we have a democratic strategist and a republican strategist. tune in to tomorrows addition of "washington journal." thank you for watching, and we will see you again tomorrow, at 7:00 a.m. eastern. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] . . ♪ ♪ >> next a house hearing on premature births and and and mortality. then remarks by the federal

reserve bank of minneapolis. now house hearing on premature birth and interest mortality. we will hear from witnesses representing the centers for disease control and the institute of national health. this is two and a half hours. cracks today we will be meeting on premature birth and infant mortality. -- >> today will be meeting of premature birth an infant mortality. we of looking at the causes and consequences.

they need to be examined. this is an important and complicated health issue. much is still unknown. according to the cdc, within half a million babies in the data states are born prematurely. the statistic is up 20% from 1990. we are just starting to see a decline. preterm births remains a pressing health issue which deserves ample attention as it is the raised the specter of infant mortality. it also leads to acute and chronic conditions. researchers are still trying to understand why preterm labor occurs. we know there are a set of factors that put women at high risk for having a premature baby. some include carrying more than one baby, having previous preterm births, high blood pressure, and diabetes. there are external factors that

occur alone or in combination with of the -- other individual characteristics such as age, race, and environmental factors, stress. we are looking at how these factors intertwined, and what we can do moving forward to them and their effect. i am particularly interested in hearing about the prevalence of stillbirths and suid within the infant mortality rate within the united states. stillbirths has risk factors such as maternal medical conditions, fetal factors, umbilical cord problems, and placental abnormalities. there is no known cause. many parents to not get answers to these deaths. no parent should have to endure the pain of losing a child especially not knowing why the child was taken from them so soon.

there is prevention evocation awareness act which will improve data collection and education so we can better understand the cause of these deaths and help parents get information so they can prevent this if possible. we are trying to create a national register to help researchers understand the scope of this and understand the scope of the cause of the debt so we can prevent this in the future. a month every child to have a chance to grow up healthy. and in mortality is a public health problem. i was like to thank all of our witnesses for being here. this is not a legislative issue on my bill but an oversight hearing. we want to hear more about these issues and determine if we should move forward with legislation. i guess we will go to the gentleman from kentucky at this time.

>> thank you very much. i want to thank the panel of witnesses for being here today on this very important subject. as the chairman said, half a million babies are born preterm in the u.s. each year. the center for disease control states that these births of the greatest risk factors for infant mortality with over poppa of all infant deaths due to pre-term birth. according to the institute of medicine, there is no one cause of preterm births. there are biological and environmental factors that lead to prematurity. one area that i am interested in and i think it is important for us to explore is the recording methods used by different organizations. we need to all have the same reporting standards so we can determine what the health

statistics are as it relates to infant mortality. the cdc ahead and in a national ranking available. the united states was 30th in the world in infant mortality. there is not one consistent reporting standard for many of the countries. it is important to understand uniform standard. of the forward to the information that will be provided today. -- i look forward to the information that will be provided today. >> next we will have someone from california. >> thanks for holding this important hearing. the fact that we have this bill being discussed, we have great a few health professionals in the

audience. we have a group on the hill visiting an organization with strong ties to this legislation. many assume that the united states does not have significant infant mortality rates would everybody has access to high quality prenatal care. it is kind of a given. prevention of prematurity and other complications is not a serious situation. the truth is the united states lags far behind other industrialized nations in infant mortality rates. and maternal mortality rates as well. why is this happening in our country? we have a problem of access. we have a new health reform law which put in to place several measures that can help our mothers and infants. training of more health-care

providers and universal health care will help improve the issue. there is more than -- more that we can and should be doing. i was proud to join in the recent capitol hill launch of a new service called text for baby. this is a new free mobile health information service designed to promote child health among underserved populations through simple text messaging. i hope to find a way to allow my constituents see this program. i hope that we will see more programs like this. the other important need is to better gathered data and conduct further research so we can develop a more coordinated in comprehensive strategy.

i want to sponsor some pieces of legislation. one is the birth defects prevention, risk reduction and awareness act. then there is a stillbirth and sid prevention and awareness and sponsored by our chairman here. having a healthy pregnancy and the baby should not be determined by the cover of your skin, where you live, or how much money you -- color of your skin, where you live, or how much money you earn. i pledge my camp -- continued support to make childbirth and safety for -- save for all moms and children. >> thanks. now from pennsylvania, the gentleman. >> prematurity is the number one risk factor in infant mortality

and the preterm birthrate in united states has been on the rise for the past few decades. not only is a potential -- fees babies can face a wide range of health problems, some lifelong such as breathing and respiratory problems, vision problems, increased susceptibility to infection, and intellectual the stability. we do not know precisely more babies are being born preterm, and we do know we need medical professionals to care for women and their babies. this brings the issue of medical liability to the forefront. we have a to the sun survey to determine how medical liability legislation and insurance

issues affect the practices of its members. some statistics and conclusions are amazing. of the survey respondents to reported making changes to their practice because of insurance affordability for availability or both, 19.5% reported a change in the number of caesarean deliveries. may decrease the number of high risk patients. 1014% decrease the number of total deliveries. some stopped practicing altogether. respondents were asked about making changes to their obstetrics practice s a result of the fear of professional liability claims in litigation. 30.2% decrease the number of high-risk patients. 49% reported an increase in

sales and deliveries. 8% stopped practicing altogether. i have heard from multiple ob/gyn could do to medical liabilities can no longer afford to practice in pennsylvania. they were retiring early, no longer delivering babies, removing their practices to nearby delaware. in philadelphia, 18 hospitals have closed their maternity wards since 1987. since two dozen one, pennsylvania has lost 3 to 2001, pennsylvania has lost 30% of their obstetrics doctors. it is the worst liability market in the world. it is a serious problem with

direct consequences for patients. particular rate for mothers and their unborn children. what did we do to fix this situation? refunded stated demonstration projects on medical liability. we have had it too large and quite successful demonstration projects on this issue. california and texas. we do not need more studies, but a real reform, and we need the new health-care reform -- and the new health care reform law does not deliver. >> next is a gentleman from texas. >> thanks for holding the hearing on infant mortality. the united states ranks 28th among developed countries in infant mortality.

among the leading cause is low birthweight, birth defects, sudden infant death syndrome, preterm births and low birth weight of the only factors as have not declined. we will hear from the march of dimes. an average of $64,000 was used to cover the inpatient and outpatient medical costs. it does not include the cost of potential reid-hospitalization -- re-hospitalization. $7.4 billion was paid to cover preterm fees. one commission reports that texas medicaid spent $408 million on causes associated with preterm births.

texas still leads the nation in percentage of uninsured residents. it has the third highest rate of preterm births. from 1990 until 2000, data showed the weight of preterm births increases -- 2006, the data showed that the preterm birth rate increase. -- increase. -- increased. one cost that has been pointed to is induced or cesarean births at 34 and 36 weeks due to a miscalculation of the

gestational age of the baby. the texas medical association and was concerned about delivering babies earlier than needed. a recommendation on maternal and prenatal health group of a concern for premature births occurred without a good medical justification. i am hoping that witnesses today will address this topic. i want to thank all about witnesses for being here and i appreciate the time. >> thanks. our ranking member is next. >> thanks. and not sure everybody is going to be able to make it up.

the appropriations committee is dealing with some testimony. >> i was told you were here before me. [laughter] >> that is my apology. the last thing on the record is we asked for someone to testify in the second panel, a republican witness. they did not give their testimony on time. that has -- i asked the chairman to invite the republican member of the second panel. i think that is appropriate. >> it is going to make it harder for me. >> lead by example. that is the key. thank you. anytime a child is born special

-- many members of the three hospitals and look at the premature babies. we have an analysis of data. we do have issues with making sure -- nobody is going to dispute that we are not as big as we could be in this country. we need to compare apples to apples. we did this in other committees. i hate when we are compared to others. we make sure that we want to compare apples to apples. other countries may not consider a live birth what we consider a live birth. let us throw that out there and

it clear data. if we are going to do comparisons, we will do comparisons. as always, i also want to make sure that as ranking member, i stay on record going for additional hearings on the health care law. we had a cbo report out this week saying we made a mistake. if there are $110 billion in extra cost. we were told this was going to save money. we know those statistics are not correct. we think it is time to start talking about this. we think it is time on this issue, the medicaid issue for the poor, as we a 18 million people to the medicaid rolls without funding, who gets left out? i think the very people we are talking about today, the poor

mothers with no care. we are $12.5 billion in debt. medicare is paying 30 cents on a dollar, 280 days late. the doctors who are servicing medicaid patients, some are just writing it off. some will start limiting that access to care. kathleen sebelius said we need more primary care physicians. this health-care law does nothing to give us more providers. we will continue to say, let's have some hearings on the law. i want to end with this. a recent individual who served on my staff left and went to

colorado and now works in the private sector she sent us an e- mail. as a direct result of the passage of this health-care law, her insurance company folded, her child who had a pre- existing condition has no coverage. as a direct result of this law, she cannot purchase insurance for her family, because her child has a pre-existing condition. we can have a hearing today. we can draft legislative language tomorrow. we can move it to the floor next week. why do we except a gap in this period of time. we were promised that that would not be the case. as chairman, hopefully you will

raise this issue, but we will continue to say, i think it is time to look at this more. i yield back my time. >> thanks. the gentleman from illinois. >> thanks. [unintelligible] can i have my time back? thank you. let me say that for chalet the health-care bill that we passed does allow for children with pre-existing conditions requires they be eligible for health care and not be excluded. .

this is significant attention on the infant mortality rates within the international community. as for our international partners, i'm constantly reminded that we have a crisis here at home. one out of eight u.s. babies is born prematurely. our colleague represents milwaukee, wisconsin. she often talks about the disparities that are so evidence in the infant mortality rates, 33 out of every african- american women die from premise related complications in 2006,

compared to the -- that of white women in the same time frame. health risks such as smoking -- a poor white woman is likely to have a healthy child birth than an african-american woman. most of our references has a disparity. when looking at the collective testimony, it does not seem that we know why there is such a discrepancy in the rates of premature birth. is it an access to health care issue? why is it that african-american women are 1.5 times more likely to deliver a preterm infant compared to a white woman?

i hope we get some of those answers today. while i am concerned about the federal we have hits, i do know that there is a lot of interest in collaboration in bringing the pregnancies to healthy term. we have a very interesting program, text for baby which is a collaborative effort along the health and human services and seven major corporations. to work with at risk moms. you can text baby and at risk young women can get the text messages reminding them to schedule a prenatal visits or get a shot and avoid drugs and alcohol. that is a small step.

a look forward to hearing the testimony today. thank you. >> we thank the gentleman. now mr. murphy. >> years ago i practiced as a psychology at a hospital in pittsburgh. there was a moment when i was seeing one of the babies there, very premature and small, transparent skin, hooked up to all sorts of equipment. another baby was born addicted to crack cocaine. i said, i have had enough of this. she said, run for office and change the system. here i am. the system still has problems. i hope we can deal with these problems. when we looked at murder rates,

they were going up or down. one factor not computed in debt was access to paramedics and the critical care hospital which makes a difference with the different rates of murder. it is important that congress does not miss read statistics and we get accurate information on a number of things. it is not just mortality but long-term development in outcome. we will talk about different issues. we need accurate information on what has happened. we need to know factors, is that education, family issues? maternal smoking, nutrition, drug use, age, complications? are there medical issues we need to know about?

access to level 3 nursery's? and a statistical analysis to make sure the definition for each of these is the same for communities in between nations. over the years, the children i have seen born premature, it is interesting now that some parent comes up to me to introduce their child whom i took care of when they were very young. in many cases, the job is successful and working. it makes me very proud that when you surround people with good quality medical care, that is a very important factor. of all the factors we looked

at, one of the most significant factors had to deal with where the child was cared for, how close they were to the medical care around. this is very important. i want to make sure that policy directly addresses these issues. we must make sure we have done a good job. we need to make sure we provide congress with this information. i yield back. >> thanks. the gentleman from georgia. >> i will waive an opening in the interest of the time of the witnesses. >> thanks for calling this

hearing. i am extremely interested in this subject. what concerns me most when i hear about cover cdc reports with regard to infant mortality, which we now is the death of a child within the first year of life, and you start stretching your head and saying, how can that be when we spend as much on health care in this country. clearly with all corrections that need to be done in making those comparisons, our

prematurity rate in infant mortality rate is too high. we need to make every effort to do something about that. i look forward to both panelists of witnesses to help us understand how we can do that. when we compare our country and to countries that counts a death in the first 24 hours of life as a miscarriage, and that is not a fair comparison. 40% of premature infants in our country are born before 32 weeks not just 72 weeks. many will die in the first 24 hours of life, 40%. some countries to not even counting those as live births. i think france does this, any child less than a certain weight

is not considered a live birth. others say any child less than 30 centimeters in length is not considered a live birth. we have got to compare apples to apples to get a true meaning and understanding. i am not going to say these statistics are necessary to make a point to have a universal health-care system or a single payer system or pass the senate bill that we did, but let's use the right statistics. it is very important that we do that. we should not overlook the need to enact meaningful tort reform. i believe republicans and democrats together can work

together on this issue, which most americans support. one more last point. i want to welcome dr. lawrence who is going to be on the second panel. he has been practicing for over 30 years. i am interested in hearing more about your mom's initiative. i hope your efforts could improve maternal and infant health. i'd like to find out ways we can work together on this. thanks. i yelled back. >> thanks -- i yield back. >> thanks. >> thanks for calling this hearing. i met with a constituency of mine, whose wife died during childbirth. explain to me the confidence such as a caesarean section, obesity.

he told me the gaps in research perpetuate infant mortality. i am interested to learn more about this topic in what we can do on these issues. there is an issue of access for expectant mothers. i have no doubt that the health care reform bill that extends coverage to millions of -- women and given the care they have not had previously. i also share a concern about rates paid in the medicaid program. at one time, the system that the federal government had oversaw the rates in a specific

amendment. in the house version of the bill, we put action that federal oversight. i would be happy to work on a bipartisan basis to put back in place this to make sure that states do the right thing when it comes to these rates and access of care. that is made much better by the health care bill and made even stronger with federal oversight. i am sure the panelists are happy to hear your testimony tonight. >> thanks. the gentlewoman from tennessee. >> thanks and welcome. i want to thank you for the hearing. memphis, tennessee has one of the highest premature an infant mortality rates in the entire nation.

it impacts our neighborhoods and our state. we know the impact it has here in our country. to many mothers do not have the information that they need and the educational resources to keep their babies healthy. dhs has stated that children of mothers that receive no prenatal care are more likely to be born and a love for freight and more likely to die than those that are born to mothers that get that necessary prenatal care. the earlier this year, a memphis newspaper reported that a premature birth and love birthrates heart sharing coincidences' in those low birth rates. this is an area where we have watched this very closely.

we were focused on this concern with this infant mortality rate. we have some great work that is being done to address this. we have programs. we have a partnership that we are doing in the public not-for- profit sector. we have a grant of $1.7 million they are working see you expand. we hope to reduce those rates. we look forward to your testimony. we look forward to working with

you on this issue. i yield back. >> thanks. next is a gentle person from florida. a lot of work has been done on this bill. >> thanks. i appreciate the hearing today so we can address this. i have concerns about the rising rates of preterm caesarean deliveries in the united states. this is for inviting one person from the university of south florida. i'd like to extend a special welcome to everyone at the march of dimes and the american college of obstetricians and gynecologists. the overall message for pregnant mothers and families and health

providers has got to be taking a peacefully to term, 39 or 40 weeks, unless there is an intervening medical reason. researchers just reported that the high rate of premature births is the primary reason the u.s. has a higher infant mortality rate than other industrialized nations. they are linked to mental disorders and developmental delays. brain development is the key to success for baby's when they become young and into their adult years. many premature babies are healthy, but sadly, many are not. some of them need constant care and have health problems throughout their lives. preterm births have declined in the u.s., but the rates are still high.

the rates in my home state of florida are much higher and of great concern. even with the greatest advances in science technology, we have a disturbing racial disparity to deal with. the pretense of birthrate is nearly 14% in my home state of florida. i am committed to working with you to bring that down. the syrian rate has risen across the country. 32% of all births as of 2008. -- the syrian rate -- see section --- c-section rate has

risen across the country. 32% of all births as of 2008 were c-sections. elected ones prior to 39 weeks put babies at risk. we need to understand these troubling numbers. there is speculation that there is over use of this procedure. they'd preterm births is a factor. these surgeries have been recognized as over used and they account for 92% of all preterm births from 1996 until 2004. i like to hear from our witnesses about this.

i am looking forward to your testimony. thanks. >> i would like to submit my statement for the record. >> of pay. thanks for holding this hearing. it is important that we examine the many risk factors and variables that relate to this tragedy. in iowa, five mothers lost a daughter got together and found a non-profit organization dedicated to preventing stillbirths and infant deaths through education and supports. this group of friends launched a campaign in june of 2009, which

is a public health and wellness efforts to improve pregnancy outcomes. this campaign is supported by the march of dimes to reduce the amount of preventable stillbirths by teaching expected brothers to -- expectant mothers to tune in to their babies. 55% of ob/gyn have began using the program. research has shown that this type of educational awareness has been very effective. a study conducted in norway reported an overall decrease in the still birthrate when patients reeducated and monitoring fetal movement. we could save more than a thousand babies if we achieve the same amount of success. it is hard to understand why this issue has not gotten more attention.

i think this should be an integral part to reduce stillbirths. i think the education and awareness act will improve the health of children, and hence activities related to stillbirth, and reduce the occurrence of infant death. i am proud to be a sponsor of this bill and i urge others to support this. >> thanks. i think that concludes our opening statements. we will now turn to our witnesses. we welcome you. we want to introduce our first panel. a senior scientist is one of our guests. we have a doctor is with us.

we have a five minute opening statements that become part of the record. and then you can submit additional statements in writing. a we appreciate you being here. >> thank you for the opportunity to participate in this hearing. i am acting chief in the division of reproductive health. i am board certified. prior to making the transition, i spent 14 years in private practice with women during their pregnancies. i will briefly outline preterm

births in united states and summarize the surveillance and research activities. preach chairman birth is being born less than 37 weeks. that is three weeks before the predicted today of the pregnancy. more than half a million babies are born preterm in united states. the cdc report released estate shows a small decline in the birthrate down to 12.3%, levels still remain higher in the 1980's and 1990's. most of the decrease was among late preterm births from 34-36 weeks of gestation. preterm births is an important risk to infant mortality. many deaths can be directly contributed to preterm births.

african-american women are more likely to deliver a preterm infant compared to white women by 1.5 times. we also need to think beyond infant mortality when we discuss prematurity. it is a leading cause of disability in children. the costs associated with preterm births has spent $26 billion. we ingest the 33 basic math -- mechanisms. surveillance is the core of our work. we monitor how many infants are born prematurely and we analyze trends. we collect birth and death certificates. the national statistics for premature rates are compiled from information on the birth

certificates. that information is linked to information on death certificates. we look at the causes of those babies who die in the first year of their life. the pregnancy risk assessment monitoring system is a state specific surveillance system to identify and monitor activities. -- this you need surveillance system represents 75% of all births in the united states. they led major birth defects which are important causes of infant mortality. we are working with partners to understand some of the biology among women who deliver preterm.

these studies focus on the interaction of jeans, other biological markers, race and ethnicity, and socioeconomic exposures for women. we do not know a lot about why these births increase during the last several decades. we are involved in a steady to review hospital records to discover why and how they occur. in the area of capacity building, we provide technical support for research, public surveillance, and state based programs. as we move forward, we will investigate how the quality of surveillance information can be improved and how it will affect public health practices. society measures what it values. as new ideas emerge and

possible prevention interventions, we will seek to legatees knowledge gaps through research. we will press forward as this group continues to comprise the largest portion of preterm births. flick and causes and prevention. we hope to have healthy babies and families. thanks for the opportunity to speak today. >> thanks. >> i appreciate the opportunity to provide the community with information about our research programs. im chief of the branch. our mission is to insure that every person is born healthy and wanted. we do not want women to suffer any adverse effects in the birthing process.

the one on church and to achieve their full potential, free from disease and disability. s we have heard from opening statements, preterm births is a major public health problem. it became the leading cause of death among newborns. those that survive, many children have mental retardation, visual impairment, answerable paulson. they appeared to be at higher risk for neurological and development difficulties. in adulthood, they have increased res for cardiovascular disease and diabetes. we are committed to understanding the causes and reducing the incidence of this. we have the lead federal agency

in working on this prevention held in june 2008. our efforts address these recommendations and range from basic work to research regarding specific question and the long- term implications on the mother and family. [unintelligible] one of the most successful approaches for research is one that allows physicians to coordinate their work and share data. and network conducts clinical studies to improve maternal and

fetal health. the of conducting high-pressure article trials. it focuses on babies in the intensive care units to improve their health and outcome. they have a steady the look at women in their first pregnancy. there is a large study to identify women at the highest risk for preterm births. they want to develop interventions and therapies. we are supporting a wide range of researches. in other emphasis is on one condition that causes preterm births. this disease is associated with

an abnormal development of the placenta. we look at the complications associated with babies born between 34-37 weeks. these practice guidelines have been looked at. in short cervical length is a predictive marker. women with a prior preterm births can lead to predictions of other preterm births. the best outcome would be to prevent preterm births in the first place. there are a women that address for another preterm births as a result of having one. we are looking at ways to lower

preterm births by one-third. the impact of this treatment was shown in a 2005 study. some birds can be prevented annually if certain women receive progesterone. in addition to setting preventive therapies, there is a way to prevent complications in the infants. there are ways to reduce the risk of cerebral palsy. they are also looking at how to manage care for infants. there were mixed results hover in one study.

we will have a conference in october of this year to assess the scientific evidence and the conclusions there of. there are higher overall rate in african-american women. we are trying to identify factors to explain these disparities. its scientific workshop will be held to focus on this. given the implications of preterm births, half a million pregnancies are affected each year as a result of this health issue. infant mortality can be improved with less heart disease and diabetes in the children and lead to healthier women and children. this is our goal. i am pleased to answer any questions you may have. >> thanks.

we have questions from the panel for five minutes. i will begin with myself. in your testimony, you discussed the role in surveillance in terms of monitoring infants born prematurely and identifying trends and risk factors. i did a sponsor one act, and i am interested in the collection of data to identify the causes of this epidemic. what are they doing to understand the causes and risk factors associated with stillbirths and unexplained deaths in childhood, and are there ways to reduce the risks? how would better data collection help reduce this in the future?

>> the national center for health statistics collects information on fetal deaths from fetal death certificates. they are not a birth certificates. it is called a fetal death report. they are able -- they are collected by states. they are compiled for the nation. the information is not always what we would hope it would be. they are filled out in real time in the hospital and sent in. there is a fair amount of variability in how people feel those out. they also look at how the fetal death is investigated at each level.

to do this correctly, there needs to be an autopsy, a fetal genetics steady. beazer not always done consistently. the amounts of information that is ultimately reported as to the cause of death can be variable. it leads us to not a good reason as to why it happens in many cases. efforts to improve its the quality reporting that each individual level would be important in terms of improving our information. there is also some pilot work that is being done at the cdc in atlanta. there is a birth defect surveillance system and some pilot work being tagged on to that to see if fetal death

registration can be used with the same infrastructure. if that is a successful, it can be expanded to other birth defect surveillance systems. thus collect much more nuanced information. about the sudden unexplained infant death, we have done a lot of fortune this area. we have learned that there is a difference between this and sudden infant death syndrome. the latter the more and more that people do investigations on the grounds in and around the time of the infant death, the more and more people are finding that there may be explanations.

we are in the process of establishing a pilot registries for that. >> thank you. i am going to summarize this next one. i think it is critically important that we do everything we can to make sure we have the right research infrastructure and i wanted to ask you three questions about the research network. we're talking about the maternal field medicines network and there is a very diverse population represented in the trials.

it depends on what the trial is looking at and how big the effect needs to be. we have had trials that have included the number of patients and we have recently completed a trial that included over 10,000 women. in addition, some of the observational studies have included many, many more women than that. the diversity of the population is assured when the network is openly and actively repeated. as part of that we competition, as part of who could be included in the networked include geographic diversity. your question about progesterone landmark study as the first preventative therapy identified for women u.s. had a prior preterm births. one of the common things that he

would see with a patient that has come in with a prenatal care, we would say that you are at high risk, but we had nothing to offer her. now we have something we can offer her that can reduce her risk of another preterm births by about one-third. that progesterone is now being studied and other high-risk populations. when you have multiple just asians are at risk. women with twins and triplets. that is very important to know that it is not a cure all for all prematurity. it is for specific conditions and it is currently being evaluated. there are a number of other studies that the network has undertaken that have impacted practice. one example is the use of steroids. those are given to women who are risk for delivering preterm with

the understanding that it will improve outcome for the baby. produces the complications. the network undertook a study looking at repeated doses of the steroid and found that it was not beneficial. it was a change in practice from repeating multiple doses of steroids. another example is one of magnesium sulfate. when these trials are published their findings are also often incorporated into professional guidelines. i can give a number of other examples as well. >> i think we better stop there. i majored go over. is not your fault. -- i made you go over. it is not your fault. >> thank you, mr. chairman.

either i am right and my constituent is denied the ability to purchase insurance on the sole reason of a preexisting condition of their child's or i am wrong and i would ask someone on the majority side to help me have a hearing on this issue to see who's right. i am asking for a hearing. i have a case of a former staffer who cannot get insurance because pre-existing condition of their child. my colleague from illinois said that is not true and i think this would be a good hearing to have on this issue of whether people under this health care law are being denied access because of pre-existing conditions. i am going to put that on my record. my colleague is not here from illinois rejected my claim.

but i throw that out as an issue. i appreciate your testimony and use a word i cannot even pronounced. i do have a question on -- the mission is to ensure that every person is born healthy and wanted. i am curious of why you have the word wanted their -- there. what does that mean for what you do? it is a curious word. can you explain that? >> thank you for your question. the question is, why the mission includes the word wanted and i will be the first to admit that the mission was created before i started working at the national

institute of child health and human development. i do not have the information at this time. i would be happy to get back with you. >> it is an interesting word. i do not know what it means. if you could get back to me. before we make conjectures and think things, i would just wait for a response. i just do not know what that means. let me follow up with this question. if individuals change their lifestyle, stop smoking and manage their weight, would that reduce of premature it -- would that reduce the risk of premature? >> the risk factors that you stated, it they lost weight and stopped smoking, would that reduce preterm births? obesity -- help the lifestyles are good for pregnancy. obesity itself has a mixed message on whether or not it causes preterm births.

starting out with a healthy weight is optimal for pregnancy for a number of reasons, regardless of preterm births. we would encourage all women to start pregnancy at a healthy weight. smoking itself is associated with smaller babies. clearly, it is one major lifestyle change that people can make that kind improve the the help of their children and remove the risk of low birthweight. >> infection itself may not be the cause of prematurity, but rather the inflammation associated with the infection. you agree with that? >> the question in regards to the role of infection versus inflammation with preterm births. preterm birth is a very complex condition. i believe there are multiple pathways that can lead to a preterm births. what is going to be an infectious pathway. the inflammation in itself can

also cause preterm births. >> are there contributing factors to increase inflammation that could be avoided? >> that is an excellent question. those are areas that are currently getting a piece out. it is likely that there is not a single factor that causes much of preterm births. whether you have certain to environmental factors, genetics, certain life style of dance that can ultimately result in a preterm births. >> we have to obstetricians and i am waiting for their questionings as their experts in the field. i yelled back my time. -- i yield back my time. >> i ask that we enter in this

letter from the secretary of health and human services to the speaker and to the republican leadership and it basically goes into the different provisions in health care reform on adult and child coverage pre-existing conditions, insurance recisions, medicare part b with the time lines. >> secretary sibelius -- the issue is that they are not. i would suggest that we have a hearing on this. >> i am just reading it. you know what it is. >> if people have no insurance, they could not get coverage for

pre-existing conditions? >> some insurance companies are offering to do it. >> my former staffer cannot get health insurance right now. >> it is not required. but it will be. >> september 23. >> but it is not right now. >> my point is, we could pass a law tomorrow to do this. >> does anybody have an objection as to entering this into the record? the only thing it says on pre- existing conditions, effective for policies beginning on or after september 23, to prohibit from excluding coverage. >> if the chairman would yield, i am going to continue to raise issues that we should have hearings on the slot. this is just another example of people not having access to health insurance because of pre- existing conditions. this is something that we could

fix. we could bring a bill to the floor tomorrow up and fix this. that is my point. >> if i could just stand in agreement with my colleague from illinois, who we handed an enormous task to the department of health and human services to create something on this lot that we passed a couple of months ago and it is incumbent upon this committee to maintain vigilance and oversight as they come up with these rules and regulations that are literally going to affect every american for the next three generations. i hope he will consider his request to hold the appropriate hearings at this level. >> the answer is yes, right? >> let me just have that back. if you do not have a problem,

without objection, it is entered into the record. >> do you object? >> you said know. ok. >> the gentleman from california has a the time. >> this has been a good discussion. to back to the topic. i want to a knowledge that there are many members of a non- governmental organization called care on capitol hill today because they are very interested in not only this hearing, but in other toppings having to do -- topics having to do with preterm delivery. one of them is a constituent of mine. we have nurses earlier as well. i appreciate the testimony that both of you have given us. dr. callahan, you included some

of the surveillance mechanisms that the cdc uses to monitor the pregnancy outcomes and and and help. health.t you mentioned that only 37 states and new york city participate in what is called the program and that the survey is representative of 75% of all burris. it is too bad that we can get closer to a hundred%. -- to 100%. >> the one thing i will say is that california has a very complementary system. >> we do something different,

that you cannot use it in the national data collection. >> that is parochial to california. >> the california system is good, but it does not help nationally. that is one of the barriers. maybe some kind of smart scientist could figure out to -- figure out how to coordinate it said that it will be useful to california, but also to the united states. >> one of the other problems left with some of the smaller states is the birds are so small and this is based on a sampling of burris and so some very small states it is difficult -- perhaps and it is difficult to get a sample that is representative. >> thank you very much. it gives me something to think about with my own state. i am very excited to hear of the

move to modernize of vital record systems. maybe this is one arena that we need to do this. there seems to be room for data collection. can you tell me what is being collected? maybe we are not asking enough questions when we are doing and data collection. what other data would be helpful to collect, especially with the kind of technology we have to collect and sort that? >> you are asking what other information could be put on birth tickets. we collect a lot of information on birth certificates. we collect a lot of information on the maternal conditions. we collect information about problems that occurred during delivery. one of the things that we have seen over again when we go back and do validation of that information is that it does not do very well most of the time.

>> there is room for improvement? >> at the level of data collection. data collection occurs individually. >> there might be some legislation that would be useful to you to help with the ctc to do a better -- to be more equipped to be able to do better is data collecting. >> if there is anything i could do in my career in public help, it would be to improve vital statistics. >> this is an area that would seem to be the low hanging fruit, if you will. some of the challenges that we face in this area, if we could put some bright heads together to figure out a better way to collect data and use it in a proper way, this would be very useful. >> there are some many factors

associated with preterm births. issues like diabetes, obesity , high blood pressure. can you say more about preconception help? this is such a huge issue. >> preconception care is clearly important to women who start pregnancy helped the and tend to have held their pregnancies. i cannot point to research or data that -- as to what exactly needs to go into that preconception care. many -- women who have a healthy lifestyle who are at an appropriate way to and to not smoke and 10th -- they tend to have healthier babies. >> thank you.

the gem and from pennsylvania. >> thank you, mr. chairman. i would like to ask unanimous consent to enter into the record a couple of articles and a list of studies that have found that women with prior induced abortions are at increased risk for premature birth and low birth rate. >> i do not see a problem. let me just look for a second. >> have many states used their master a settlement funds to start programs targeted at pregnant women?

>> i did not have the information at hand to answer that question. i would be happy to get that information to you. >> you mentioned that african- american women are morris then twice more likely than white women to have the preterm births. why is that the case? >> understanding that it is one of the holy grails to understanding the medicine. these are disparities that we have seen over and over again. they are pernicious. we adjust for education levels, so co knack -- socioeconomic status. it just does not go away. the gaps are even greater when we look at the difference between the most well-off

african-american women and the most well-off white women. the gap is even greater. the path to preterm birth are likely very, very complex. this has been likened to another group of diseases that we called, and complex diseases, like cardiovascular disease. there are lots of different ways to get there. our current hypotheses around this is that there are genetic factors, environmental exposures, such as stress, poverty, all of which are interacting to result in what ever happens that goes into spontaneous preterm births. if the answer to that question and if we could fit problem, at

our rate to be dramatically decrease in the united states. >> in 2006, congress passed the preemie act. one provision of the legislation to -- called for hhs to award grants, to conduct demonstration products for the purpose of improving the provision of information on prematurity to help professionals and the public and to improve the treatment and out comes for babies born preterm. the grants were to support programs to test and evaluate screening for and treatment of infections, counseling on good nutrition, smoking cessation, prenatal care. how many grants have been awarded under this program? >> we began receiving appropriations for the act in

2009. we continue to to work in preterm births as i outlined in regards to the interactions that we are looking at. the interactions between preterm births, race, a genetic factors, biological markers. they're people that cdc -- there are people at cdc that are working at appropriations and i would be happy to have them get back in touch with you. that is information that i am just not familiar with. >> i do not have much time. you mentioned the gnomic research. can you further expand on what we have learned about prematurity? >> there have been a number of

smaller studies looking at specific genes or specific alterations in jeans to try to identify why one group may be at higher risk. they have identified certain to changes in genes. however, that is not going to answer the question, looking at small groups of people one alteration at a time. because of that, we undertook launching a network to try to deal -- to do a screen and it really evaluate what the changes assisted with spontaneous preterm births. that network is ongoing and over the next couple of years, i expect we will have some findings. >> thank you. >> i guess we are going to the

gentlewoman from florida. >> correct me if i am wrong. i believe there is no conclusive evidence that links rise in sea section rates to premature the numbers or data that displays the increases in c-sections. the speculation is strong, however. the march of dimes reported that from 1996-2006, c-sections accounted for 90% of preterm births. can you talk about the kind of studies that must be conducted to get to the bottom of this? >> i was a co-author on that paper. it is really 92% of the increase in preterm births and not the

total preterm birth rate. still, that is a very compelling number. the issue about this really hinges are around the word cause. cesareanhis time, bee section have been rising. it is going up. i think that the issue around cause and maybe we need to look at this a little differently is not so much as a cesarean section that causes, but we should expand that a little more to say intervention. there are other ways for other decisions that are being made around delivering. i think that is what we need to get at, what kind of decisions are being made. there are always two steps in

this process. the first step on a clinical basis is the position and the patient together in the best circumstances make a decision that delivery should occur. that is the first thing that happens. should delivery occurred? the next question is how delivery should occur. that first that -- the first step is what we really need to get at. we have a pilot study in three metropolitan atlanta hospitals. we're going to abstract -- we're going to identify through vital records a group of infants that were born between 34 and 36 weeks, go to the medical records, and see if it is even possible to find a reason why the birth occurred. we're also planning on doing some key interviews in those hospitals to try to get some more qualitative information about what might be influencing

those decisions. what we really need to do is get at these process these. this is hard stuff. this is not just numbers. this is getting qualitative information about what process goes on and -- when decisions are made to deliver prior to term. >> the march of dimes have the best recommendations on protocol. it sounds like the steady in atlanta is something along those lines. would you support something like that on a broader basis as well? thank you very much. >> thank you. the gentleman from texas. >> i'm actually glad that subject, that you are having that discussion. in 2006, when we reauthorize

the national institute of health, there was important language in the bill dealing with the concept of doing the necessary studies. that thereconcerned was a movement toward collective cesarean section. within my professional life time, i saw rates go from 12% during our residency to probably 25% when i concluded active practice in 2003. now i suspect they are even higher still. his concern was that we may reach a point where we ought to have the data before we reach that point because once we are there, it then becomes very hard to walk back from patient demand on something along those lines. where are we with that? are we looking into the concept

of cesarean section rates and elected cesareans. are the rates of late prematurity a result of influence is either with cesarean section? do you have data on those issues? >> that is exactly what we're trying to get at now with those studies. there is also a study that i am involved in peripherally wearing my cdc had in florida trying to look at that. there are no national data on cesarean section on demand. >> it was his concern that we ought to get that data before it becomes an established norm. we would never people to go back to randomly assign people to groups. you know that. it becomes almost impossible

steady to construct. >> to do that on a national basis, to include all deliveries in the united states, would likely demand really changing our birth reporting forms to have that as a check box or questions on that. to the degree that that could be done, i would wholeheartedly support that. >> it is expensive to do that type of study. honestly, it baby something that we need to look at -- it may be something that we need to look at. i've represented part of north texas, the east side of fort worth. for work this were the west begins, but i have the east

side. we have some infant mortality rates, some of the highest in the country. if you look at african-american women and the infant mortality rates for that population, it is astoundingly high. yet, in dallas, the and the mortality rates are much more benign. you not to give racial disparities. both counties are large. both have significant urban populations. both have county hospitals. the difference between the two is the availability and access to what might be referred to as a community clinic. i have labored since 2005 to get a fairly work acquired held center. ly required health center. access may be a problem.

arguably, there is equal access because of the availability of a county facility. these are tax supported institutions. utilization was hugely difference between the two counties. i to be part of that to the fact that the availability -- the doctors were not were the people work. that is been one of the difficulties that i saw to overcome. do you have any experience out looking at things like that? >> we do not have a lot of experience in looking at that particular thing. i think you are referring to your home base and a report that they had about reducing preterm births and infant mortality. it is an intriguing model.

lookingin the 1950's, at a map of the dallas -- looking at a map of dallas, that is where he said at the clinics. -- he said of the clinics. we as residents would rotate to the clinic's back in the 1970's. on the other side of the trinity, that is not an established part of what people think about what -- when they think of going to john peter smith because it is a county hospital. we talk about how we spend money and we have to spend it wisely. that is one of the areas where we perhaps missed an opportunity in this health care bill.

thank you, mr. chairman. >> the gentleman from the virgin islands. >> i would like to ask unanimous consent and put into the record a written testimony from dr. brave men at the university of california san francisco. it is written testimony that i would like to insert into the record. >> ok. >> just for the record, and dino this is -- and i know this is cdc, i see no reason why the

preterm delivery is -- deliveries are not reported on. in the virtue lies -- in the virgin islands, it is 7.56%. that is in a largely african- american and porter rican community. >> i think it would be good for the administration -- >> thank you for raising the issues to help with the disparities in african americans. i did not have to do my opening statement. dr. callahan, what is puzzling and has been known for a while is that even in african-

american women who are well-off, well educated, live in supportive of surroundings, there is still a hire a low birth rates. they still have a higher rate of low weight babies. it is the research being done to determine why this is and are you -- this is following up on the other question. >> before -- i came to cdc in 2001. there is the name long history of cdc people together to look at this problem. a lot of the work -- what is the social context of pregnancy in african-american women? what is the effect -- what is

the context of african-american women in the united states and looking at the long-term effects of institutionalized discrimination, it institutionalized race, and how does that stress, which is very difficult to measure, we know that that stress exist. we also know that chronic stress plays itself out biologically. there is no question about it. stress is a biological phenomenon. there are pathways between what is going on in her brain and the brains are connected to everything. the hypothesis that some of these stress hormones actually are regulate the placental

clock. there may be messages coming down that it is time to be born in better not in the best interest of the woman for the baby, that is what is going on. we start drawing -- there are some speeding back on one another. they're almost not even lines anymore. the more important thing is not so much the recognition that stress plays a part, but the next step. how can we ameliorate the effects of chronic stress? almost a bigger problem than trying to understand that stress effects are biology. >> are you actually testing

women in any way to see what their level of stress is? we're talking about people who are working in great jobs, have a decent education. everybody has stressed. >> when you look at to -- and we look at these steps logically, individual stress is much worse when you sort of overlay their neighborhood context, for example, people who live in poor neighborhoods have a more profound response to stress as it relates to preterm than women who do not. nih is doing a lot of the fundamental work as well. >> before you answer, we're glad to hear about the august

conference that you are having. could you tell me if the -- if the people in these trials, could they tell the impact on the african-american or latino or american indian? >> thank you for both of your questions. i am going to take the second question first. the diversity of the patient population from the network is required by the competition every five years that the sites are geographically diverse and the population is geographically diverse. one of the best examples is that progesterone was found to be both equally beneficial in the african-american women and non african-american women. we do strive for that and we are achieving that. i would like to bring to your attention one steadied that that we currently have under way

called the community child help research network. the goal of this network is to involve the community itself along with the academic side to develop the interventions, to try if we could understand the disparities. and to try to see if we could identify potential intervention. >> thank you for your answers. mr. chairman, thank you. >> i think that completes the questions for this panel. thank you very much. it was helpful in terms of what we're trying to achieve. we may send you additional questions from some of the members within the next 10 days to answer in writing as well. i will ask the next panel to come forward.

let me introduce the three of you. on my left is dr. alan fleischman who is senior vice president and medical director of the march of dimes foundation. next to them is dr. charles mahan.

finally, dr. paul lawrence to is vice-president for practice activities for the american college of obstetricians and gynecologists. as week -- as you know, we have five minutes. if you want to submit additional materials in writing, you can. >> thank you, chairman. on behalf of the 3 million volunteers and 1400 staff members of the march of dimes, i want to thank the committee for your interest in the public health crisis of premature birth. the march of dimes is a national voluntary health organization. founded in 1938, by president franklin delano roosevelt to prevent polio. today, the foundation works to improve the health of mothers, infants, and children. their research, community

services, education, an advocacy. after three decades of increases in the rates of prematurity, the march of dimes is heartened by the news that the rate of preterm births has finally leveled off and has begun to decline. now was not the time to rest on our laurels. the life-threatening and lifelong consequences of prematurity can still be felt by more than half a million babies and their families. some 28,000 babies each year die before the first year of life due to preterm births. prematurity is also the number one cause -- contributed to infant mortality and it is responsible for lifelong disabilities. we have also learned that the complications of being born in the late preterm, just four-six weeks preterm, are also significant.

since one-third of brain growth and development occurs in the last five weeks of pregnancy, infant born just four-six weeks early are more likely to have significant long-term deficits, such as school learning problems, disabilities, and lower rates of college education. in addition to the severe consequences, the cost of prematurity is immense. the annual societal economic costs associated with preterm births are at least $26 billion a year. approximately half of 40% of states for preterm infants are financed by medicaid. hospital costs for these babies averaged $45,900 each. in recent years, we've seen several effective interventions to decrease preterm births to comprehensive quality strategies. the health system in utah

initiated perspective review of all elected inductions and cesarean sections and were extremely successful with dramatic decreases in early deliveries. parkland hospital in dallas, universal access to cultural sensitive services over the past 15-20 years. including high-quality evidence based care with accountability and continuous quality improvement has resulted in the lowest rates of preterm births among african-americans in the united states. for the march of dimes, the cesarean section question is simple. every baby should be delivered at the right time for the right reason. we applaud the guidelines and efforts of the american college of obstetricians and gynecologists. adherence to their current guidelines can make a major difference in the rate of preterm births and is needed in

every hospital and the united states. we're beginning to see some progress. to sustain and to be truly successful in reducing the incidences of preterm births, we require the continuing commitment of the federal government. that is why the march of dimes is seeking reauthorization of the 2006 preemie act. my written testimony provides more specific recommendations. let me be clear. further research is essential into the fundamental causes of prematurity. as the institute of medicine reported in the surgeon general's conference recommended, trans disciplinary funded by the national institutes of health with new dollars allocated for these activities will integrate a wide range of disciplines and steady this complex problem. second, we need to reauthorize and expand preterm activities at

the cdc division of reproductive health. to improve national vital statistics an increase community-based intervention programs. third, we need to reestablish the federal interagency coordinating council on prematurity and low birth weight to coordinate federal efforts and keep congress apprised of, -- progress on the issue of prematurity prevention. we hope that one of the outcomes of this hearing is that you will agree to work with us to grasp and obtain the swift enactment of legislation we authorizing and expanding upon the progress made as a result of the act. i am sure that each of you in the room join all of us at the march of dimes and look forward to the day when every baby will be born healthy and stay healthy. to buy very much. >> thank you. >> i finished my residency 45

years ago and practiced for the first 20 years and then morph into public health and directed the state health department in florida for a year's. i've been asked to speak to two areas of the committee. one was disparity and the other was some public help steps that we could take immediately and in the fairly short term, to start turning this around. a lot of people have already spoken to the disparity. the biggest problems are and african-americans. in florida, we have the most black births of any state in the union. our black-white infants debt ratio is down from 1.921.

-- 1.9 to 1. there is a chart on the testimony that shows a flood charged how these things -- a flow chart on how these things are developed. this is a very complex problem. you have root causes which upheld and health care are only two and stress has been mentioned. economics, education. family support and crime. all of these are things that can lead to problematic outcome in pregnancy. the two biggest factors that enter into preterm births are social issues and maternal help

when the mother enters pregnancy. i people smarter than i am, it has been predicted that if we correct its and every african- american woman got a great healthcare without addressing those other issues, we beat -- we may be able to nibble away at 30% of this problem. other countries that have passed us in this area have dealt with the education, the jobs, and the other things that are important leading into this issue. depending on where you live, this is not just the problem in the black community. in appalachia, which is mostly white, we have terrible pregnancy outcomes there also. we have different root causes.

25% of our patients at the frontier nursing service are addicted to prescription drugs. there is very little treatment available and many providers will not accept people that are addicted into their practice. the other issues that have been studied at ucla and in atlanta, black women are victims of what is called weathering. if you are a black mother that has a low birth weight baby, you're low birthweight daughter is more likely to produce a low birth weight baby. it may take three or four generations of being upper end, to actually shed the this weathering the system which they think is mostly due to stress. adding to that, black women have the highest rates of caesarean of any group in the country.

the second part i was asked is what public health interventions time we do to reduce prematurity. one thing you could do right now is pick up the phone and call cms antel medicaid to stop paying for collective inductions and cesareans. at any stage of pregnancy. i did not even agree with the recommendation of 39 weeks. we agree that that might be arbitrary, but there is probably no reason a normal woman should be induced, no matter where she is. the second thing is that in our studies in florida, we find that women that are agreeing to this -- and national studies show that generally win elective things are done, the doctor recommends it. the patient generally does not bring up the subject. in fact, less than one-half of 1% of patients do.

they are quick to go along with what the doctor recommends. we have designed some informed consent showing that elective procedures such as elective caesarean are hazardous to the help of the mother and the baby. they are not equivalent to having a natural birth. these are low-risk women. those are part of the attachments you will get. unfortunately you do not have them right now. natural birth after cesarean has essentially disappeared even though studies show that having a repeat caesarean is slightly more dangerous to the mother and the baby than having a vaginal birth. i would propose a new scale of payment for medicaid that would be something like $2,000 for a vaginal birth, $1,500 --

20005000 for a vaginal birth, 1004 see section -- $1000 for a c-section. in the short term, we could encourage the development of new pregnancy provider models. most other countries having midwife for primary care. for could even be used people with high risk problems co-managed with an obstetrician. i would recommend, and that is coming from me, that we stop producing generalist ob/gyn because the young folks coming out today do not want to work on nights and weekends and turned over to midwives backed up by an increased number of specialist. that is a model that i have work to end in gainesville over the years. it is a wonderful life style way

to work. i also put in here to pay midwives the same amount as obstetricians get paid for taking care of normal people. it was pointing out to me today that that is already in the new health care bill. forget that one. [laughter] i would encourage the movement to group prenatal care -- instead of individual prenatal care, especially for low-income women, so that they can do some community support of each other. >> can you bring it to close and we will move on? >> i think develop quality standards, i have an extension section on the cost savings that this could have. that would be in the tune of about $50 billion. >> thank you very much.

dr. lawrence? >> thank you. my name is dr. hall lawrence. i'm here today representing 53,000 physicians and partners in women's health care. preterm births is one of the most complicated and difficult issues. as a nation, we still do not know very much about the risk factors, the causes, and prevention. we do know that preterm labor is the most common cause of hospitalization before birth. there is a link between preterm births and infant mortality. the rate of preterm births is a growing health problem that cuts across social, ethnic, racial, and economic groups. our nation must do better. we firmly believe that we can make a difference and we are committed to leave -- leading

the change and we're very clear that deliveries but for 39 weeks gestation should only occur when an accepted medical indication for delivery exist. we have been intimately involved in a number of efforts over the years to improve research and practice guidelines to reduce the rate of premature births in america. we are nationally organized organization that helps shape -- shape maternal -- maternity care. these include practical information on preterm births, management of preterm labor, assessing risk factors, use of progesterone, and obesity in pregnancy. where research has not been conducted, the guidelines have to wait. preterm births can only occur -- can occur in any pregnancy. our current medical tools cannot

determine a woman's risk, except for women who have had previous preterm births. even so, the ability to predict whether a woman is at risk for a preterm delivery has a value only if an intervention is available to reduce or eliminate that rest. right now, we have very few effective interventions. . .

those include nih research to reduce preterm births and focus on obesity. the mortality reviews, modernizing birth and death records systems, in approving new safe motherhood program. the infant mortality review brings together local doctors and health departments to reduce infant mortality rates and improve the maternal/child health grant. comparative effectiveness research into pre-term birth issues. testing the medical home to address the unique issues of pregnancy, and corporatisupportg quality improvement measures. it is impossible not to mention the links between medical liability and the practice of obstruct the -- obstetrics performing the liver. a perfect pregnancy can turned

disastrous in a heartbeat. for no fault of the obstetrician/gynecologist, decimal bursts and see section -- vaginal births and c- sections can go wrong. doctors can be sued with the result of large rewards. we recommend exploring medical liability alternatives including early programs, health care courts, alternative dispute resolution, and birth injury compensation changes. i like to thank you for your attention to this important issue and your earlier comments. i would also like to thank represented burgess who plans to introduce legislation relevant to this hearing. it will provide for research on birth defects and breast

feeding to educate women on ways to reduce risk to their babies and have healthy pregnancies. i urge the subcommittee to quickly take up this legislation. i would also like to thank the chairman, we have been fortunate to work with his staff. i like to thank him for his focus on stillbirth and sudden infant death. we look forward to offering support as the legislation goes forward. thank you for the opportunity to provide this statement. a written statement has been supplied. we applaud your leadership on this issue. we look forward to working closely with you and the subcommittee. thank you. >> your testimony was outstanding. let me start by asking about the subject that you each briefly touched on. that is the inaccurate gestational dating. it seems there is a concern out

there. the recommendation is that you go fully to term. how do you measure in certain sub-groups that you have an accurate due date? is it based on cecile economic factors and education? is there something more concrete that we can get that? -- is it based on socioeconomic factors and education? >> whenever you have any recommendations on the timing of delivery, having inaccurate dates of the pregnancy is crucial. we have published guidelines on how you determine when someone is at least 39 weeks' gestation period those guidelines clearly state that you have to have had an ultrasound in the early second trimester to confirm an

estimated to date so you are sure they are 39 weeks. or you have to a packed 36 weeks of pregnancy following a serum or urine pregnancy test, or have documented fetal heart tones. all three of those methodologies will confirm that someone is at least at 39 weeks gestation period i know there is discussion about early trimester scanning. we think that is an interesting opportunity. we have discussed this. in great britain, the duke a booking -- they do a booking scan. when we weighed the benefits and costs of ultrasound's at 19 weeks of gestation, not only do you get a very accurate gauge

calibration within nine days, you also get a good anatomy evaluation of the fetus. there is a lot more benefit found. because of that, we have been unable to say that we should recommend two scans at this point in time. >> we talked about this before we testified. the 39 weeks that is recommended is something we should look up again. if a woman is entirely normal, why should she have the 39 week recommendation? mother nature tells you when term is because labor starts. the institute for health care improvement recommends that we wait for labor to begin.

we can see how labor goes, again, in normal people. you have to count on all of the things that dr. lawrence said for someone who is high risk if you have to deliver them early. >> we go back to the institute of medicine report in 2006 that clearly recommended early ultrasounds in the first trimester as the most accurate method of gestational dating. that combined with his street would give us a very important public health program to assure that the kinds of complex things that dr. lawrence is saying are the proper ways if you do not have the earliest of sense. almost every obstetrician as an ultrasound machine to another office. early, they to find the fetal

viability and the beatles gestational age. we would be making better decisions at the end of pregnancy. we know from intervention studies that if you put off until at least 39 weeks, you run a very low risk of premature taty. if you do not have accurate gestational dating, you risked premature births. >> i concur with you. this is great testimony. one thing i really enjoyed about this subcommittee and health care is that it is a caring profession. everybody is doing it for the right reason. adults, unborn children. with all of our fights and

battles, is great to have people who are very concerned. i am an old army infantry d guy. we are "keep it simple. " it seems like your testimony keeps it simple. god created human beings. the body tells us when. we should not be doing things unless we have to. there are ways to incentivize that financially. we are a third pair in the health care delivery system. -- we are a third payer in the health care delivery system. their opportunities to look at that. i really enjoyed the testimony. dr. fleischman, a state that there are several factors that

caused the increase in elective induction and cesarean deliveries. you made a statement about the litigious environment. i am from illinois. we've had a huge medical liability crisis. we had a supreme court campaign turn on this. all of our physicians were leaving the state. it was not enough. we have gone back to that. i know we do not like to talk about it. it is in your statement. talk about that for me. >> we're very sympathetic to the practitioners on their concerns and fears about the litigious environment. we believe the best way to prevent lawsuits is to have the highest quality care. set standards, a set of guidelines, and practice appropriately with appropriate accountability.

that protect the patient and doctor. i think we're moving in those directions. with the joint quality commission and other setting standards. cms is willing to set standards and quality measures. we think that high quality practice is the way for the obstetric community to ensure that they are able to protect themselves and their patients. >> i get it. if we do not have problems, you do not have lawsuits. how do you tie that into the courtroom drama that and falls -- and falls -- unfolds? how do you tie that to the courtroom? that is the issue. those are your words. you talked about the litigious environment and defensive medicine. >> we can stand tall if you

practice a high-quality medicine based on guidelines which. . care. if we do that, even if we make our way to the courtroom, we can have a reasonable defense of good, high-quality practice and decrease the incentives on the part of those bringing the lawsuits. >> you are not willing to talk about the courtroom dilemma faced? dr. lawrence, do you want to weigh in on medical liability? >> medical liability is a huge issue in our practice. you have heard this before. over 90% a practicing obstetrician/gynecologists have been sued. i could tell you that 90 percent signed are not doing bad things. i know that each of you know that. -- i can tell you that 90% of them are not doing bad things.

and know that each of you know that. quick to confine that in the military and schools. -- >> you can find that in the military and in schools. >> we work hard to put forth guidelines to enable a medical staff and hospitals to create practice parameters and protocols to take care of these patients. the problem for us is that even when you do that and do it all right, that does not guarantee a perfect outcome. reproduction has never been perfect. reproduction will never be perfect. there will always be adverse events. there will always be situations that are not predictable. somehow in this process, if the providers are doing everything right, we should not be held accountable for our adverse outcome that we could not have

prevented. that is true in the vbac situation and mentioned and in many other situations in managing patients' whether high risk or low risk. there can be a cord prolapse all of a sudden. i have been there. i have jumped in and then those deliveries. fortunately, they usually go ok, but not all of them. if you do it right the liability system has to recognize that and deal with that in a way other than a tort situation. >> i am going to follow-up on other things i would like to get into. time will not allow me to do that. >> true informed consent, how do

you define that and arrived at that? >> i have worked with the national coalition to improve maternity services on this for the past year, especially for informed consent for cesarean. we based all of our efforts on science. it is evidence-based. we did studies of the upper income and upper-middle-class people. we found was a last-minute, glossed over thing that was all going to be ok. in the attachments that you will get is a copy of the risk

checklist that women should be given at about 32 weeks of pregnancy, not at term, so that she and her partner can look at it. >> are they both supposed to sign it? >> are believe so. i believe so, and so is the care provider. this is just a suggestion. it is only been adopted by this particular group. when the mother looks at the section of possible problems for my baby, my baby is likely to have breathing difficulties after caesarean. it is normally best for labor to begin and so on. my baby is more likely to die than if it were born vaginally. it is not a high chance, but it

is statistically more likely to do that. the mother needs to know that. >> thank you. your third immediate recommendation, i would ask you and the others about the data on outcomes in vaginal birth after caesarean? does acog recommend a vaginal delivery after a caesarean? >> we just participated in the conference. there is a new practice bulletin about discussing this. we do recommend that women be offered a trial of labor after caesarean section, assuming that the section for whawas for a no- recurring cause like a breach.

we do recommend patients be counseled and offered the procedure. institutions have to be able to provide the services to support the procedure. the problem with vbac is when the risk of uterine rupture is low, it is less than 1%. however, if it occurs, there is a study from los angeles county that shows that you 12 minutes to get the baby born or the baby will probably not survive. if it does survive, it will be severely handicapped. because of liability concerns, many institutions and providers have said they're not willing to

put the baby at that much risk. at the same ni consensus conference on bvbac one of the attending from parkland stood up and gave a scenario of a perfectly managed vbac. this patient had delivered vaginally after previous cesarean section. this puts her at lower risk. everything was going great. the uterus ruptures. the crash cesarean section. the baby did not do well. $11.5 million against the institution and physician. that group no longer does vbac's. that is the scenario that this has placed on many providers. that is the reason there is concern about the procedures. >> i will follow-up. i believe it was an excellent conference.

the issue we have to deal with nnow is what dr. spong's studies have shown. you can lose babies and mothers with a repeat caesarean. the problem we need to deal with is tied up with the liability issue. since so few hospitals are providing vbac, women in communities that cannot get it are turning to home birth because they cannot get it anywhere else. they have such a bad experience with their first pregnancy that they do not want to go back to the hospital. we are worried about that. it is another reason to deal with the liability crisis. >> i think the fundamental question is how to decrease

primary cesarean sections done unnecessarily. we know if we induce a woman when she is not ready to deliver, she is highly unlikely to result in a caesarean section. we put the woman in the position of having to choose vaginal birth after caesarean. that is the real challenge. >> you mentioned the institute of medicine. the institute of medicine recently published a 570-page resource book entitled open court pre-term birth: causes, consequences, and prevention. gabortion is noted as an immutable risk factor. however, the risk factor is avoidable if women are given

risk information prior to pregnancy. i would like for each of you to respond to this. i know that 59 studies found that women with prior induced abortions are at increased risk for preterm births and low birth rate. this is a two-part question. do your organizations ecology abortion as a risk factor? -- your organizations consider abortion as a risk factor? do you inform women of the risk factor? >> at the march of dimes, which continually monitor the data -- we continually monitor the data you mentioned. the most recent data from modern techniques and termination cannot give convincing evidence of that as a significant risk factor for preterm births. we do not raise that issue within our materials. >> dr. mahan?

>> i do not know the answer to that. i just read the executive summary of the report. one of my problems was it was not dealing with the elected induction/cesarean issue. one thing in my testimony that i hope he will read is that one of the key things to improve maternal and infant health in the u.s. is pre-conception care. intra-conception care with women who have had a low birthweight baby, we just drop them and wait until they have the next pregnancy. we know it would be best if we help them to pregnancy for least two years. -- we know it would be desk if we help them to space the

next pregnancy for least two years. we need to do the same thing with diabetic mothers. in florida, we woke up last year. the cdc told us we are 51st of all the states plus the d.c. in providing reversible contraception to women. this is the 50th anniversary of the pill. when the pill came out, i was a student in chicago. the average family size was 6.5. now, it is 1.5. if you want to reduce abortion, if it does cause this problem, we've got to stop putting our heads in the sand about helping people to space their pregnancies. >> i am aware of the data. we do review the data. i also agree with dr. fleischmann. more recent studies with more

recent technologies do not show a correlation between interest pregnancy termination and premature birth. i also think that dr. mahan is right on target. one of the benefits of the health care reform law is that patients will be able to have ongoing, continuous care. the best way to have a healthy baby is to have a healthy mother. on going well-womens'health care, rolled in with pre- conception care is a major factor in helping to reduce preterm births in improve maternal and infant outcomes. we have an opportunity. >> dr. fleischmann, i did not the response. do you believe comprehensive medical malpractice reform would help providers stop

practicing defensive medicine? >> it is the detail of what it means would be -- >> like what they have in california or texas. >> we have not taken a position on that of the march of dimes. >> absolutely. >> dr. lawrence? >> i am in total support for a comprehensive medical liability reform. it will help in all areas of medicine. >> i am out of time. >> we have a series of crucial votes. the entire nation hangs in the balance in 15 minutes. [laughter] we will have to take off and do those. i appreciate you staying with us. your answers to questions are intriguing.

i am going to answer mr. pitts' last question for you. defensive medicine is learned behavior. physicians of another generation are not likely to unlearn that behavior overnight. it will certainly help. but when i am criticized by the president because we did liability reform in texas and mccallen is still place where health care is expensive, you are not going to change it overnight. i do not think there is any question. i remember the studies that came out of los angeles while i was still in practice. they threw up their hands and stop offering vbac's for a while because of the liability issue. dr. lawrence, restored of what the group intuit the $11 -- of

what the group got into with the $11 million judgment. that is 11,000 vbac's we will have to do to cover the cost of the $11 million judgment. the numbers do not work out. we have to undertake a more sensible medical justice system in this country. i do not know what it is. unlike earlier offer. i-- i like earlier offers. what is going on in texas seems to be helping in a big way. it is not as holding down the cost of premiums for physicians, but holding down costs for institutions that self-insure reliability. it allows smaller, not-for- profit hospitals to have more money to invest in capital improvement and salaries, the very things we want them to do

in our communities. i stand behind what happened in texas. i would have liked to see us do more in the health care law that passed. unfortunately, we did not do it. dr. mahan, use it for medicaid to stop paying for elected infections, and that may be great in theory, but we have a problem at home. you can have a hard time finding a doctor who will take medicaid because the reimbursement rates are so much lower than commercial insurance. as a consequence, are we likely to make it more difficult for the woman to get prenatal care because we have created a hostile environment for practicing positions -- physicians. they may have gotten over the

funding issue but may not want to practice when they're telling them what to do. >> we're working on the issue in florida. we did find an association between the rising rates of caesarean and the rising rates of we preterm -- late preterm. that will be published soon. we found our colleagues understand this is producing bad outcomes in women and babies that otherwise would have been normal. they should not be delivered by cesarean or induced if they are normal people because the outcomes are worse. we're finding most of the ob's as we approached them and say we're producing bad babies because of this, they're extremely willing to listen to

that and change their practice. i agree that from state to state, the medicaid rates are problem. half of our berths are medicaid. these are doctors taking care of them. they seem to be willing to step in and reverse this. in the health care law that just passed, there was a protection for primary care. medicaid rates would be 75% of medicare rates. in your state, are obedgyn's considered primary care? we do not know. that is up to the secretary of health and human services. we're all going to be surprised one day. even then, if it iwe get them

determined as primary care to get 75%, the funding kicks in in two years. we're back to the pre-existing medicaid. all of this becomes terribly difficult and complicated. one last observation. dr. lawrence, a reference the medical home. that is what the generalist obgyn was when i was practicing. if some say the generals are not helpful and that we should go to midwives and perinatology thist. i would submit to you that positions of my generation were trained to do that. >> we still traine obgyn's to do that. we are the primary for women's health care from teen years

through menopause. we're definitely care providers and corridors for obstetrics patients. we are the ones were able to intervene when a key crises occur. -- when an acute crisis occurs. >> we're going to have to bring a hearing to a close. i would like to ask dr. fleischman to spend one minute on the implications for brain development. you have a terrific visual exhibit here. i am afraid they will not be able to see it at home. please describe the difference in brain development from 35 weeks to 39 and 40 weeks to close out the hearing. >> we developed this visual for a project in kentucky to help women understand that 1/3 of the growth and development in the brain occurs between 35 and 39

or 40 weeks. all of the neurons and nerve cells that interact with each other are continually growing in the last five weeks. that growth and development is critically important to the fetus. it can happen outside the uterus, but it happens inside the uterus if the fetus is not in jeopardy. -- but happens best inside the uterus if the fetus is not in jeopardy. it helps physicians to know what to say. it helps women to not push hard for inappropriate early delivery. >> thank you very much. all of the witnesses have been terrific today. that concludes the questioning. i want to remind the members that you may submit additional questions for the record to be answered by the witnesses. the questions should be submitted to the committee clerk within the next 10 days. the clerk will notify your offices of the procedures. without objection, this meeting of the subcommittee is adjourned.

>> and we will save a great formation. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] >> the supreme court nominee moderates a panel of the six judicial conference. on monday, president obama nominated solicitor general kagan to replace john paul stevens who is retiring at the end of the term. that is today at 7:00 p.m. eastern here on c-span. >> in the relentless

revolution, joyce appleby describes the history of capitalism. >> the new president of the minneapolis federal reserve, narayana kocherlakota, talks about financial regulation. he was appointed last october after 10 years as a consultant to the minneapolis fed. he discusses the financial regulation bill before the senate and his ideas for limiting bailouts of financial institutions. this is about half an hour. >> the key for the generous introduction. it is a pleasure to be here. -- thank you for the generous introduction. it is a pleasure to be here. i was here in august for the top. richard gave a fantastic talk. the theme of his address was to hide your banker h --u-- hug yor

banker. [laughter] i thought about following that up with "kiss your banker,"but decided to go on a different direction. bankers collectively that that house prices would not fall within three years. we were wrong. this discrepancy between our expectations and realizations was the cause of the crisis. the congress is currently considering legislation to restructure financial regulations. no matter how well written or well-intentioned the legislation, no law can completely eliminate the types of mistakes that lead to financial crisis. these mistakes have taken place periodically for centuries.

they will certainly do so again. once these crises happen, there are strong economic forces that lead policy-makers to bail out financial firms. no legislation can completely eliminate bailouts. any new financial regulatory structure must keep this reality in mind. my theme today is that although bailouts are inevitable, the magnitude can be limited by taxes on financial institutions. i arrived at this conclusion at this use of taxes by thinking through an analogy i will develop at some length. i will argue that knowing bailouts are inevitable means that financial institutions fail to internalize all the risks that their decisions impose upon society. economists would say that bailouts create risk externality there's a century of

thought about how to deal with this. usual answer is through taxation. i will suggest the logic for taxation is applicable in this case as well. any views that a share today are my own and not necessarily those of others in the federal reserve system. the case for taxing the banks is distinct from other arguments. the thinking usually runs the taxpayers put money into the banking sector and the banking sector should repay all of the money. this is fundamentally grounded in the desire for revenge. some big banks, perhaps gone forever, it took our money so all big banks must pay. it is a means of exacting retribution from the guilty to compensate the innocent.

the big banks are seen as being guilty of being greedy and arrogant and way too good at math. my story is different. some big banks did make socially undesirable choices. but in large part, they were led to make these choices by incentives within the tax and regulatory system. there was the ultimately correct expectation that some bailouts would take place in the event of a pfennig to crisis. these government guarantees created an incentive for institutions to make socially undesirable choices. taxing is a useful way to correct this incentive. earlier, and claimed that bailouts are certain to occur in financial crises. there are many forces at play.

i believe the strongest has to do with the nature of financial mediation. investors of financial institutions always want the ability to pull out their funds quickly. financial institutions liabilities often take the form of short-term debt and deposits. these instruments are prone to self-fulfilling crises of confidence economists have named the "runs." banks need large amounts of loans each day to survive. for a given winter to be millwig to make up $1 billion loan, they have to believe the bank will get another $1 billion in loans from somewhere else. bank x may fail simply because every possible lender believes correctly that no other lender is willing to lend to that bank.

this crisis of confidence can occur regardless of the true condition of bank x. this story is hardly new. it is why we have deposit insurance, to prevent runs, by reassuring depositors that the money is safe. the story has huge consequences for how government operates. in a financial crisis, there is a tremendous sense of uncertainty. there are some truly insolvent firms out there. no one knows for sure which one they are -- which ones that are. with panic in the air, any institution may be subjected to a run if confidence falls. contagion effects can become extremely powerful. even a slight loss by one short- term creditor to lead all short- term lenders to rushed to safety. such flights when in danger the

survival of key financial institutions even if they are fundamentally sound. government cannot risk systemic collapse. in times of crisis, they end up providing debt guarantees for all financial institutions. policy-makers inevitably resort to bailouts even when they have explicit resolve in the strongest possible terms to let firms fail. many observers of the events of september 2008 have emphasized the need for better resolution mechanisms. different people mean different things by this. most want to impose losses on debt holders. i do not believe better resolution mechanisms will stop bailouts. i am led to make a prediction. no matter what mechanisms we legislate now to impose losses on creditors, congress or some agency acting on their behalf will block them when we face

another financial crisis. congress or its agencies will do so for a very degrees in, to forestall a run on the key players. that is my first point. bailouts are inevitable. let me move to my next point. bailouts create inefficiencies in the allocation of real investment. here is what i mean. financial institutions make investments in risky by their nature. the returns are not certain. the finance these by debts and deposits. imagine that we live in a world without bailouts, or the government does not provide guarantees, and there is no deposit insurance. to increase the risk level of a portfolio, the debt holders and depositors would face a greater risk of loss. by way of compensation for the rest, the demand higher yields. as a result, financial

institutions would find it more costly to obtain debt financing for risky investments and for less risky ones. this effect on the margin would curb the appetite for risk. it would have an especially powerful effect on highly leveraged institutions. high debt to asset levels mean a higher risk of being unable to fulfil debt obligations. that was the artificial world without bailouts. let's return to the real world with deposit insurance, that guarantees, and the inevitability of government bailouts. even if the only kick in during crises, these change the relationship between risk and cost. the depositors and debtholders are partially insulated from risk and do not demand a sufficiently high yield for riskier firms.

financial institutions to gone too much risk. they're no longer deterred from doing so by the high cost of debt finance. the missing deterrent is especially relevant for the institutions that are highly leveraged. they would be paying very high yields on their debt by taking on risky projects and investments. the expectation of bailouts leaves to too much capital being allocated for overly risky ventures. these allocations of capital do not create the collective mistakes and predictions that create crisis. but the misallocations do mean that society loses a lot more for these mistakes. bailouts are inevitable. the bailout create inefficiencies. we now move to what kind of policy we should use to correct this. i am going to use an analogy

that comes from a different arena of public policy. suppose you have a factory create air pollution as a byproduct of operations. the firm that owns the factory chooses to produce more output. incurs various private costs for materials, labor, and so on. the production also generates more pollution that will be adorned by the surrounding communities. the pollution is a social cost of production. economists refer to such costs as externalities' because their external to the firm. it is this distinction between private and social cost that is applied to financial institutions that face that guarantees. the guarantees imply that some portion of the risk produced by a firm's decision is absorbed by

taxpayers. affirmed ignores that portion of the risk. it is the social cost of the product that the firm does not internalize. just like pollution, the risk is an externality. this analogy is useful because it helps us and know how to deal with externalities. the long history says the best way to correct externality is to provide incentives through taxation. let me be more specific. think about the firm that is polluting with the factory. many of its choices affect the amount of pollution produced. how long they run the factory during the week, technology employed, the kind of energy that runs the factory.

the government to regulate the pollution level controlling each and every one of these choices. to do that, the government has to choose how to trade off these three factors and a bunch of other ones against each other. the trade-off decisions of the government will be influenced by pollution considerations and cost factors. the anti-pollution technology is something the government may require the firm to invest in. if the technology is expensive, the government may require a them to switch to natural gas instead of coal. making these trade-offs on affirmed by a firm basis requires firm-specific information and know how. historical evidence suggests that governments are not good doing this. that is why we have private markets and firms.

the solution to the difficulty is not to regulate how the firm produces pollution, rather to regulate the amount of pollution produced. pollution has a social cost of the firm does not internalize when choosing the level of production. for society, the firm will overproduce pollution. the firm will choose a socially functional level of pollution if it is required to pay for or externalize the cost of that pollution. to be more concrete, suppose the firm is told before choosing the level of production that the government will measure the amount of pollution produced and charge the firm a tax equal to the social cost of the quantity of pollution. the policy will generate a tax schedule that translates the amount of pollution generated by the firm into an amount paid by the firm. if the firm knows it faces this

tax schedule, the cost of production will include the social cost of pollution along with the labor, materials, and energy. what was external to the firm is now internal. as a result, the firm will choose a socially efficient level of production. it will automatically choose to produce the pollution and more beneficial outputs in a better fashion. we do not need the government to serve the problem. these lessons about pollution regulation translate directly to lessons about financial regulation. as in the case of pollution, a financial institution should be taxed for the amount of risk that is borne by the taxpayers. the firm will then choose the socially optimal level. here is my preferred policy. the firm is told that the

government will estimate the expected discounted value of bailouts that the financial institution or a stake holders will receive in the future. i say expected because the amount of the bailout is unknown. it is likely to be 0 much of the time. i say discounted because the bailout could be next year or in 30 years. we have to discount accordingly. clearly this estimate will depend on many firm choices and attributes. these include leverage ratios, liabilities, investment portfolios, and compensation schemes. expected bailout will be higher for firms with risky investments and those with less risky portfolios. having done the calculation, the government charges the firm tax that is exactly equal to the expected discounted value of the bailout.

just as in the pollution example, this measurement + taxation policy confronts the firm with a tax schedule but translates its choices into a cost paid by the firm. the tax amount is equal to the extra cost to taxpayers because of bailouts. it is an appropriate adjustment for this, time, value, and money. the firm no longer has an incentive to undertake inefficient and risky investments. the investment choices will be socially ambitious. it is useful to tax them justic as it is useful to tax fr pollution. it is to ensure the firm pays the full cost, private and social, of its production. i emphasized that the pollution tax corrects the pollution

externality without creating new cost inefficiencies for the firm. the risk tax has the same property. policy-makers and considering responses to the events of the past two years. these include higher capital requirements, leveraged capps, and restrictions on compensation. all of these potential changes are good if they serve to lower the amount of risk taken by financial institutions. they also create new kinds of inefficiencies for the targeted firms. imposing new restrictions on incentive compensation is may hamper the ability of a firm to motivate employees. the proposed risk tax could correct the externality without creating new inefficiencies. there is one part that i sleep

through that is very difficult -- that i skipped through it is very difficult. there would have to estimate the future value of bailout payments. these calculations are likely to be complex and a number of ways. howevthe calculations to be controversy. financial institutions with risky strategies get high profits when the strategies are working. they would be required to levy higher risk taxes on those institutions that appear to be extremely successful. for these reasons, it would be useful to develop an objective way to compute the required tax using market information. here's what i have in mind. for every relevant financial institution, the government issues a rescue bond. the rescue bond pays a variable coupon.

the coupons is equal to transfers made by the taxpayers. you might want to pick a small fraction. any fixed fraction will do. much of the time, this coupon will be zero because bailouts are not necessary. the firm will not receive transfers. just like the stakeholders, the owners of the rescue bond will occasionally receive a large payment. in a functioning market, the price is equal to the1/1000 of the discounted value expected. the government should charge the financial firm a tax equal to 1000 times the price of the bond. this approach can use for a wide variety of financial institutions including banks.

in principle, the government does not need to be that precise about which firms are systemically important and which are not. they could simply issue a rescue bond for every institution. the market would reveal how systemically important it is through the price of a rescue bond. markets are not perfect. it would not be appropriate to rely only on market measures to choose the proper tax. the price of the rescue bond would create -- have valuable information for the input costs. i have talked about bailouts been inevitable. i have talked about the inevitability of bailouts living -- leading to inefficiencies and how we can use taxes to fix the distortion. as i mentioned at the beginning, they are considering

changes to the financial regulatory system. in december, the house passed the wall street form and consumer protection act of 2009. the senate is deliberating restoring american financial stability act of 2010. there's much to like in both of the legislation's. neither one incorporates the kind of risk tax on describing. the senate bill proposes no new fixed taxes on financial institutions lost one fails. in that event, taxes would be levied on large surviving institution's regardless of whether they engaged in excessive risk-taking. the house bill has a new risk- based assessment of large banks and hedge funds. the risk adjusted tax could have desirable effects on the targeted firms. however, the tax will and when it raises $150 billion.

this capa's problematic. the tax only has a deterrent effect on taking a risk when it is operational. -- discount is problematic. -- this tap is problematic. the bills failed to include the new levies that i propose. both bills significantly underestimate the extreme economic forces that lead to bail outs during financial crisis. the opening language of the senate bill declares that it will end taxpayer bailout. the objective is laudable but not achievable. thinking that it is can lead to poor choices about financial regulation carried let me wrap up. bailouts will inevitably happen during crises to prevent systemic collapse. we need to structure a

regulation to limit the size and occurrence of these bailouts. how should we best design such regulation? the social distortion we face with guarantees create risk externality. financial institutions do not bear the full cost of their choices. financial regulations should be designed for the best externality. . .

>> all home mortgages, i don't believe they're addressed in the reform legislation as being contemplated. i don't think given their government agencies they'd be subjected, maybe they would the tax you're contemplating. could you address that? yeah, i mean -- the long run i think that we would rather have markets providing this kind of service are providing currently. but we're in a current situation that we're in and we have to plan appropriately for the transition somehow. i do not have a plan. certainly it's true that fanny mae and freddie macked a the

guarantees i was talking about it and it was socially desirable. there are many things i think we would want to correct in doing mortgage finance in this company. >> i have a question. trying to think through your theory for a second. if we provide a tax that is supposed to normalize the risk, is there a difference then in the returns to share holders between one firm and another firm? i mean, what is the difference between them, when we've normalized all of the risk? >> the only risk i'm seeking to normalize is the risk taken on by taxpayers. so that a firm that was all executive finance for example, just to take the extreme, there

would be no tax with my proposal at all because there would be no guarantees. so the only portion of the tax, of the risk taken on by taxpayers by the fact that they stand behind with some guarantees. probably if you would only had some small amount of executive it wouldn't apply. if you were not, viewed important. from small bank or financial institution or small firm sales, they're not going to have to be taxed on this firm. so it's only about correcting for the risk that's taken on by taxpayers i'm interested in correcting. >> so there would still -- obviously there will be return differentals among stocks because of that? >> my question has to do with where your policy would lead. you know, given three issues, most of these large banks or multibusiness firms, ok?

secondly, there's an old rule of thumb that most everybody agrees with, now taxes are paid for by customers and not just business firms. and third taxes like all expenses and cash can move between businesses. doesn't a policy like this, where you're taxing the most risky affect ship those cost to others, or wouldn't that impact some of the lebbeding activities that they might actually favor in a situation like that. wouldn't the only way to escape that to have price control put on all of those other projects to make sure the shifting didn't take place. that's a real concern to me. >> i'm sorry, i didn't get all of the question. many of these financial firms are actually multibusiness operations. so if you try to tax one portion, they'll be shifting the risk of portions that are not

being covered. >> no, not the risk, the cost. as a result raising the prices for other products which may not be directly related and might bring social benefits. >> if that's -- under my proposed scheme what's doing to be happening is you're correcting for the risks only being taken on by taxpayers if that's going to be that way, spinning off those operations away from the tax i'm describing. it should be as close as possible as what a private market receives in the absence of these bailouts. the kind of price increases that you're describing, the only reason they're not able to offer price decreases in that case is because they're getting them

from the taxpayers. so that doesn't seem right. it will lead to inefficiency. the policy i will correct, the bailout inefficiency will in fact correcting the inefficiency of subsidizing the prizes of the other markets. does that make sense? if you're able to offer a lower price because you're getting a sub si difrom the taxpayers, that leads to resources. the way to correct that is to undo the effects them. >> the house and the senate bills would give the federal reserve as a regulator increasing systemic risk, regulation. i mean would it require it to -- would your tax structure -- or

what would be the rule in the tax structure you're proposing and the rule of the oversight counsel in such manner? let me take a stab at answering this thoughtful question. the way i'm proposing this tax to operate would be that the tax itself would have to be authorized by congress. and then the level of the tax would be set by supervisor personnel. the feds role in this would be to -- the bank holding company level certainly is going to have to cooperate a bunch of different regulators. what i'm proposing, i don't see anything fed specific. it's more a map of how it will work going forward.

it would have to come from congress. >> the bank holding company would have to pay to the fdic. that's a factor in this tax. an additional added expense. how do you think that will propose and what do you think that will do to current competition? >> what i'm proposing here i would want to net into the fdic premiums that are being charged as well. one of the things we saw was we felt we had raised enough money, again, the wrong thing to be doing because you want to be

able to always be providing the right kind of incentives. but any that are being offered should be folded in with what i'm saying. i'm not trying to propose anything on top of that. it's complimentry to what they're doing. >> thanks a lot for all your questions. >> in his weekly address, president obama urges the senate to pass the financial regulation bill which he says will create consumer financial protection and prevent unnecessary risk taking by banks. he's followed by chris lee with a republican address. he worries about the threat to job creation and offers his party initiatives to reduce federal spending.

>> on thursday, i talked with them about what my administration is doing to help our families, our small businesses and our economy rebound from this recession. jump starting job creation in the private sector and a climate that encourages businesses to hire again is vitally important. i'll continue working hard to make sure that happens. my responsibility as president isn't just to help our economy rebound from this recession. it's to make sure economic crisis like the one that helped trigger this recession never happens again. let's -- that's what wall street reform will do. there's been a lot of discussion about technical aspects of the bill and a lot of heated and frankly, sometimes misleading rhetoric coming from opponents of reform. all of this has helped obscure what reform would mean for you, the american people. so i wanted to take a few minutes to talk about what every

american has a stake in wall street reform. first and foremost, you have have a stake in it, if you have ever been misled by a credit card company or ended up paying fees and penalties you never heard over before. you have a stake in it if you ever tried to take out a home loan, car loan or student loan and been targeted by the predatory practices of unscrupulous lenders. it represents the strongest consumer financial protections in history. you'll be empowered with the clear and concise information you need to make the choices that are best for you. we'll help stop predatory practices, and curve unscrupulous lenders, helping secure your family's financial future. that's why families have a stake in it. our community banks also have a stake in reform. these are banks we count on that let our small businesses hire and grow. the way the system is currently set up these banks are at a

disadvantage because while they often play by the rules, many of their less scrupulous competitors are not playing by the rules. so what reform will do is help level the playing field by making sure all of our lenders, not just community banks are subject to top oversight that's good news which is why we receive support. what true for community banks are also true for small business men and women like the ones i met in buffalo. these were some of the worst victims that led to this crisis. their credit dried up, they had to let people go. some even shut their dors all together. and unless we put in place real safe guards, we could see it happen all over again. that's why wall street reform is so important. with reform, we'll make our financial system more transparent by bringing in the kinds of complex back room deals that helped trigger this crisis into the light of day. we'll prevent banks from taking on so much risk that could

collapse and threaten our entire economy. and we'll give share holders more of the say on pay to help change the incentives that enjoy reckless risk taking in the first place. put simply, wall street reform will bring greater security to folks on main street. the stories i heard in buffalo this week were a reminder that despite the progress we've made, we need to keep working hard so we can rebuild on this process. the reform bill being debated in the senate will not solve every problem in our financial system. no bill could. but, what this strong bill will do is important. and i urge the senate to pass it as soon as possible. so we can secure america's economic future in the 21st century. >> hello, i'm congress chris lee and i have the great privilege

of representing new york's 26th congressional district. which includes the suburbs of buffalo and rochester. president obama visited our area this week and it was my hope that he would listen. really listen to what the people are saying. i've been in congress now 16 months. but it doesn't take that long to figure out that washington does more talking than listening. it certainly does more spending than saving. often in the name of creating jobs that never seem to come. it was supposed to keep unemployment below 8%, but joblessness is now near 10%. the new health care bill is faring no better. it was supposed to lower american's health care cost, but the obama administration's own experts determine it will actually increase them. but now the new law will cost taxpayers more than one trillion dollars.

after leading them on the hook for massive stimulus programs and permanent bailouts, democrats in washington have no credible plan to put our fiscal house in order. in fact, house democrats may not offer a budget this year. one democratic leader has called it the most basic responsibility of governing. another democratic leader has said "if you can't budget, you can't govern." now they want to continue spending money we don't have and they want to do it without a budget. this is a remarkable failure of leadership. not passing it would be unprecedented in the modern era. for you and your families it means a missed opportunity to provide the fiscal discipline economists say that is needed to boost jobs and economy. what's worst, the fewer

sacrifices washington makes now, the more americans will be asked to give up later. in the form of massive job killing tax hikes. this is a recipe for economic disaster and it has to change. consider this -- since president obama was sworn into office, our national debt has risen by more than two trillion dollars to a record $12.9 trillion. in just two more years, according to the president's own estimates, our national debt will surpass the size of our entire economy. unless we change course, our debt will reach levels now being experienced by greece whose estimated to reach 125% of its economy this year. greece is already in the process of receiving an international bailout. we're seeing what happens when debt spirals out of control. how it shapes the come tans of consumers and small businesses and how it creates obstacles to economic recovery.

we're also seen in europe that government is not immune to the same fates that befalls any business or family that recklessly spends more than it earns you run out of money and you go bankrupt. our choice is this. make the tough decisions required to put our fiscal house in order or continue to dunk them. that's why republicans propose several initiatives to cut spending now and make washington do more with less. just as families and small businesses are. we've asked president obama to use his third under the law to force congress to consider spending cuts. we have also imposed an immediate earmark band and called for the savings to be used to reduce the deficit. we have proposed strict budget caps to limit federal spending on an annual basis. less spending, more jobs, it's that simple. president obama and democrats and washington should listen to the american people who want us to work together on a common sense solution to stop the spending spree and focus on helping manufacturers and small

businesses create jobs. a responsible budget would be a good place to start. thank you for listening. >> here's our schedule -- >> this week on america and the court, supreme court nominee elena kagan nominates a discussion on the recent spourt conference. on monday, president obama nominated kagan to replace john

paul stevens who's retiring at the end of the term. "america and the courts" today on c-span. >> sunday, new british prime minster david cameron and deputy prime minster nick clegg at their first news conference. also, remarks by outgoing prime minster gordon brown. >> next, a hearing on how businesses are using consumer credit scores for purposes other than lending money. luis gutierrez of illinois chairs the financial service subcommittee on financial institutions and consumer credit. this is almost three hours. [inaudible conversations] [inaudible] thanks to all the witnesses

appearing before the subcommittee today. today's hearing will examine the impact the use of credit reports and information have on consumers outside of the traditional use for lending and credit purposes. we will examine the use of credit based insurance was and whether a person has default and whether or not a csumer's credit information should be used to determine their employability. we will be lited opening statements to ten minutes per side but with objection the record will be open. opening statements will be made it part of the record. we may have members that wish to attend the duenas on the subcommittee as they join as i will offerunanimous consent for each to sit with the committee and for them to ask uestions when the time allows. for iyield myself five minutes for opening statments. this morning's hearing is about the use of credit information in areas such as insurance underwriting and employment

purposes. we will hear about important yet complex and often opaque process these concerning credit insurance and insurance scores in the first panel and in the second panel we will hear about the equally important to a vast number of consumers little known or understood use of credit information fo hiring and even firing decisions and the effect medical debt ha on one's consumer report even after you paid the medical debt off. when legislators and regulators attempt to fully grasp an issue such as credit based insurance scores they see a complex system latent with ever-changing computer applications and models. but it is precisely the complexity that should make the hearings in congress still further into an issue that affects every single american who owns or rents a house. a car has insurance, has a job orders looking for a job or is likely to incur medic debt.

to most consumers know that their car or homeowner's insurance rates may go up due to their credit scores? do they know if one of the medical bills goes to a collection agency and they pay in full it will still affect their credit report for up to seven years with extra people realize thateven in the tough economic times preemployment consumer credit checks are increasingly widespread? trapping many people in the cycle of debt that akes it harder for them to pay off their debt and for them to get the job that would allow them to pay off the debt? i wond when you go to state farm or allstate or geico to get insurance the eckert is core and if eckert is worse negative they are going to charge more for your insurance to this and you a note in the mail telling you that you're going to pay more for the insurance? these are all very important questions the american public

needs and indeed the current system facilitates the denial of employment to those that have bad debt. even results the denial of employment. the vicious cycle and has a good crestor can't get job. and i wonder who is most likely to be effected especially in the economic times. extend unemployment compensation? what about the national debt? why have a way we could settle and limit competition. how about letting somebody get a job and in prove who they are without mysterious numbers coming out of a black box somebody nobody knows about it. that is a committee in this hearing. sick and so for this year's credit reports, eckert this course and impact on consumers we will look at reports, studies about the predictive nature of insurance court and traditional scores among other things. but as we do so we also need to look the basic guiding principles of equity, fairness

and transparency. some have contended there is no disparity of minorities injured scores some will saeven if there is a disparate impact on some groups the system still doesn't need to be changed. the question of how productive the credit based insurance score is on an injured likelihood of blame is important as it is the predictive value of the traditional press corps used for granted. but as long as they're continues to be disparity in the outcomes of the current system for racial and ethnic groups and a long glass and geographical line i believe the system needs strenuous overght and fundamtal change. how to correct the disparity in the system with its disproportionately negative impact on minorities and low-income groups while maintaining the cret information as a risk management tool is a talent we should take on. for example on issu like use of credit information for developing insurance pricing and the inclusion of dical debt

collection determining the risk i have doubts as whether there arethe uses of date. the equal employment opportunity commission, the federal reserve, the brookings institution, federal trade commission and texas department of insurance have all found racial disparities between african-american latinos and points and chris cord success to and we will see this as a wide-ranging implications beyond simply obtaining consumer credit. depending on decisions such as determining their insurance rates or even something as vital as whether or not to hire someone that is based on something that is shown to possess a degree of bye yes that is difficult to say at least. but i welcome that estimate is one of those who believe the system works and of those who believe the system needs to be changed to work ia more equitable fair and transparent faction. in the same spirit of transparency, i am making it clear at the outset i side with the latter. i don't think you need any sort

of score to predict that from my point of view. in orderto persuade the committee from moving forward on the legislation that was strongly limited what we believe to be fair practices the industry witnesses before us must prove to me not only are the questions to colin colin but the their fair and equitable to americans. the ranking member mr. hensarling is recognized. >> for as much time as you need. how much time do you want? >> for and have for calling this hearing. as we know last week we were greeted with more bad economic news in the nation and as on an employment ticked up again to 9.9%. again on a plan of remains mired at a generational negative since the president asked for and congress passed the stimulus

bill approximatel 3 million of our fellow countrymen have lost their job. countless stories of hardship and countless stories of suffering and we know that the number in plan a rate hovers around 17 to 18% of the country. any historical standardwe should already be out of this recession. we should have robust gdp growth and robust employment growth but unfortunately we do not. i believe as do many that the reckless spending, the enormous debt and deficit that has been brought upon us by this congress, by this administration, the serial bailouts, the government takeover and legislation passed but ultimately restrict access to credit have contributed to the fact we are still mired almost double digit uemployment i believe the administration and congress are holing back our economic recovery.

an economy that wants to recover. the economies work on reverse gravity. what goes down must come up. egypt is recovery has been the most tepid languishing recovery in the modern economics era. i didn't even mention the impact of the high-cost health care bill or the national energy tax. as i talk to small business people in the fifth congressional district of texas and investors and i talk to bankers and fortune 500 ceos i ear the same message over and over and that is all i am not willing to expand my business d create more jobs today. i don't know what thhealth care costs a going to be for my employees owith the energy cost might be associated with cap and trade. i don't know what my tax bill is brenda diaz tax relief expires eight years and and i don't know how my nation is when to pay for all of this debt. more taxes, more inflation.

given the backdrop i would hope any legislation the subcommittee were full committee considers that we would consider jobs to be job number one for our committees. yet i feel we are considering three more policy ideas that will further harm job creation in america by restricting access to credit. all of the ideas before us are either going to prohibit accurate data from the pantry credit flail or prohibit the use of accurate data that may be in a credit file. to many of us this is the distinct odor of government cenrship even e risk of the orwellian thought control. the bottom line is the kurdish files will the road isk-based pricing of the products which in turn is going to lead to less available credit, more extensive credit to at a time agai when

our nation is meijer and almost double digit on employment. now should curtis course be used in insurance underwriting are they predicted? i have seen a number of stuies that claim they are but most importantly i suppose those who are using them find them to be predictive and i believe they have an incentive to get their right otherwise they would ultimately lose money and have to fold up their shopping. those who get it wrong ultimately go out of business. maybe one entrance company feels that those who wear blue ties are riskier than those wo don't. i don't know. i don't know if that is predicted. tautogical but maybe it is. one company may decide to use it and another one might choose nt to use it. information about this charge medical bills, you know there is a lot of setbacks one can have in their life that ultimately impact their credit to force,

unemployment, medical bill. but at the same tie or they predict if? if they are productive if we don't allow that information and ultimately small businesses many of which are organized as sole proprietorships -- >> [inaudible] >> in that case, mr. chairman michael -- [inaudible] >> i am going to ask unanimous consent miss gilroy be allowed to sit in this hearing and grand two minutes for an opening statement. hearing no objection, so ordered. >> thank you, mr. chairman and for your leadership in this important issue. and i thank the witnesses for their time here today. i'm interested in what you have to say particularly about medical debt and the impact it has on the credit scores for millions of americans and their ability to get an affordable home loan or a car loan after they've paid their medical debt.

and i ask for unanimous consent to enter into the record a letter written to me from my constituents, julie mueller of columbus ohio. she's a responsible young adults, college student. she pays her credit cards on time, she purchases health insurance and checkedwith them before she was going to have an expensive procedure to see if it would be covered. she was assured it was and that was her understanding until te bill can and her insurance company denied coverage she ended up in a yearlong dispute on that. eventually resolved but it destroyed her credit score and now she's worried about her ability after college to buy a car, to buy a house, and i wry it might even affect her ability to get a job. i introduced a medical debt relief act to help hard-working americans like julia to play by the rules, pay the medical debt, yet our find chris course

adversely affected for years t come. today we are taking an important step in the right direction to do with this important issue. i want to tell julia when she writeto me that, quote, fiscally responsible and i would like to be treated that way. but that is what we are aiming to do ere today. thank you, mr. chairman. i yield back my time. spec the gentlelady yields back the time. mr. garret. okay, mr. price is recognized. >> the last two years have taught anything it is that risk is unavoidable and ever present. for the economy to work businesses must people toprice products for risk that they incur. risk-based product to the comprizing is important when you try to determine the reliability of the injured and exposure of job creators. a credit based insurance laws have proven to be the most productive factor in determining the likelihood of a consumer

filing a claim. the risk model enables insurance to more accurately underwrite and price for the risk and when this is, well everyone wins. democrats want you to believe everyone ouldn't be judged by past actions. however it is the americans' right to pull yourself up by working hard and making responsible decisions to read and what makes the risk-based pricing insurance score is important could be ability for people to improve their scores and lower their rates by paying their bills on time and taking responsibility for their financial decisions. so ask yourself what would happen if there was no risk pricing? everyone would get the sampras re was alleged insurer has to pay to cover a claim. this would result in significant and dramatic increases in rates to virtually all americans, less credit available, more expensive credit and more job destruction. this is clearly not the most wise ave. i look forward to the testimony and hopefully our response in

wisdom and i yield back. 2 >> thank you. ai thank the witsses for appearing to read mr. chairman i am concerned about the credit based insurance scores especially as they relate to employment. it's very difficult to be poor. it's very expensive to be poor poor neighborhoods goods cost more. important neighborhoods you find that unemploymentis obviously higher for any number of reasons. it's very difficult to be poor. and when you are poor and you needed job and it's difficult to get a job because of credit scores it seems the compound. i injury concerned about how we approach credit scoringith

reference tohe employing people is especially people who are poor. i look forward to hearing from the witness is and i look forward to solutions that poor people won't find they are being insidiously discriminated against. thank you. i yield back the balance of my time i ask unanimous consent mr. manzullo be allowed to sit on the subcommittee and hearing no objection to recognize him for a minute and a half. >> thank you mr. chairman. there is a distinction between pele who incur medical debt to those who go out and charge a vacation and consumer items. i practiced law for 22 years and have been through a thousand bankruptcy's and in several of those cases the people put in the bankruptcy either exhausted insurance or had no inurance and the filed bankruptcy not because they wanted to, not

beuse they did anything intentionally but simply because they couldn't stay off of their medical bills. i talked to two colleagues of mine in rockford illinois specialist in bankruptcy. if then threw 30,000 bankruptcies together and one has a record for credit card debt, $140,000. mr. chairman those for all medical expenses. and we have to draw a distinction between people who because of their spendthrift outrageous on credit or the conduct go out and buy things they need just because they want that and people who are caught up especially today without insurance or lack of insurance or many times very high deductibles, co-payments etc. and i am a sponsor of this bill because it is the right thing to do especially with so many credit card ompanies the case my wife and i have done a simple 150 donner coach put othe way

it took us four years and it wasn't until the fair repoing act they finally backed off on it and so credit card companies reporting companies i'm sorry, credit reporting companies do a job and i understand what they are doing. t for people who are the unfortunate -- >> [inaudible] >> they shouldn't have to suffer the consequences. >> my friend, mr. watt is recognized. specs before, mr. chairman. i may not even take a minute. i just want to applaud your continuing effort to shed some light in this area, an area that a number of us thought looking at doing the last term of congress and found some very disturbing things like credit scores or determine yor

automobile insurance rates. and i never could quite figured out why somebodies credit had anything to with their driving record or how somebody's credit had anything to do with the insurance rates they pay on thehomeowners' insurance. there's a lot of disconnected and we need more information about this so that we can make some good judgments and possibly do some legislation in this area and i think that is why this hearing is so important and i applaud the chairman for the hearing. thank you. >> ai thank the gentleman. mr. garret of new jersey is recognized. >> thank the members of the panel that are here. credit information has obviously become an essentials and valuable tool in allowing

various market participants to more accurately price for the risk and one of the areas examined today is how the information is used by insurance companies determining the premiums they charge for their clients. there's been numerous reports as studies and by using consumer based insurance determining premium rates insurance companies are basically more able to accuratel price and the rates to sycopha plea decreased for a broad majority of the holders. credit scores are just one of a number of different points that insurers consider in determining premiums. if we were to limit -- more people would pay higher premiums and less people would be able to purchase insrance. neither of these are good thing. so in the week of the recent financial crisis instead of

looking for ways to decrease credit availability and accurate pricing of risk i believe congress should be considering policies to help expand credit for consumers and small businesses and lower the cost of credit and insurance premiums for the majority of americans with the current unemployment rate around 10% we really work on initiatives to expand economic opportunities for all americans. no place for the government to micromanage the nation's small-business is and for frisking be accurate price of risk and with that i yield back the balance of my time. >> okay. and last for the site we have congressman maloney. >> thank you mr. chairman. first i want to welcome mr. wilson from lexus nexus headquartered in the district i represent and i'm proud to represent this country -- this company that is valuable to the country and the number of consumer complaints related to the credit scores has been going up and i look forward to the testimony of others on how we

can better move forward in a way that is fair to consumers and fair to busess. thank you. >> we have two panels tis morning. so stop the covers will focus on insurance information for underwriting and the second donner eating information and areas as employment. the first panel consists of three witnesses, the honorable michael mgraff on behalf of the national association of insurance commissioners and i welcome you here from illinois. during a great job in the state of illinois and happy to have him here. then we have mr. david snyder vice president and associate general counsel public policy american insurance association and the third witness is mr. price of georgia. >> thank you mr. sherman. mr. wilson as a constituent d i want to welcome him to our

panel today. mr. willson served as to the eckert analytics for the group at lexus nexus risk solutions joint equifax in 1983 and early experience included the walls us marketing analysts and field operations manager for electric and gas and telephone utility customers. then served as manager of strategic planning and research before moving to equifax in the development. he worked extensively on the flight of introduction of the first credit scoring models as a wealth of knowledge in this area. the current roll with nexis and lexis he continues to support insurance risk scoring models and manages the team of statisticians and modelers and he holds a b.a. in marketing and brand university down in georgia and m.b.a. from mercer university and other great institution in georgia. we want to welcome mr. wilson. you are welcome here.

>> we are going to start with the gentleman from illinois,. you have five minutes. when you see it turning yellow you hve one benet. one minute last quite a while. when it is read five seconds later we hope he will wrap up. you are recognized for five minutes. >> thank you may to become mr. gutierez the director of insurance of illinois and serve as chairman of the property and casualty committee for the national association of insurance commissioners. today i offer the views of my fellow regulators on behalf. thank you for your intention to the use of credit information and personal lines of insurance. h.r. 5633 sponsored by the chairman last year coincided with our own effort to scrutinize the use of insurance

scores. as regulators we do not fashion public policy those decisions are made by congress and state legislatures. states view the insurance scores from different perspectives. they have band the use of credit information and others impose rate bands or prohibit use on a renewal or allowed only if credit information would reduce premiums. still others equire only that credit not be the sole basis for an isrer decision. and illinois on like most states our law requires only that insurers consider extraordinary events and does not even recogne military deployment as an extraordinary event. in the illinois an older gentleman frm a small town road that he had paid cash for everything his whole life, car, farm land, his hand written note explained he bought car insurance before the law required never a fancy meals or bought pricey clothes.

he even added he'd been married 47 years to the same woman but confronted a greater. illinois law we should be improved we applaud this committee's desire to move past the rhetoric of interested parties towards the fully informed approach. to this an end we held public hearings and 20093 interested parties, insurers, actress and insurance vendors argue that injured scores allow for more accurate underwriting and ratings. consumer representatives argue that credit based insurance scores had a disparate impact on the members close to the to protecting clauses and premised upon irrelevant if not inaccurate information. we heard in great length about the studies that support both positions. and our own state insurers sell homeowner insurance in urban neighborhoods where homeowners were previously stretched to find affordable coverage.

insurers argue that credit based insurance scores have facilitated the market change. studies also indicate individuals of racial and ethnic minority heritage or over represented in low credit score categories and credit based insurance scores discriminate on the basis of the heritage. our national focus has turned. rather than engage in the circular debate we've undertaken the two-pronged strategy to assist the policymakers. first we are developing a standardized static or detailed interrogatories for the personal lines although companies. the data will target the impact of different factors upon rates paid by consumers. gender, marital status, eckert discourse among others. the data will enable congress and the states to measure the consumer and market impact of one states law versus another.

second, we are difficult and a model to bring insurance score vendors with an insurance regulators oversight. one panel indicated in written testimony the vendors are already subject to state regulator oversight on which we largely agree. however the same vendors argue the opposite before the naic and we tend to eliminate ambiguity. as digital information expands access to consumers details insurance regulators remain vigilant protecting consumers against potentially abusive underwriting and trading practices. we are watchful for underwriting rating formulas that may constitute a proxy for the race gender or other protected characteristics. insurance must function as insurance. for the naic we appreciate the chance to assist the subcommittee and pledged continued support of your effortswith the two-pronged approach state regulators intend to offer reliable fact based

information for the congress and the states. as the data called the model development concludes we will deliver the results to this committee and, worse. thank youfor your attention and i look forward to questions. >> thank you. mr. snyder, recognized for five minutes. >> good morning. german gutierez, ranking member hensarling mr. price and members of the subcommittee my name is dave snyder vice president isasi general counsel for the american insurance association. in the midst of the fiancial turmoil and its related chaos the u.s. property and casualty insurance sector is stable, secure and strong. there are good reasons for this. the united states never lost sight of fundamental shared goals. reduce risk where possible accurately assess and assume the remaining risk and provide effective coverage to the american people. as a result although and homeowners insurance markets are by every measure financially sound, competitive and

affordable. claims are being paid daily by the companies. the market is competitive by any measure and insurance is taking less of a bite of the household inmes than in the past. this is good for the economy because the maximize competition forces prices downto the lower seasonal levels people have money to spend on other things. insurance scoring has played a major role in creating deposit for all concerned. by empowering effective risk assessment pricing majority of the population pays less. insurance is more avilable and more people can receive reasonably priced coverage instead of being relegated to thhigh risk pools because insurers have a cost-effective tool to assess price for risk giving them the certainty they need to provide covere to nearly everyone. you asked us to address issues related to the insurance scoring. in summary it is race and income blind and has repeatedly has been proven to be an accurate predictor of risk indeed one of the most accurate. the states effectively regulated

insurance commissioners have full access to all of the information they desire. in response to the request for recommendations we suggest all states adopt the national conference of insurance legislator model law. second they should make sure they capture and analyze all of the credit complaints they can and communicate with insurance companies about them individually and in the trend is. we know for example from the director's testimony that the rate of complaints under the existing system for the credit based insurance scores is about one complaint out of every 1.5 million policies issued to renew. in addition we need to work together more effectively on financial literacy to help the american people understand how insurance is reduced by insurance companies to provide them with coverage. there is one other recommendation we did not emphasize in the written statement that is to make it more possible to innovate on a pilot basis for example to introduce more direct measures of driving performance such as

ability to assess risk based not only on mileage but how when and where they're driven. one other factor in the strength of the personal lines of the insurance market is that we have collectively reduced risk. thanks to the leadership and that of the safety groups, insurance industry and the state's far fewer americans are injured and killed on the highways than would ever have been expected. using fertility rates of 1964 last year alone we have collectively saved 120,000 lives and prevented millions of injuries. this has created a solid foundation of a healthy auto insurance system we have today. now the insurance industry is focused on building safety as never before. for advocacy of small tecum smoke detectors and codes requiring sprinkler lawyers eminent testing centers with wind turbines, powerful enough to test the structural integrity of buildings. we hope to see the pattern of positive chan similar to that

which we helps bring about all those c2 with your cooperation and assistance. thank you for inviting me to speak with you today and i would be pleased to answer any questions you may have. >> good morning. my name is john wilson, director of analytics for the insuance group at lexus nexus risk solutions. lexus nexus provides technology and information that helps businesses, government agencies and other organizations reduce fraud and mitigate risk. in the entrance to the services group will provide a variety of products and services to support the insurance industry including credit based insurance scores. in my remarks today i will focus specifically on how the insurance is to twist and gulated. credit based insurance was have long been used by insurance underwriters and actress to accurately to the credit the as as homeowners policies. insurance scores provide

objectives effective and consistent tools that insurers use witother information such as dredging history and prior claims to better predict the likelihood of the future plans and cost of the claims. deriding the score follows as straightforward pocess. a carrier compiles historical policy experience including earned premiums and incurd losses by a population of risks. lexus nexus works with a credit bureau to mask the policy experience to the historical consumer credit from the particular point in time to which the policy performance data pertains. then using regression techniques we identify the credit variables that taken together provide the best representation of the observed loss ratio performance. most credit variabl can be grouped into one of five primary areas. one of how long you've had the account established. to cut the number a type of account to hold. three, indications of recent activities including inquiries and new account openings.

for, the degree of utilization on the accounts and number five, payment history. the relative weight of each of these areas can vary depending on the line of business being modeled. but for any specific model the insurance regulator is given access to the individual variable description and point assignments. entrance scores do not consider factors such as race, religion, national origin, miracle status, age, sexual orientation, address, income, occupation disability or education. also inquiries made to account review or promotional insurance purposes are not yet used in calculating entrance scores. we also exclude medical collections through. it's important to note what alexis lexis provides insurance course we are not an insurance company. we are not involved in insurance rates sitting determinations' or decisions with respect to groups of individuals of individual consumers. lexus nexus is not a consumer credit bureau and we don't make credit decisions. our role was to supply information to the insurance carriers to assist them making

underwriting decision the credit based scoring process is currently regulated at multiple levels. lexus nexus is considered a consumer reporting agency under the federal fair eckert reporting act and state analogues. as required by that lexus neus provides consumers upon request th all access to the information and a consumer final at the time of the request. we also set a process by which any nsumer may order a copy of their insurance or via the choice trust website. additionally because insurance is regulated lexus nexus must have models to the state statutes regulations and guidelines relative to insurance scoring. most states have adopted a regulatio based on the model on insurance soaring default by the national insurance legislators. pursuant to the state requirement a third-party vendor like lexus nexus must file its model for the review of the state insurance department. in many states carriers are required to include lexus nexus

ogle file and materials in the rate filings. other states the carrier may be allowed to reference the lexus nexus model once it has been filed. finally the insurer must gain approval of the rate filing that may include insurance scoring component. as a result lexus nexus works on an ongoing basis with state department of insurance to explain the models and create state approved scoring solutions for insurance customers. in addition lexus nexus provides web sites to the consumer disclosure of that insurance scores and process is more readily accessible to the consumers and other interested individuals. in conclusion credit based insurance laws provide an objective effective consistent tool that insurers use with other information to better predict the likelihood of the future claims and cost of those claims. there are existing federal and state regulator approval process these that provide comprehensive oversight by individuals the department of insurance over the

erance scores, insurance or developers and use of insurance scores. lexus nexus works cooperatively with commissioners and staff in seeking approval for the scoring dels. so i appreciate the opportunity to provide the committee with information on insurance scoring and i had to address any questions you may have. >thank you very much. welcome to all of you here. i know there is a lot of questions. there's quite a number of members that have shown up this morning. let me just a couple of minutes and then allow people to ask questions. and then make some general comments. that is to say that if someone has cancer and they become very ill and they don't have health insurance, they're likely to suffer great economic, and that is going to affect their credit score. so that me ask you if someone becomes ill, is it more lily they are going to try quickly to

get into an accident, dr. erotically -- drive erotically because as we know the chris or will be effective. in to the questions please left to right. mr. mcraith? >> mr. chairman first let me say also in reply to congresswoman kilroy's's concerned about medical expenses, we are where to third of all personal bankruptcies are based on medical cost. three-quarters of those people who file final even though they have health insurance. it's a significant problem. different states have adopted different approaches to dealing with an extraordinary life event like medical expenses. as you've described. and allowing -- >> if we use the deteriorated credit scores it is more likely i am going to