like every year. so it's about 0.6% of overall per capita growth every year. they don't change that much. and they take into account the changes in the demographic mix of the population. >> in the short run, they don't change very much. in the long run they will change as the population ages. but it's an index that we create that attempts to adjust for the different composition of consumption that occurs as the population ages. so in the near term, like anne

said, 6/10 thchlths of a percen the short term. >> following up on that, how is the distribution of sex changing and which sex on balance is more expensive? [ laughter ] >> yes, so we have another study where we take the historical data and we break it out by age and by gender. it's not as current as the data that we're releasing today. so we have estimates through 2012 on our website. and what we do is we break it into -- we can look at children, working age adults, and then sort of the elderly, 65 plus population. and in general, women tend to spend more per capita on health spending than males. there are several categories, i believe it's with children, and perhaps with drugs, children's

consumption of drugs where they spend more. i can follow up with you. we have a study thatooks at that. it doesn't take it through 2015. >> can you talk a little bit about the factors that go into explaining use and intensity? you mentioned obviously the coverage expansion is driving a lot of things. to what extent are you able to say that the growth in the high deductible plans may be depressing some of that? >> well, we don't have really any data on the residual use and intensity, because it's just the residual. yeah, it's what's left over. so we look for supporting information to explain the trends. and i mean, high deductible health care plans, i mean, they have grown in popularity over the last few years. and because of the higher deductible, people may not use as many services because they're

having to pay out of pocket until they reach their deductible. so it may deter. but we don't know. we can't like tie it specifically to the portion of growth that is residual use and intensity. >> other questions? we know there's a lot to take in. yes. >> just to clarify, so age and sex is not that important, but some -- i think -- mr. hartman, did you say that patients are sicker? >> that was a reference to what's going on with the marketplace. and so just looking at some of the reports that have come out recently, and just making some comparisons with this population as they just are getting experience with 2014 and 2015

about how they utilize health care, and one of the studies that we cite in the report talks about how they tended to be sicker and use more services and had additional chronic conditions compared to populations that were previously insured, already had insurance. that's what some of the insurers are starting to find with the population on average that's been expanded with the marketplace. and that's what our, you know, estimates show. >> thank you. >> i did find in my notes some of the details from our age and gender study. so in aggregate, this is for 2012, this is for an old older vintage of the historical data, but females spend more than males on a category basis. the only place where males spent more was for children, spending

9% higher per capita. >> okay. i'm just going to wrap up, then, with a couple of comments. first is one i make every year, which is that the data presented here are really critical, but a lot of the policy questions, why did something change or what was the effect of this change, those are sort of the stock and trade of the articles we publish in "health affairs." those require techniques that are not what the purpose of these estimates are. i don't want to detract from the value of these, this is raw material, but some of the in-depth analytics require time and are different from the ones the health expenditures team uses. please continue to look for that material from us as it evolves. i'll just remind you that in the press release, there's a link not just to the abstract but to the entire paper. as i mentioned, we have flash drives with the graphics.

please, 2:00 p.m. embargo, please honor the embargo. this material is under embargo until 2:00 p.m. today. thanks again to our colleagues at cms for their terrific work, for the effort they put into making these very complex data as understandable as possible. thank you for joining us. and we are adjourned. [ indiscernible conversation ] while congress is on break this week, during prime time we're showing american history tv programs normally seen only on the weekends. tonight, a look at world war ii. it starts at 8:00 eastern with spies and code breakers. followed by the fbi

investigation into a nazi spy ring. and world war ii veterans on american resistance in paris and the start of what is now the cia. american history tv prime time, tonight here on c-span3. new year's night on "q&a." >> while people were starving, van buren was having these fancy parties in the white house. it was part of the image-making, were harrison was the candidate, the poor man for the poor people, and here was this rich man in washington sneering at the poor people. harrison had thousands of acres of estates, he was actually a very wealthy man, but he was portrayed as the champion of the poor. women came to the parade and they waved handkerchieves. some gave speeches and some wrote pamphlets. they were criticized by the democrats who said these women should be home making pudding.

>> ronald schaffer, author of "the carnival campaign: how the rollicking campaign changed presidential elections forever," sunday night on c-span's "q&a." the c-span video library is an easy way to search and view c-span programs and to help through its use is dr. robert browning, executive director of the c-span archives. >> go to c-span.org, which is the main site, and look on the front page. on the left side are all the hearings and the presidential events of that day and the political campaign events. and then right underneath that, on the left side, is a link that says "recent events." and they appear in the order that they were on the network. you can search for a person's name. every person, 117,000 people have pages that contain all

their video. and on that page is a link, a search box, and you put in a word. so let's say you want sheila jackson-lee. and then you put in a word, let's say they talked about climate change. >> members of the congressional black caucus tomorrow will receive the signatures and public statements of those demanding that this body fully support president obama's clean power plant. >> if you want ted poe, he talked about iraq. put in those words, that will get you to particular spamall pieces, almost like paragraphs, where they made their remarks. >> the soldiers, second armored brigade team of the first cavalry decision, volunteers who swore to protect the united states. >> across the top we have a link that says all our video, our

clips, you can find all the clips that people make are available for other people to look for. >> who leads first, obama or assad? >> i certainly hope it's assad. >> i do, but i don't think so. >> there's another tab that says mentions. mentions are quotes that are valuable. >> what a bizarre decision by the president of mexico to invite donald trump down there. >> then on the far left side, there are breakdowns, much like you would find on any other shopping website, you could say i want to see a particular person's name, i want to see a particular senate committee, or a tag for a policy. the left side is very valuable for narrowing down. >> search, click, and play on the c-span video library at c-span.org. the future of financial

sustainability of medicare and medicaid was a recurring topic at an american bar association conference on health care policy in washington, dc. in this panel, two policy experts talked about the importance of the two programs and ways to improve them for future generations. this is about an hour. all right, hello. good morning, everybody! how are we doing? still alive? still awake? want to talk about medicaid? i'll take that as a yes. so, good morning, everybody. welcome to a moderatorless panel. we are going to make this work on our own. i'm matt salo, executive director the national association of medicaid directors. i'm going to be going first. and following me, as you can see, is david salisbury, an expert in the field and in all things texas. that's it for my introductions.

i'm going to go first, talk a little bit. then david's going to -- i'm going to do sort of a national view of medicaid issues. david's going to dive in, talk a little bit more about texas. then we're going to open it up for q&a. and then we'll get started. and i see my timer here is going, so we're on the clock. so, i am always pleased to be anywhere talking about medicaid. the most important program in the country that very few people actually understand or know exists, which is a real challenge. and like i said, i'm going to talk about things from a national perspective and try to do a little bit of a past, present and future, if i can do that within 20 minutes. we had talked about this session -- we had developed this session a couple months ago, prior to the elections. clearly, things are a little bit different moving forward in

terms of what the future will hold, and i will try to accommodate or acknowledge as much of the crystal ball that i actually have. but i think it's important to do a little bit of level-setting. as i understand, there's probably a couple of experts here and a number of people who are not deeply immeshed in medicaid. so as i start off at 30,000 feet and dig deep, i hope not to bore the experts at the front end or get too much in the weeds with acronyms at the back end of the hour. so, big-picture stuff. so you know, i represent the individuals in all 56 of the u.s. states and territories who actually administer on a day-to-day basis the medicaid program. and the medicaid program is one that is very difficult to talk about from a public policy

perspective. and we find this is true amongst lawmakers in general, amongst the american electorate, amongst any number of conversations. but i like to talk about medicaid as being a program guided by what i call two stickers, the tale of two stickers, one of which is the bumper sticker and the second of which is sticker shock, and i'll explain what i mean by both of those. the bumper sticker first. it's often said in debate or forensics that if you can reduce your argument or message on to a bumper sticker, then you're well on your way to winning any argument or debate or election.

and part of the challenge for talking about medicaid is that it fundamentally doesn't fit on anybody's bumper sticker. it is too complex. and you can try. you know, but compare it to say medicare, a program much more in the visibility of a lot of lawmakers. medicare's relatively easy to put on a bumper sticker. health care for old people. and you can get away with that and people understand what you're talking about. but with medicaid, the challenge becomes how do you put our mission and our goals and our function in the health care system on a bumper sticker? and the closest most people can come is -- health care for poor people? and that's kind of close, but that's really not very accurate for a lot of reasons. three of which happen to be, a lot of people that medicaid covers are not technically poor. a lot of people who are poor do not qualify for medicaid. and a lot of what medicaid does

isn't actually health care in the traditional definition of the word. so, what is it and what does it do? medicaid -- if you, like me, have seen the terrific movie "west side story," there's a great conversation in there between tony and riff. they're talking about how important their friendship is, and they talk about it being from birth to earth and from womb to tomb. and in many ways, that's kind of medicaid's functionality in the health care system. we are the birth-to-earth program. medicaid covers more than 50% of all births in this country. we cover more than one-third of all kids up to the age of 18. we also cover the majority of mental health services. we're well on our way to covering the majority of all substance abuse and behavioral health services. we cover the vast majority of

long-term care services. and basically everything, every service, every issue, every complex piece of the health care system medicaid owns in a very, very big way. but what doesn't it do? like i said, if you're a pregnant woman, if you're a child, there's a large chance that you're going to be on medicaid, no matter what state you're in. but the way that medicaid's eligibility rules work in many, many states historically, if you were the parents of small children, children would be on medicaid, but oftentimes the parents would find themselves left out. and in fact, there have been a number of states, states like a mississippi, i think texas, alabama, where if you are the parents of a minor child or children and you're working but

you're making 20% of the federal poverty level, one-fifth of the federal poverty level, as in you would have to make five times as much money in order to qualify to be at the poverty level, in a number of states, you're too rich to qualify for medicaid. and historically, in all states, most states, single adults, childless couples or parents of kids who are over the age of 18, no matter what your income is, if your income is zero, you do not qualify. so you can see medicaid does a lot for people who are not poor. medicaid does not cover a lot of people who are poor. and again, i'll come back to this -- huge, huge role that medicaid plays in long-term care, which i don't think we technically qualify as health

care, you know, when you're talking about home-based care, community care, nursing home care, et cetera. so it's extraordinarily complex. it does many, many things in the health care industry. it defies easy description. but we get to the other sticker, the sticker shock. it is a massive, massive program. we cover 73 million americans, and on a combined state and federal basis, we spent $500 billion a year. and the medicaid program is generally 25% or so of the average state budget. and by itself, it is 3% of the nation's gdp. it is a very large program. a lot of what it does, it does very quietly and people don't know or don't appreciate what it does. so, that's my very high-level overview of what it is and what we do. let me talk a little bit about changes and what's coming and

what we can safely or not safely predict. so, as i talked about, medicaid's a very confusing program. you have all sorts of weird, different ways to get eligibility and then barriers to eligibility. you know, historically, people without kids weren't covered, very low-income working parents weren't covered. the affordable care act, or obamacare, was intended to fix a lot of those problems nationally. and one of the key pillars of the affordable care act was a massive expansion of the medicaid program in practically every state. and what it did was to say that every american up to 138% of the federal poverty level would be

eligible for medicaid, no questions asked. which would have been a pretty significant expansion and change in role and purpose in a lot of different states. and it was interesting, because that didn't actually get a whole lot of attention during the debates before, leading up to, during and after the passage of the affordable care act. and ironically, it wasn't until a significant lawsuit found its way up to the supreme court. and the roberts court looked at a number of very, very high-profile questions, for example, the individual mandate, which there was, you know, a running bet of, i don't know 50/50 that they say that's constitutional or not. it wasn't until that lawsuit hit the supreme court and the roberts decision came out, and

they declared that, oh, no, no, no, the affordable care act is perfectly constitutional in all aspects of it. except, except that medicaid expansion piece that, frankly, no one was paying any attention to. that, that was the thing that they declared was unconstitutional about the affordable care act. and you guys are all lawyers. i'm not a lawyer. david's not a lawyer. so bear with us. but there were some really fascinating legal terms used in that decision. phrases like "economic dragooning" and "holding a gun to the head of states," which had i known this was part of the legal field, i might have gone into law school. that's pretty good stuff. but it wasn't until the decision came out that people said, what, medicaid?

there's medicaid in there? yeah. there's a lot of medicaid in the affordable care act. in fact, if you look at the affordable care act as a whole, as a law, the congressional budget office looked at that and said this law is going to spend $1 trillion over a ten-year window. half of that was medicaid. and again, really wasn't until the court came out and declared the expansion unconstitutional, people recognized it was there. it's a pretty important component of that law and of the health care system. so, that set in place a number of very, very interesting conversations where with the declaration of this expansion unconstitutional it became an option for states. and there was a lot of questions very early on about, well, what does that mean? what are my options, you know? is there a menu of things i can do? i'd like to talk to you about my options.

and as states went to the administration to say let's explore our options, the answer came back was you've got two options. you can do the expansion as envisioned in the original law or not. that's it. and that turned out to be just fine for half the states, and half the states said, that's great, we'll do it. we're going to get 100% federal matching funds for the first couple of years. that will phase down to about 90% eventually. that's a good deal for us. we'll do it. but other half of the states said, no, that's not good enough. and that set in process a number of very, very interesting political and ideological conversations between states and the administration about different ways to get there. and you saw starting with arkansas, which developed

something called the private option, which was essentially expanding medicaid but taking the vast majority of those individuals and actually enrolling them into private coverage in the exchanges, but taking a small number of the sickest, the frailest, the most medically complex patients, keeping them in medicaid tradition and kind of ended up with indiana, which got approval for something called healthy indiana 2.0, which essentially was a system of health savings accounts run through the medicaid program, and which for the first time in i believe the program's history, the addition of a beneficiary financial contribution in the form of a

contribution towards this hsa, that was binding, as in failure to pay would have actual repercussions. and those repercussions could include losing medicaid coverage for some period of time. never really been done before in medicaid. so that's kind of where we've got about 31 of the states who have done the expansion up until now and the rest have not. which kind of leads us into, what's next? so, we are having a lot of conversations around, well, what is the prospect for expansion look like in the next administration? and as people were thinking about, well, what would a clinton administration do to sweeten the pot to get the rest of the states to do the expansion coverage? how flexible would they be? what would that look like? but now we're in a very, very different scenario. and now there are two major

conversations that are going to be happening, that are starting right now, and are going to be occupying the attention of everybody who is interested in medicaid over the next several years. the first of which is repeal and replace of the affordable care act itself. now obviously, this is something that has been proposed and passed by the house and/or the senate, many, many, many times, but was never going to get anywhere under the obama administration. but now, very clearly, there's the votes. and you know, on some level, you kind of think about, you know, the scenario is, it's sort of like a dog chasing a car. you know, you can chase the car all you want, but what happens when the dog catches the car? i think the scenario here is that the dog has caught the car and the dog has to learn how to drive that car and not drive that car into a ditch and do so in a relatively small window of

time, because similar to what the obama administration learned, once -- you know, it's sort of the pottery barn philosophy of government. you break it, you bought it. and with the passage of the affordable care act, the obama administration owned everything that happened in health care, whether it was related to the act or not, good or bad. and what we will find now is that the minute that a repeal vote takes place, the trump administration and the congress will own everything that happens in health care, whether it's related to that repeal or not, good or bad. and they are going to be highly, highly motivated to figure out how to fix this and how to prepare this in such a way that doesn't completely destabilize the market. so there are going to be a lot of conversations now about what does repeal look like? all of it?

parts of it? just the stuff we don't like? will things be rebranded? will bad things be phased out and good things phased in? under what timetable? will it be set around the midterm elections? how much time do you actually need before the insurance companies, who are a pretty important part of this, look at this and say, we can't work in this kind of chaotic environment and we're going to pull out, and then, therefore, destabilize the market? one of the things we're going to be trying to engage with is to say, you know, to step back and say, some of these questions -- repeal, replace, should medicaid be turned into a block grant, big-picture entitlement reform, medicare reform -- these are very, very high-level, political

questions, and these are way above my pay grade and they're way above the pay grade of the state medicaid directors. but in many ways, the state medicaid directors are the people who run these programs, and like the mechanic, these are the people who understand how the car works. these are the people who when you open up the hood know where all those various hoses and cords go and need to be at the table to be able to help folks understand and appreciate what medicaid is and what it does. so, which leads me to the second question of -- because you know, in case the aca repeal and replace doesn't take up everyone's attention, there is also going to be a very significant conversation around medicaid reform. and converting it to a block grant, converting it to a per capita cap, making changes.

part of the challenge about talking about this, throwing around the phrase block grant -- to me, it's somehow similar to the six blind men trying to describe an elephant. you know that story. you've got one guy who touches the tusk and goes, the elephant is a spear. another touches the nose and says no, the elephant is a giant hose, you know, and so on and so forth, you know, touches the ear, it's a fan. depending on where you stand, what a block grant is or does or means could be very, very different things. and so, it's very hard to conceptualize what it could do, what it means. but again, from our perspective, i think the important thing is, we want to make sure that the people who are going to be thinking about these changes understand how the medicaid program works, what its role is in the health care system, and

how interconnected it is with everything else. and months that the -- i think the fear or the challenge is that -- and again, this comes full circle -- because medicaid's not terribly well known and often not very well appreciated, it becomes very easy to sort of dismiss it as a simplistic program or a, oh, that's just health care for the poor. and in fact, it's easy to look at medicaid and say, well, who are the people on this? a lot of pregnant women, a lot of kids, a lot of low-income, working families. and it's very easy to look at that and say, i know who that is, that's a welfare population. i know how to fix welfare. and you can go back and you can dust off 1996 welfare reform and say, look, here's a welfare program. it was an entitlement. we turned it into a block grant. we gave it to the states.

we talked about time limits, we talked about work requirements, we talked about personal responsibility, and it was a grand success. so, let's do that again. but it's critical to understand that that's many of the people who we cover, but that's not where the money is. the money in medicaid is in very, very different places. 40% of medicaid's budget is spent on medicare beneficiaries because medicare -- and i say this for the purpose of being somewhat provocative -- medicare's largely irrelevant for a significant number of really sick and really poor seniors. and we spend 40% of our budget paying the premiums, co-pays and deductibles, for paying acute

care and mental health benefits when medicare runs out, and for doing all of the long-term care in this country. and in fact, two-thirds of medicaid spending is on seniors or individuals with a broad spectrum of disabilities. that's where the money in medicaid is. that's what the medicaid program does. you have to understand that in order to make changes, and you have to understand that when you start to open up the hood. so those are the questions that are going to be going on. those are the conversations that are going to happen. i view our role as being educational and informative, trying to lay out the reality of the world without getting into very high-level, above my pay grade, political questions about should you or shouldn't you, because again, that will be for other people. so, let me stop there, turn it over to david, and then we'd be happy to take questions from all of you, so.

david. >> thank you, matt. my name is david salisbury. i've been chief financial officer with various health care organizations, large systems, mainly academic and/or public health systems for 25 years. and for the last two to three years, about three years, i've crossed over to the dark side to do health care consulting. so, what i'd like to do is just take a few moments to really kind of expound on, kind of drill down into what matt stated. we talked about texas and what's that like for texas, one of the states that said no to medicaid expansion. so, let me start first by just giving you a little bit of kind of the layout in texas in terms of its health insurance coverage. you'll see in the child care

population, ages zero to 18, texas has about 3 million individuals, kids in the medicaid program, and about 700,000 kids that have no coverage at all. that's a total of about 7.6 million people. we look pretty similar to the nation in this age category. where texas looks very different from the rest of the nation is in the adult population, the age 19 to 64. as you'll see, we have 16.5 million individuals, of which 1.2 million are covered by medicaid and 3.6 million are uninsured, which would give you a 3-1 ratio in terms of the uninsured versus those covered by medicaid. and the reasons for that, as matt stated, the coverage requirements are very strict and often well below the poverty levels. i think we do run a distinction as well, is that in total, we

have more individuals uninsured than we do in medicaid. so it's been a challenge for the state. if you look at it as a percent of population, you'll see about 40% of our children are covered by medicaid, compared to the nation of 39%. so again, we compare fairly consistent there nationwide, but it's in the uninsured population where you'll see in that 19-64 population, 22% of our population is uninsured, whereas compared to the nation, it's 13%. combined of all age groups, texas does run the distinction of having the highest rate of uninsured in the country of 18% in these two age buckets. as far as how medicaid is funded, you'll see that the top line there, medicaid is funded, 59% of its funding is from the federal government, compared to 41% provided by the state. that compares a little bit

favorably to on a national level, we're about 63% of the funds in the state come from the federal government and the state covers 37%. in total, texas has a $35.8 billion budget for medicaid in 2015. and again, $14.7 billion provided by the state and the remaining $21 billion provided by the federal government. because of that, our state is fairly heavily dependent on supplemental payment programs. you'll find that $9 billion of the $36 billion in texas is paid through various supplemental payment programs, the first of which is the 1115 waiver. texas has the distinction of having the highest approved amount waiver, had $29.1 billion approved over a five-year period that ended september 30th of 2016. broken up into two pools.

one is a delivery system reform incentive pool, which was used to transform the care provided to the medicaid recipients and the uninsured recipients through about 1,400 different transformational projects that are coordinated and run within 20 regions by various entities. texas also relies heavily on uc funding. the uc funding replaced what was formerly upl funding. what you'll see there in 2016, both of those programs were at about $3.1 billion each. the state also receives a fairly sizable dish allocation of $1.8 billion provided for the high medicaid and safety net facilities on that. on the long-term care side, the state had implemented what's called an impact program or a quality incentive payment

program that was really meant to try to bring additional funding to the nursing homes. as matt indicated, nursing home funding is one of the largest line items in a state's medicaid budget. and then finally, there's a program called network access improvement. that was developed to allow largely the academic medical centers and the public hospitals to try to develop innovative ways to enable access and expand access in the state. again, all in trying to serve largely the medicaid population, but in addition, this large uninsured population. so, currently, what are some of the hot topics in texas? so, first of all, there's really kind of three areas that texas today sees friction with, with cms over, and that is really

among many priorities, but these three tend to stand out. and as i noted earlier, uncompensated care funding is a significant element of how texas facilities are funded for their uncompensated care. and really, cms does not see that as a long-term solution. they certainly prefer expanded coverage as a solution and see that more of an integrated way to manage care and manage outcomes for that population. secondly, cms believes the medicaid program should pay adequate fee-for-service rates. by various calculations, you'll find in texas, texas health systems are paid between 55% and 65% of costs for care to the medicaid population. so you'll find that there's a significant shortfall that accrues to the hospitals when they do treat medicaid patients.

and then finally, cms has, i think, been on the forefront of trying to really innovate around managed care and innovate around various value-based payments options and quality incentives for the purpose of transforming how care is provided to this population. as well. and so, again, the state of texas has been slow to adopt some of the majors that other states may have adopted, and i'll talk about that in a minute. you'll see that in large part in 1115 waiver program. so, things that are really on the forefront in texas right now is, as i indicated, our 1115 waiver expired september 30th, 2016. it was extended through december of 2017, and now there is talk with the election results of another 21-month extension of

that program. it is, as i noted, a $29 billion program. and texas has about 1,400 disparate projects that are all geared towards different aspects of care coordination or improper deduction of care utilization or expansion of behavioral health and mental health integration in the state, but it has largely excluded the managed care organizations. and that's an area that even the state has recognized that we have to figure out in texas how to bring these two worlds together to try to continue to manage that population. the second area of contention in texas is its large dependence on an uncompensated care pool. as i said, it's $3.1 billion. and cms would like to see that

pool reduced and potentially rates expanded on that. that argument has to do with the availability of funding. the second area of contention between cms and texas has to do in the area of how it funds the intergovernmental transfer in order to pull down the matching funds. so in texas, for its uc program, the state of texas does not provide any funding for the uc program. its state portion is generated through public hospitals and other governmental organizations that have the ability to put up -- in our case, we put up 41 cents and we were able to draw down $1 or 59 cents from the federal government on that. a lot of that funding has occurred through a model called community benefit model, where

it becomes a partnership or where it becomes a relationship between various private and public entities. and in that case, the private entities -- or the public entities are, because of that relationship, are able to put up an igt. that particular arrangement has been in place for about ten years, and it has been under fairly significant scrutiny for ten years. and most recently, it rose to another level where the arrangement in the dallas-ft. worth area was disallowed and is now going through the appeals process. that occurred on september 1st. texas filed an appeal on october 28th, and now they're waiting for the response from cms. that's a significant issue for the state, because as i said,

the state of texas does not provide a lot, if any, funding for supplemental payment programs, which is about 25% of our funds. and so, what you're actually seeing happening now in texas is a lot of effort on a program called an lppf, local provider participation fund. it's akin in many ways to a provider fee program that you may see in other states. the challenge in texas is we don't like taxes or anything that looks like a tax. and so, texas actually currently has 11 of these programs in place at a county level, but they're typically in areas that only have two or three hospitals. but i think what's happening in texas now is that there is a realization that this community benefit model that's been

deployed for the last ten years probably has a limited life, and that the state has to come up with another model. so there's a lot of effort around the entire state to look at ways of allowing counties to implement this if they so choose and then these counties would then have to work with hhsc and our state to develop regional payment programs to help increase the amount of payment that's achieved through the payment rates. so that's kind of the current areas of focus. current areas of focus, where matt touched on really the hot-button issues with the election, on that. in my kind of cfo candid perspective, i think the health insurance exchange, i think in one sense, it may have a limited impact in texas, and that's in

large part because most of the insurers pulled out of the exchange in texas. i live in tarrant county. we have about 1.8 million people, and we have one option in our plan, and that's a blue cross option on that. and so, i happen to think that the optics of pulling out of that are probably fairly attractive from a political standpoint, but as matt noted, the mechanics of doing that are much, much more complex. medicaid's expansion is certainly a whole other animal in itself. even though texas did not expand, i think it's going to be very difficult to come up with a transition, a model to transition to in the short term. i think it's going to take a significant amount of time. i found an hfma article the

other day that said that states that did expand, the hospitals in these states actually seen an increase of $3.2 million in medicaid payments and a reduction of uncompensated care cost of $2.8 million. so you know, the impact at an individual hospital level is fairly significant, but certainly nothing compared to the impact on 15 million people who became insured as a result of the aca. and so, whatever happens with the medicaid expansion, i think a couple things have to be very, very high on the forefront of our elected leaders' minds, and that is, how do we protect this large body of people who now have coverage in that? how do we also, though -- the one thing that we don't talk a lot about is, you know, how do we continue to provide a momentum for the innovation

that's been achieved through the 1115 waiver and other waivers within cms in these transitions? because we've seen a lot of good things happen with patients, particularly in settings where mental health and behavior -- or primary care and behavioral health have come together. been able to improve outcomes, reduce hospital visits, reduce meds, the number of meds an individual's on. we certainly would not want to see the gains that we've had there occur. now, one might think if you read some of the national information that the block grant for the states that did not convert seems like it's kind of like a win-win. i think people are really starting to drill down on this now and starting to understand that, you know, a block grant approach, is that really a

friend or a foe to a state? you know, it was noted on a call i was on last friday, where the speaker indicated that there's potential possibility under a block grant approach that the state now has to assume a lot more financial risk for the outcomes and the cost of care for a population than they would under the existing program. and so, a lot of those details, obviously yet to be ferreted out. but i think we're going to find that this, you know, has its own set of dynamics and own set of issues related to that. often times block grant programs result in a replace-and-reduce type of approach where states actually end up with less money than they had prior to the block grant program. so the other challenge, i think, that people have to understand even to get to a black grant

program it takes probably two plus years to get through all the statutory and other requirements in order to enact such a program. and so we may barely see the impact of such a program before we hit the next election. so i think it's a -- for a red state, it's a -- it's a state of caution and potential optimistic but a cautious optimistic state. for texas, as i indicated, we are in the middle of extension periods for 1115 waiver renewal. it is a large program, as i indicated, in the state. and you're starting to see a lot of discussion around the state of some elements of the healthy indiana plan that matt referred to that may serve as

a potential model for what texas might look to in terms of trying to reform its medicaid program so i wanted to just take a few minutes to highlight that plan assuming you may not be familiar with that plan. but one i would reference -- the bottom of this slide i would reference a report put out by the lewin group of the analysis of the healthy indiana plan after its first year of operation. as matt said, it's the most aggressive type of 1115 waiver in terms of its expectations of how the beneficiaries behave and how they're held accountable on that, but we think it does provide some potential clues as to what a future 1115 waiver may look like in texas and some of the elements that we think may

line up well with some of the thinking occurring in texas so to give you a high overview, healthy indiana plan has five goals. they want to reduce the number of uninsured low income indiana residents. the reason is called the healthy indiana plan 2.0. it replaced a prior plan that had a small number of beneficiaries. so it allowed for a more aggressive approach to that population. it wanted to provide a value-based decision making approach through a health savings account. this health savings account is referred to as a power account. it wanted to promote disease prevention on that. and it wanted to use private market coverage mechanisms to do that, not state hhsc departments. finalley