when rains in the past. as waste water. had we get this water out of the way? -- how do we get this water out of the way? back in the costly proposition. many of your cities are struggling to maintain their current infrastructure. in an effort that cost upwards of $30 billion per year in capital investments nationwide. when you include the operating funds, cities spend up to $100 billion per year on water and wastewater services and infrastructure. despite this price tag, we still love problems. we still end up losing almost 7 billion gallons of treated water, water that we have spent money to treat. we also have leaky sewers and water that is yet to be treated leaking. we know the infrastructure is causing some were overflows and

contamination of local streams. we have significant investment that we need to continue to make in our infrastructure. we are trying to confront the challenges with you in some of the same way as we confront all our environmental programs through innovation and through innovation in the technologies that we use and employ to lve the problems. last year, administrator jackson outlined a comprehensive drinking water strategy that lays a plan to address water contaminants in groups as opposed to when the time. it uses available stories that the epa has in other statutes like toxca that i mentioned or pesticide laws to try to get ahead of contamination and protect the water become -- before it becomes aroblem. this can capitalize on both technology advancement and treatment efficiency. we have begun to make progress on these goals and we are exploring the uses of

those statutes to help prevent pollution before it gets into the drinking water. in the coming months, we will begin the process of selecting some groups of chemicals and contaminants' that we can look at all at once as opposed to one of the time to find a mostly efficient way to deal with those contaminants in our drinking water systems. the minister has made it clear that we would engage more with you and with other stakeholders like state and local governments for it we are connecting with the private sector. this is an important parts as they are the innovators and entrepreneurs in our system. we also connected earlier this week with the administrator of the small business administration announcing a water technology innovation cluster. i will talk about that and a second in cincinnati, ohio. the cluster concept does what i was mentioning -- harnessing be

on the proportion than the innovation of the private sector. it brings together the utilities, the city, the research partners, and the business community all in that community. we have had a lot of experience in drinking water and water technologies. this has a great opportunity to create jobs in small businesses. the cluster helps us look at the future and sustainable ways we can work smarter to protect america's water, we are also already at work in some of you communities today. i can use northern kentucky, for example, or expensive storm water projects were being looked out but when faced with these expensive projects, the community's came to the epa to look for ways to address some of these overflows, particularly storm water overthrows and sewage overflows and to help sustain a growing economy at the same time.

instead of investing in some of the traditional treatment approaches, they have used some of that same money and we're spending the same amount of money on new green infrastructure techniques that addressed a whole host of concerns in the community, not just reducing the overflows or treating the storm water. it created a network of green street who manage their strong water in a way before it became pollution. ca alsolmed traffic -- a falsecalmed traffic -- and that also calmed traffic and make communities more livable. while green may not be the answer to every problem, it certainly is the answer to finding more cost-effective ways to deal with some of our wet weather-oriented pollution from rainfall but also a way to combine other community assets

and community amenities like green spaces and more treelined streets. and green areas along our highways and green roofs and other enhancing from a static as well as a local climate perspective. this is a process we will learn more from you as the golan and we are excited to push forward on this initiative in ways that will help be more cost-effective and efficient in our work. many of you here today have stories you could add to the ones i just mentioned about how you are making your cmunities healthier. we are eager to work with you to find those best approaches and meet your community's needs a cost-effective and efficient way. we want to build the foundation for lasting prosperity and all the communities.

as the act as your partner, we hope y will be a driver to help us toward innovation. i look forward tour ctinued work together. i can't tell you howappy we are to here speaking with you today. i want to point out also that a small contingent of all of you were able to get over to epa yesterday and made with the administrator and i am very ppy that happened. thank you for the invitation and good luck for the rest of the conference. >> and later a debate between the chicago candidates for mayor.

and former u.n. ambassador john galt -- john bolton speaks live friday at 12 noon eastern time. and then the congressional black caucus holds a series of discussions on the recession and how it is affecting minorities. live coverage on c-span and c- span.org. >> a living standards are going down in america and affecting the future that we have. we both it to the country to lead a different path. >> the new chair of the house budget committee response to the state of the union address by the president. find out more online on the c- span video library. search, watch, and a share, all free. c-span, your way. >> a report today on the causes of the financial industry. the crisis was a result of u.n.

action and inaction, not of mother nature or computer models gone haywire. phillip chan of the new york times. what went wrong? >> the report offers a multifaceted analysis. it can be boiled down to one sentence. failures of regulation, corporate mismanagement, a failure to manage risk, a breakdown in accountability in ethics and other economic forces as well. what happened. >> office says the crisis was avoidable. how was it avoidable? >> it is to regulatory feelings. they could ever acquired banks to hold more capital. the federal reserve could have

had more powerful lending standards. wall street executives could have paid better attention to and not -- in packaging and selling these securities based on a shaky mortgages. those executives failed to do their due diligence according to this report. >> why separate analysis? >> the republicans, there were four on this 10-member commission. three of them offered a dissent that was not dramatically opposite of what the democrats had. they were different in several respects. they said it was avoidable and they focused attention on failure of accountability and leadership. the republicans focused more on broader macroeconomics forces

that contributed to the credit bubble. a buildup of savings in asia, all of this capital they were searching for an investment opportunities that fueled the housing bubbles in the u.s.. then as a separate republican had a single dissent and says it was in government housing policies that contributed to the demand for these mortgages that ended up being so shaky. the mainstream view says there was more than one cause and that government housing policy was a contributing factor, not the main cause. that is the view of the majority. >> how could part of the nature of these findings impact the nature of the report? >> it could have quite a negative impact. reports have of more than standing with unanimous recommendations. i think the commissioners regret

that. it shows the complexity of analyzing the financial crisis and what caused it. they were not able to reach consensus. >> you right there is a stern warning on repeating the crisis. what could happen? >> basically, the report quotes ben bernanke saying this is the worst financial crisis in world history, worse than the depression, even though the facts have not been as great as the depression. there will be a boom and bust cycles. that seems to be endemic with boom and bust business -- boom and bust cycles. but make sure we do not have a crisis this severe and dangerous in the future. not everyone will agree with the prescription. that is the way the country is going right now.

>> thanks. >> thank you. the >> today we present to the president, the congress, and the american people, this report in our conclusions of the causes of the worst financial economic crisis since the great depression. the task of this commission was to first determine what happened and how it happened, so that we

could understand why it happened. this official report of the causes of the financial crisis and our conclusion are based on our exhaustive and fact based investigation, which we pursued for more than a year. we hope that the american people will read this bible report, because it is our belief that if we do not learn from history, we are unlikely to fully recover from it. some on wall street and in washington with a stake in the status quo may be tempted to wet from memory the events of this crisis or to suggest once again that no one could have foreseen or prevented it. this report exposes facts, identifies responsibility, unravels myths, and helps us understand how this crisis could have been avoided. it is our best attempt to record history not to rewrite it nor to

allow it to be rewritten. this crisis has been of no small consequence to this nation. all of us are eager to see signs of recovery, but we cannot forget that this financial of people will likely impact our economy for a generation. it is brith havoc among businesses, entire communities, and households across the country. more than 26 million americans are out of work, cannot find full-time work, or have given up looking for work. near the $11 trillion in a household in retirement savings has vanished. 4 million families have already lost their homes to, foreclosure as a direct result of the economic fallout of this crisis. many innocent bystanders, people who followed all of the rules, fear for their future, while our country faces no easy path to

renewed economic strength. along our investigative journey, we met many people from all walks of life who have seen their aspirations crushed by this crisis. there is much anger in this country about what transpired, and justifiably so. many of these people looked to the commission for answers, and perhaps some encouragement that the country's political and financial options will choose a better path than the road to this catastrophe. we kept this in mind as we completed our work, with the hope that we will never need an investigative commission like this, at least not in our lifetime. over the past 10 years there has been no shortage of debate or discussion -- two years, there has been no shortage of debate or discussion about this. our mission and the central

question that we addressed was this, how did it come to pass that in 2008 a coronation was forced to choose between two start in painful alternatives. -- our nation was forced to choose between two stark and painful alternatives. we concluded first and foremost that this crisis was avoidable. despite the expressed view of many in the circles of financial and political power that it could not have been foreseen, there were many warning signs

that were ignored or discounted. second, we found widespread failures in one into regulation. third, we describe dramatic breakdowns in risk-management in corporate governance. we detail how the explosive brew, risky investments and excessive borrowing put our financial system on a collision course for crisis. we concluded a key policy makers, our government was prepared for this crisis and the inconsistent response added to uncertainty in panic. this explains how breaches in accountability and ethics became widespread at all levels during the run-up to the crisis. this morning, each of us will take a few minutes to summarize our findings. i will start by focusing few remarks on our first conclusion. this financial crisis could have been aborted.

let us be clear -- avoided. this was a result of human action, in action, and misjudgments, not of mother nature or computer models gone haywire. the cap -- the steward of our financial system ignored warnings and failed to manage the eve of an risks in a financial system that is so essential to -- the devolving risks in a financial system that is so essential -- evolving risks in a financial system that is so essential to our economy. by 2004, the fbi was publicly warning that a surge in mortgage fraud had the potential to become an epidemic that would have as mitch -- as much impact as the savings and loan crisis. other red flags occurred.

financial firms rely on short- term borrowing. there was a pervasive permissiveness. this report documents specific instances where leaders did not take action to stamp out smoldering threats that eventually led to financial crisis. the record is replete with evidence of the failures. he will see these throughout the report. the federal reserve failed to act as our system was engulfed in a wave of toxic mortgages. ward of securities were sold and bought that were never examined in in known to be defective. -- mortgage securities were sold and bought that were never examined and known to be defective.

from 2000-2007, moody's rated 45,000 mortgage securities as triple a. there were six companies this year with that rating. in 2006, it gave this stamp of approval to 30 such securities. the results were disastrous. none of what happened was an act of god. the greatest tragedy would be to accept the idea that no one could have seen this crisis coming and nothing could have been done. if we except this notion, it will happen again. -- if we accept this notion, it will happen again. one citgo described this. here -- ceo describe our conclusion. here he is. >> thanks. there were widespread failures in a financial regulation that

proved devastating to the stability of our nation's financial markets. it is clear that people were not at their post. this is in large part because of a widely accepted belief in the self-correcting nature of the market and the ability of financial firms to police themselves. this misplaced confidence in the regulation of the highly competitive industry was championed by the former federal reserve chairman alan greenspan, and others, and supported by successive administrations. our report describes how this laissez-faire approach opened wide gaps in the government's overcome -- oversight in key parts of our financial system at a place where we were at risk. this includes a trading market of over-the-counter derivatives and a market system that was called the shot of banking system. in some areas where federal oversight existed, the government allowed financial

firms to select their preferred regulators, setting off a race to the weakest supervisor. we do not accept the view that regulators lacked power to protect the financial system. they had ample power in many arenas, and they chose not to use it. where regulators thought they lacked authority, they could have sought new powers to fulfill their mission of protecting our country's financial system. let me highlight four examples from our report where effective regulatory intervention would have made it unnecessary for all of us to be here this morning. the federal reserve was the only entity in power to stop out of control mortgage lending by setting prudent lending standards. it has the ability and the responsibility to step up as well as avoid this crisis. it did not. the securities and exchange

commission could require more capital and halted a risky business practices at the big investment banks. again, it did not. the federal reserve bank of new york and other regulators could have clamped down on excessive advances that they saw, such as citigroup as it increased its exposures to sub-prime securities. it did not. policy makers and regulators could have stopped the run away sub-prime secured debt station and danger signs emerged. yet again, they did not. this report also describes how they waited the institutions that they saw as safe and sound, despite evidence of the contrary. in case after case, they downgraded these firms, just as they veered towards collapse. it did not surprise the commission that the financial industry would push for weaker or lighter regulation. what troubled us was the

failures of the overseers to enforce the regulations that they did have. these actions or inactions deprive our nation of strong independent scrutiny of such a crucial sector of our economy. the leaders charged with protecting our system sought the position of responsibility. with that comes the obligation to act. tone at the top does matter. let me turn the microphone over to our colleague who served as the chair of the commodities futures trading commission from 1996-1999 and early on identified critical risks to our financial system.

>> the commission concluded the dramatic failures of corporate governance and risk-management and many systemically significant financial firms were critical causes of the crisis. this report details case after case where top executives and financial companies they led acted in imprudently including aig, bear stearns, fannie mae, lehman brothers, merrill lynch to name a few. the government's hands of a

philosophy and financial firms increasingly perilous business decisions went hand in hand. to many of these firms acted recklessly in, taking on too much risk with too little capital on short-term funding many focus their activities on risky trading activities that produce hefty profits. many of these companies took on enormous exposures by acquiring and supporting sub-prime lenders and creating, packaging, repackaging and selling trillions of dollars in mortgage-related securities.

some financial institutions expanded in ways that left them too big to manage. let alone to big to fail. too many firms set aside their judgment by embracing mathematical models as reliable predictors of risk. too often, risk-management became the risk of justification. compensation systems in an environment of intense competition and the light of regulation rewarded the big bets with the payoff on the upside would be huge and the downside ignored. after these instruments were fully deregulated in 2000 -- in the wake of that action, the

market for these derivatives spiraled out of control and out of sight. it was growing to 600 -- $670 trillion by 2008. we concluded that over-the- counter derivatives contributed significantly to the crisis. the report explains the unlimited leverage, lack of transparency, lack of capital requirements, and the concentrations of risk that proved so disastrous. it also lays out how credit derivatives fuel mortgage securitization and amplify losses from the collapse of the house in bubble. after that collapse, derivatives were in the center of the storm. millions of driven since of all

types between systemically important financial firms were unseen and unknown when the financial system nearly collapsed. the obligation hidden from view added to the market uncertainty and escalated the panic that we saw in the fall of 28 -- two dozen aid. it led to government rescues of financial firms. let me now turn to my colleague. he is a nevada entrepreneur whose career spans government service, business, and the law. he has spent much of the last decade protecting investors from security front.

>> thank you very much. this commission concluded that a combination of inadequate capital, risky investments, and lack of transparency were critical vulnerabilities and important enough to warrant separate attention by this panel. in the years before 2008, to many financial institutions are extraordinary sums by operating with insufficient capital and left themselves susceptible to financial distress or ruin if the value of their assets declined even modestly. from banks with excessive leverage to participants in the deeply flawed mortgage securitization chain, nobody had enough skin in the game. for example, the major investment banks, bear stearns, goldman sacks, lehman brothers, merrill lynch, and morgan stanley were operating with extraordinarily thin capital.

by one measure, as of 2007, their leverage ratios were as high as 40 to one, meaning that, for every $40 in assets, there was only $1 in capital to cover losses. so immodest 3% market moves against them could consume their entire capital reserve. to make matters worse, much of their borrowing was short term in the overnight market. that meant that the borrowing of tens of billions of dollars had to be renewed each and every day. the kings of leverage or fannie mae and freddie mac. they were the two behemoths government-sponsored leveraged banks. their leverage grew 75 to one. it was often hidden in derivatives positions in off- balance sheet entities and through what is called window dressing, financial reports made available to the public. our report in detail instances

in which lehman brothers and bear stearns worthy true leverage was masked. the heavy debt taken on by some of these financial restitutions was exacerbated by the nature of the assets they were acquiring with that debt. as the mortgage and real-estate markets turned out riskier and riskier loans and securities, many financial firms loaded up on them. but these firms were not alone. households took on more debt as well. from 2001 to 2007, national mortgage debt almost doubled. the amount of mortgage debt per household rose 63% to $149,500 even while wages were essentially stagnant. within the financial system, the dangers of all of this that grew more ominous because transparency was not required or desired.

massive short-term borrowing combined with the liabilities and seen by others in the market heightened the chances that the system could rapidly unravel. the shadow banking system that had evolved over the past few decades did not have the protections that this country built in the early part of the 20th-century to serve as a bulwark against runs on banks. by 2008, the $13 trillion shadow banking network had become larger than our nation's traditional banking system. as it turned out, we had a 21st century financial system with 19th century safeguards. when the housing and mortgage market was created, the lack of transparency, the extraordinary debt load, the inadequate capital, and the risky assets all came home to roost. what happened was panic and for some, we had reaped what we had some.

we will hear from senator bob gramm. after spending 38 consecutive years in public office, he let the office in 2005. senator, it has been a distinct honor and personal privilege to share with you on this commission. >> as part of are charged, it was a corporate for the commission to review the actions taken by government in response to the developing crisis and to determine if any of those responses contributed or worsen the crisis.

we concluded that the government was ill-prepared for this disaster. it is inconsistent responses added to the uncertainty and panic we saw during the course of the crisis. this report describes how the treasury department, the federal reserve board, and the federal reserve bank of new york, which were best positioned to watch over financial markets, were caught off guard by the events of 2007 and 2008. other agencies were also behind the curve. they were hampered because they did not have a clearer grasp of the financial system they were charged with overseeing, particularly as it had evolved in the years before the crisis. the lack of transparency in key markets was an impediment.

policymakers believe risk had been diversified when, in fact, it had been concentrated. time and time again, from the spring of 2007 onward, policy makers and regulators had to scramble as the contagion spread. they responded on an ad hoc basis, with sprint civic programs to put the figures in the by -- what specific programs of the fingers in the dice. they had no specific plan for containment because they did not understand the risk and the interconnections of the financial markets. even some of the regulators now concede to these errors. the commission concluded that senior public officials failed to recognize that a bursting of the housing bubble could threaten the entire financial system. the evidence that that was a possibility was clear. for example, in june 2007, when

bear stearns had funds that were heavily invested in mortgage securities imploded, they were thought to be relatively unique, although many other funds were exposed to exactly the same risk. in another example, the federal reserve bank of new york was still seeking information about the exposures created by lehman brothers more than 900,000 beretta contracts just a month before the firm collapsed. -- 900,000 derivative contracts just a month before the from collapse. they made the decision to let lehman collapse into bankruptcy while aig receive government assistance. this inconsistent approach stoked uncertainty and panic in the markets at the heat of the crisis.

it is now my pleasure to turn the microphone over to heather marin. she retired in 2002 as one of the most respected equity analysts in the nation. >> thank you, bob. as we have witnessed, the integrity of our financial markets and the public's trust in those markets are essential to the economic well-being of our country. the soundness and sustain prosperity of the financial system and our economy rely on notions of fair dealing, responsibility, and transparency. americans expect businesses and individuals to pursue profit and, at the same time, to produce quality products and services and to conduct themselves well. but after careful research, we

concluded that this crisis was fuelled by a systemic breakdown in accountability and ethics. these failures were not universal. but the breaches stretched from the living room to the board room. they resulted not only in significant financial consequences, but also in a loss of confidence on the part of investors, businesses, and the public. examples of these breaches included borrowers who defaulted on their mortgages so rapidly after taking a loan that it suggested that they never had the capacity or the intention to pay them off. mortgage brokers worked with lenders to put many qualified borrowers into higher cost loans so that these same brokers could reap greater fees. lenders such as countrywide wrote loans that borrowers could not afford. mortgage fraud flourished in the collapse of lending standards and lax regulation. one estimate shows that losses due to fraud and loans climbed to above $100 billion. and when financial firms

package risky mortgages and then sold them off to investors, our investigation found that critical information was not disclosed. yet we believe that the commission's conclusions must not only be viewed analytically, but also in the context of human nature and individual and societal responsibility. it would be simplistic to pin this on human failings, such as greed and hubris. but rather, the failure to account for human and weakness -- for human weakness proved devastating. the breadth of the crisis does not mean that everyone is at fault. in fact, many firms and individuals did not participate in the excesses that we chronicle in this report. we do place special responsibility with the public leaders who were charged with protecting our financial system, those entrusted to run our regulatory agencies, and the chief executives of

companies whose failures and drove us to crisis. but we believe that we must also, as a nation, except responsibility for what we permitted to occur. collectively, although certainly not unanimously, we acquiesced and embraced a system, a set of policies and actions that gave rise to serious crisis. while we were not charged with making policy recommendations, the very purpose of our report has been to take stock of what happened so we can plot a new course. based on our report and the work of others who have investigated the crisis, it now falls to us, to each of us to make different choices if we want different results. thank you. i would like to turn it back over to our chairman phil

angeles's. >> thank you. before we go to questioned, i would like to make some closing remarks. i want to thank my nine colleagues, especially vice chairman. i know i speak for all of us when i say how fortunate we have been to have won the albert as our executive director and the extraordinary staff who has -- to have wendy adelberg. the report and many materials sighted in it are available online at our website. before the commission officially disbands on february 13, will post additional materials gathered during our investigation. as of this morning, there are about 1200 documents already placed on this website. many are associated with the book. we expect to place approximately

700 plus additional documents and about 300 audio transcriptions summaries of an abused so there is an historical record beyond this to send to the national archives. this report should not be viewed as the end of this nation's examination of this meltdown. in many respects, our financial system is still unchanged from what existed on the eve of this crisis. we believe there's still much to learn, investigate, and to fix. and now i do want to know that, if senator graham please before we're done, it is because he has to catch a plane. >> mr. chairman. >> thank you. >> ok. >> thank you so much for your time.

obviously, wheat, in the press, have noticed the absence of the republican appointed members of this commission. is the fact that their descent is likely to undermine how port and play this can be taken? >> let me make a brief comment and then i will ask one of my colleagues to comment. first of all, we're here to present the report today. there are two separate the sense that have been filed. the public and the media will have a chance to view the dissents.

we can find areas of agreement in the conclusion. the seriousness of mortgage fraud. but i would say this, there are fundamental differences. we believe that this crisis was avoidable. we believe that it was the result of human action and inaction. i believe that the report speaks for itself. would you like to add to that? >> i think it would be useful for the record for the questioners to say their name and their affiliation. >> thank you. >> i apologize. >> and i might mention also, on this one point, that in this report -- almost the entirety of this report, 490 pages of report and footnotes is

dedicated to the backs of what happened to this country upon which we based our conclusion. i believe the report speaks for itself. i will let the might be handed over. >> hello. can you elaborate more on the responsibility of the household factor, the borrower, and elaborate on the policy implications. it does not seem that a lot of the households were rescued and they carried the brunt of this crisis. >> the report itself does not make prescriptions for policy. it does add an awful lot to the evaluation of responsibility within the whole system, natalie failures that occurred by our regulatory -- not only failures that occurred by our regulatory agencies,

corporations, and households themselves. i think that the use of this report for those who are making those decisions is to come back to a treasure trove of information that is inside of it and also on our website that relates specifically to the underlying investigation analysis and research that we did. >> next question. i encourage my colleagues, if you have something you want to note on this, please just weigh in. let me know. >> i am a reporter with cnbc. you talk a lot in the report about was to blame for various aspects of the financial crisis. but there are key players that are still in power and making decisions about the recovery. what do you say about the roles of ben bernanke and timothy geithner? >> first of all, mr. bernanke himself admitted to us that it was a very serious failure of the federal reserve not to stem the flow of toxic mortgages.

i think mr. geithner himself could have done more to curb the excesses of citigroup. i think the report speaks for itself. the fax are on the table. there were failures and there was a government that was ill- prepared for this crisis. >> i think we should acknowledge those who were power at the moment of the crisis dealt with anomaly vote -- dealt with it in an unbelievable manner. in fact, our country is better off because of the actions that were taken there. our look is what -- i look his that would cause the crisis. the federal reserve was the

stewart of lending standards in this country and -- was the steward of lending standards in this country and did not do anything about it. on and on, regulator after regulator, they either chose not to act or turned a blind eye to what was actually going on. it is less about a particular individual that a systemic sense of deregulation and inaction by those who were in power to take action. >> have they learned the lessons of the financial crisis?

>> that would be a better question posed of them than me. >> both chairman bernanke and secretary geithner, during the course of their interviews with us and their testimony, themselves upon reflection, have noted that there were certain decisions they had made that perhaps they wished they had made differently. i think it is very admirable for them to articulate that. it certainly was a rarity among all those who came before us to actually talk a little bit about their role in the financial crisis and to talk about how they may have changed the actions they took. i think that is something that reflects on their character. >> really, i would like to add is that i do want to emphasize that -- i think it is very clear from our report that this government was very ill prepared for this crisis. when you read our report can you see that only a month out from the crisis the government is trying to figure out the exposure created by almost 1 million derivative contracts that lehman had, that is very sobering. when they go in to try to find

out, they are afraid by even asking the question it will spread a panic. the federal reserve, the open market committee discussed this and they thought bear stearns was unique. so there were big misses along the way. we hope that lessons can be learned. >> i think it is important not to focus just on those who are currently still in leadership positions. our commission was exceedingly nonpartisans in his criticism. mr. greenspan received plenty of attention in the book for the judgments that they made in the course of the time when they were at the helm of the responsible agencies. i think this is something that has been pervasive for quite some time.

>> thank you. next question. >> cnn. i have two questions. number one, have you referred anything to law enforcement authorities for further investigation? if so, can you share as much detail as you're willing to? it snows here that all the sex received a bailout money from a id. -- it shows here that goldman sacks received a bailout money from a id. -- from aig. >> one was to examine the major institutions that would have failed if it were not for government assistance. we were asked to refer to the attorney general of the united states and any appropriate state attorney general that the commission may have found had violated the laws in relation to the crisis. where the commission found potential violations, it referred to those matters to the proper authorities. we will not comment on any specific referrals. secondly, let's talk about goldman sachs.

>> [unintelligible] >> i said, where we found potential obligations, we refer them to the appropriate authority. i will not spend a lot of time on this. on pages 377 and 30778, many people know that goldman sacks receive about $14 billion that it passed through to many other clients.

but we found that goldman received another $3.4 billion from aig and retained two-thirds of it. unlike what might have been understood broadly, it was passed on to others. >> corporate crime reporter. listening to you, flipping through the report, we hear words to describe the c o's of these companies, such as risky, reckless, imprudent, irresponsible. we do not hear the word "criminal." did you find corporate criminal activity or individuals and corporations who committed crimes? if you did, why have you not made that conclusion in this report?

>> as the chairman said, our mandate was to refer to the attorney general or to the state authority any individual that our investigation may have violated u.s. laws, whether civil or criminal. we made several of those referrals, but we will not talk about any of those details. >> are the public and the financial system better protected because congress gave the sec and the cftc the regulation without the money to do it to?

>> i hope that the statutory powers of the two agencies are fully implemented and financed. >> [unintelligible] >> i think a great deal of rule making is going on now. they have some resources and they may well need additional resources for their additional responsibility. >> i am being told now that we will go to the phones. there are apparently a number of members of the media on the telephone. it is a snow day for those in washington and some remote. >> kevin hall, your line is open. excuse me, kevin hall? is open. ask your question.

-- your line is open. ask your question. >> you had a very specific case where warren buffett was in front of you and you ask him to specifically whether or not he had been told by mühe these employees -- by moody's employees that there were problems with structured finance and the there was a crisis ready to happen. he denied ever receiving that. you had documents and e-mail in your position, showing that he had reached out to them. can you talk a little bit about mr. buffett who'd showed to be pretty indifferent to the workings of moody's? >> what was the end of that question? >> whether or not how much you

touch on mr. buffett's testimony in new york in which you showed him during questioning to be a major shareholder who seem to divorced of the workings of the company and the earlier part of the question, whether or not you had in your position e-mail that shows he had been reached out to all from the structured finance division. >> first, i will have to ask the staff to get back to you. that is about the e-mail exchange. i do not have that at my fingertips. we do talk about moody's extensively. we do talk about berkshire hathaway's large ownership in that company.

i will have staff get back to you to point out where it is in the book and what we have. let's get to the next question. >> dave clarke with reuters. your mandate was not to make recommendations for policy changes, but congress obviously already made those. do you think that the dodd- frank law is adequate? >> we hope that this will be a guidepost to policy makers as our financial system is reformed. that journey has just begun. it has by no means added. there are major rules and procedures that have to happen. the jury is still out. would you like to comment on this? >> not particularly. [laughter] >> i just want to make sure that any other commissioners have any comment. >> i do not think we chose to take their work and shape it for dodd-frank at all. our task was to identify the causes of the financial crisis, not necessarily to safeguard

investigation into a piece of legislation that might have involved. it is a circumstance that it did so during our investigation. i would hope that what we have outlined in our report does become a guidepost for what legislators or regulators will do as they move forward. but it was not, by any stretch of imagination, intended to reinforce or support any particular piece of legislation. >> unaccustomed as i am to avoid or to pass up the opportunity to comment, i have changed my mind. i think it is important to recognize a couple of things. our financial system is really not very different today in 2011 than it was to the run-up to the crisis in 2006 and 2007. in fact, the concentration of

financial assets in the largest commercial and investment banks is really significantly higher today than it was in the run-up to the crisis.

>> the senate committee on health, education and pensions will please come to order. today, we meet for the first in a series of hearings that this

committee will hold on the affordable care act, hearings that will focus not only on the politics of health care reform but on the tangible, positive impact the reform is having on americans' lives. we can all agree that what this debate needs more light and less heat. today's hearing will focus on the benefits of health reform that americans are experiencing right now, specifically the bundle of significant consumer protections that went into effect last september, known as the patients' bill of rights. these protections are a historic long awaited improvement in the quality and scope of health coverage for all americans. everyone who pays a premium is protected against some of the most egregious and abusive practices of the health insurance industry. thanks to health reform, americans now have protections that every senator on this dais has had for many years. before the affordable care act,

many americans had lifetime limits and it was estimated that as many as 20,000 people annually could be denied coverage for care due to those limits. surprisingly, people in danger of hitting a lifetime limit are seriously ill and their benefits run out. the affordable care act phases out annual limits by 2014. providing economic and health security for those who need coverage the most at critical times. one of those folks, lisa grasshoff is here and will talk about her care for her son and her financial future. as i'm sure the secretary will discuss in her testimony, last week the department of health and human services released a report analyzing preexisting health conditions. the findings of strikinging. 129 million americans have preexisting conditions and millions more are much likely to

develop such a condition over the next eight years. before the affordable care act, these americans faced denial of coverage, restriction of benefits or higher premiums as a result of their preexisting condition. their ability to take a new job, start their own business or make other important life changes was limited. they were in effect locked into their original insurance coverage. because of health reform, insurance companies are now prohibited from restricting or denying coverage to children under 19 because of a preexisting condition. in 2014, this production will be extended to all americans. between now and 2014, the law establishes and insurance plan in every state taylored to adults with preexisting conditions who are currently uninsurable offering coverage at standard rates. another element of the patient's bill of rights a requirement for every insurance plan to cover

evidence based preventive services that will head off many illnesses, that will address them in the nurse's office rather than the emergency room. this consumes 75% of health care spending annually. dollars that could be used to build roads, create jobs. the prevention investments in the law are down payments on the project of transforming our sick care system into a genuine health care system, and first dollar coverage of preventive services like mammograms and immunizations are a vital part of that. before the affordable care act, millions of adults went without insurance because their jobs didn't offer it or they were ineligible for coverage on their parents' policy. these people had to largely fend for themselves in an unregulated market for individual coverage, the charges high preem yims for moddette benefits. health reform allows young people, more than 2 million of them to stay on their parents'

policy until age 26. this reform relieves young people the burden of high health insurance costs. we'll learn more about this from one of our witnesses today, a university of nebraska student. finally the affordable care act puts an end to one of the most outrageous insurance company abuses, canceling coverage when someone gets sick, and based on technical paperwork area. a california insurer using computer programs cancelled policies of pregnant women and chronically ill because they submitted expensive claims. another insurance company that submitted claims reaching a certain cost level looking for reasons to cancel the policy. insurance companies paying bonuses on how many policies they cancelled. health reform puts an end to

that sorry state of affairs. we'll hear from public officials from state and federal levels, as well as private citizens who will talk about how this has affected them. our first panel, of course, we welcome secretary of health and human services, kathleen sebelius to her first hearing of this new congress. in addition to experting implementing the private insurance market reforms, i want to applaud the secretary for her relentless work in eliminating the abuse in medicare and medicaid. we recovered more than $4 billion of fraud last year, the highest annual recovery ever. thank you very much. the department released new rules authorized by the affordable care act giving it more effective tools to detect and gatd fraud. our second panel is composed of three government witnesses.

as always, i'm pleased to be joined by senator mckenzie, and before i turn to an opening statement, i have one administrative matter. i request the record to stay open for statements to be submitted. >> thank you, mr. chairman. i appreciate the secretary being here today. i was very pleased at the state of the union that the president mentioned that there are flaws in the health care bill that need fixing. he specifically mentioned tort reform. of course a year and a half ago at the american medical association convention, he promised that the health care bill would have tort reform and a permanent doc fix. neither one of those things wound up in there. today's hearing is designed as another marketing tool for the health care plan. i don't think we can fault the millions that have been spent on the marketing. it's been voluminous, but it's the policy that's flawed, not the marketing plan.

it's easy to pick a few paragraphs out of a 2700 page law to find a few provisions that are popular. apparently the purpose of the hearing today is to identify those few issues in the law law that enjoy support. that's often from both sides of the aisle. usually a hearing is to seek solutions. unfortunately, the reality is americans won't have the luxury of only abiding by their favorite paragraphs of the new law. americans will be forced to comply with the entire law. that means, as a direct result of the new law, millions of americans will see their health insurance premiums increase. plans like blue shield of california have announced premium increases of 59%, a portion of which they directly attribute to the mandates in the new law. as a result of new law, children in many states are not able to get child only health plans. i got a letter from a disabled veteran in wyoming he wrote to me because of the new law he can't get health insurance from his kids. he gets his from the va.

he doesn't need a family policy. he needs a policy for his two kids. because of drafting errors in the new law, he's out of luck. no health insurance plans in wyoming are writing new child only policies. i asked my staff to look into this, they found that to be the case in at least 19 other states. because of the new law, kids are not able to get health insurance. another problem that millions of seniors on medicare will see their out-of-pocket costs go up and benefits go down because more than $500 billion was cut from medicare and used to pay for a new entitlement program. because of the new law employers across the country will be forced to lay off workers and reduce wages at as their health care costs continue to increase as a result of all the new taxes in the law that will increase their health care costs. the new law forces 16 million americans into the medicaid program, one of the worst health care programs in the country that provides some of the lowest quality care. while at the same time, forcing

cash strapped states to pay an additional 20 billion over the next ten years to expand the program. this is the reality that we face as a result of the new health care law. nothing in the testimony we will hear today is going to change it. that's why survey after survey shows that the american people reject the policies set forth in this new law. we recognize there are individuals who will benefit from a few of the provisions in the law. many of those provisions do enjoy bipartisan support. there are many senators, both democrat and republican that support policies like prohibiting recisions and making it easier for parents to cover their children on their plans up to age 26. we could have enacted a plan last year that would have afforded those protections. instead the new law will force americans to buy the type of health insurance that washington thinks they should have. employers will be required to offer health insurance or pay $52 billion in new taxes. americans will not have the

luxury of picking which parts of the new law apply to them but instead will have to comply with the 2700 pages of new mandates, taxes and limitations on their freedoms. that couldn't count the pages of new regulation. there is a sign in tside of a building that says as regulations grow, freedoms die. madam secretary, you have the job of writing the health care law. with each page you publish, you will be limiting the freedom of individuals, for example whether they pay their mortgage or health insurance premiums. americans have to pick health insurance, if you don't have insurance, you are backe breaking the law. >> businesses that have more than 51 employ es will not have the freedom whether to increase a employ epay. if you don't provide health

insurance, you have to pay 52 billion in new taxes. the freedoms of businesses to make decisions about how to run their companies are disappearing. americans who wish to pay lower health insurance premiums by picking a plan that has a higher deductible will no longer have this freedom. the new law decrees that washington knows best. the administration will soon be publishing regulations capping the amount of out-of-pocket costs and limiting the deductible amount small businesses can offer their employees. madam secretary, i don't envy your job i do appreciate you are here today and you have been working on those regulations and meeting a lot of the deadlines. we will have the opportunity to ask some tough questions about the new law. i do believe this is your first time to appear before this committee since your nomination hearing roughly two years ago to perform proper oversight, this committee will need to hear more from you. i will ask you to reaffirm that commitment today. i'm glad this committee will have the opportunity to ask you

questions about the implementation of the new health care law, which impacts 1/6 of our nation's economy. i'm always interested in the doughnut hole provision, 60% through the doughnut hole will get 100% from taxpayers once it gets through the doughnut hole because we no longer give incentive for people to go to generics. i have people from wyoming talking about medicare advantage because their rates have gone up so much or completely been eliminated that they're losing a part of what they considered to be health care and invaluable health care and there's some animosity towards the aarp because they helped to do that and are the ones supplying the med gap policy. i believe we can and should do better. i intend to focus on ways to eliminate the provisions in this

law that limit our freedoms. i will work to enact reforms focusing on increasing consumer choices and decreasing health care costs. we must make health care more affordable for both consumers and the federal taxpayer. thank you, mr. chairman. >> thank you, senator enzi. we have an exceptional group of witnesses today. i would like to thank all of you for taking the time and energy for being here on our first panel, of course, secretary of health and human services, kathleen sbe kathleen intel sebelius. she was a leading voice in the passage of the affordable care act. she's responsible for implementing many of the key provisions. prior to joining the cabinet, she served as the kansas insurance commissioner. she has a great deal of knowledge in that area and later of course as the honorable governor of the state of kansas

where she worked to expand access to quality, affordable health care and fought to protect consumers. madam secretary, thank you for your hard work. thank you for sharing your knowledge with the committee today. i commends you for your work on this important issue. your statement will be made a part of the record in its entirety. please proceed as you so desire. >> thank you very much, mr. chairman. it's nice to have a chance to visit with the health committee on this important issue and i want to thank chairman harken and senator enzi for the opportunity to discuss the implementation of the affordable care act and talk a little bit about the enormous difference it's already making in the lives of americans since it was passed. as you know in the framework of the bill over the last ten months, our department has worked closely with two other departments, with treasury and secretary tim geithner and with

labor and secretary hillda so lease, but we've been working with governors across the country, with my former colleague, state insurance commissioners, health care providers, doctors, nurses, consumer advocates, employers and other stake holders to deliver the key benefits that have already become available to the people of america. we've met deadlines. we've established strong working partnerships and begun laying the groundwork for the additional reforms that take place in the years to come. in that time, i've had the chance to see the new law through the eyes of people it helps every day. mr. chairman, you've already referenced the new patients's bill of rights. because of the enactment of those provisions, millions of americans don't have to worry about losing their health insurance when they need it most. many of the worst abuses of the insurance industry, like unfair

and arbitrary recision practices and lifetime dollar limits on benefits have now been brought to an end. in addition, the new law begins to free as many as 129 million americans with preexisting health conditions, from the fear of discrimination by insurance companies. starting this year, it did prevent insurers from denying coverage to children because of adisability or illness. in 2014, all americans will be free from discrimination by companies based on their health status. the law is also beginning to slow down the rising health insurance costs for families and small business owners. there are new resources for states to review questionable premium hikes and new regulations that limit the amount of premium dollars that insurers can spend on marketing and ceo bonuses. beginning in 2014, individuals, families and small businesses will be able to pool their

purchasing power and negotiate lower rates in new health insurance exchanges, which many states are already working on to design and implement. i've also seen how the new law is impacting america's business owners. over 5,000 businesses, state and local governments and unions are already using new funds to help maintain coverage for a very vulnerable population, folks between the age of 55 and 64 and their families, the so called early retirees, 4 million small business owners are eligible for tax credits to help them provide insurance for their employees. thanks to the new law, seniors and those americans with disabilities enjoy stronger and more sustainable medicare. we've sent over 3 million checks to those who fell into the doughnut hole last year.

they've received a one time $250 rebate check. this year, for those who reach the doughnut hole coverage in 2011, they will begin to receive a 50% discount on the covered name brand prescription drugs. at the time the doughnut hole closes altogether. medicare beneficiaries are receiving critical preventive services and an annual wellness visit which has been added to their guaranteed benefits. in addition to giving americans more control over their health care, the new law is strengthening our economy. just recently, the congressional budget office reiterated their numbers that the new law will reduce the federal deficit by $230 billion over the next decade and over a trillion dollars in the following decade. tuesday night, president obama laid out a vision to how america can inwin the future by building a foundation for long term

growth that allows families and business owners to thrive. improving our health care system is vital to making that vision a reality. the affordable care act is an essential component to this goal. by freeing family frs the worst insurance company abuses, freeing entrepreneurs to start new businesses without worrying about losing their coverage and freeing all of us from the burden of skyrocketing health care costs that make it hard for families to pay their bills, the law allows american companies to compete and allows the federal government to bring down the deficit. since march of last year, our department has focused on working with congress and our partners across the country to implement the law quickly and effectively. in the coming months, i look forward to working with all of you to continue all of those efforts and make sure americans can take full advantage of all that the law has to offer. i again thank you for this opportunity and look forward to our discussion.

>> thank you, madam secretary. we'll start our round of questions per agreement between the ranking member and myself. earlier on, the order will be the chair, ranking member and senators in order of appearance, and my staff, so it would be senator mccain, franken, bennett, roberts, reid, ice akson and sanders in that order. madam secretary, could you descri describe, getting to this child only issue, can you describe the new protections that the health reform bill provides to children in the private market and how it differs from the status quo before the affordable care act was passed? >> mr. chairman, before the affordable care act, what a number of companies did is offer child only policies, but eliminated any child with a

preexisting health condition. so the parents who really desperately needed coverage for their children with anything from asthma to diabetes to cancer survivor were blocked from getting coverage. the affordable care act says that if you are going to offer child only policies, they must be open to all children. no longer can you only offer policies to children who don't have a health condition that may require them to have health insurance. what we have found companies doing is some companies may be changing the kind of policy offerings. what most companies are doing are keeping in place their coverage for children like those referred to by senator enzi and selecting whether or not to offer policies going forward, prospective policies. a number of states have taken action, i think 19 or 20 so far,

to say companies who want to offer policies to children must offer them across the board. feeling that the discrimination against children with preexisting health condition is the worst of all worlds for parents, and particularly, when you have a sick child, to not be able to find affordable coverage is just untenable. children are also available -- eligible for the new high risk insurance pools that are run in states across the country, in addition to the private health market. >> so it's kind of a situation saying we experienced in other areas of insurance, that if you are really healthy, you can get a health insurance plan. >> the promise not to get sick. >> that's right, if you have no preexisting conditions. one other thing that i wanted to just ask is the first dollar coverage for proven cost effective preventive services. as you know, that's something i

worked very hard on, with others to get into this bill. senator byrd was also very active on that also, to focus on preventive measures. that has also started. i just wanted to again ask you how the mandated coverage of these services are affecting americans' health and how the provision is being implemented on the preventive end right now? how is that being implemented right now? >> mr. chairman, i know that prevention efforts are an area where you have spent a lot of time and energy over the years and one that i think has the potential of yielding huge results in terms of not only lowering overall health costs, as you say 75 cents of every dollar is spent on chronic diseases, most of which are preventible, but also on a healthier workforce.

the new law has a couple of provisions. medicare beneficiaries have eligibility for mammograms, cancer screenings, variety of preventive coverage without co-pays. that's a big step forward in terms of taking down a cost barrier. in new plans offered, beginning after january 1st of 2011, the private insurers will also offer preventive services that are covering a wide range of care without co-pays to encourage, again, people to have regular checkups, get screenings, find problems much before they get to be acute issues and deal with them in a much more cost effective and frankly life saving strategy before people get acutely ill and spend that time in hospitals or in a condition where their lifespan is reduced and their health

costs skyrocket. >> very simply, do you feel the department has the wherewithal to implement this right now? in other words, to really implement these provisions? >> we're finding that, yes, as we go forward, we are moving ahead and those policies are becoming effective. >> i appreciate that. thank you, madam secretary. senator enzi. >> thank you, mr. chairman. i want to go back to the child only plans question a little bit, because we did take a look and found that there are at least 20 states where you can't buy child only insurance anymore. if they already have it, they can keep it, but there's not any new policies being issued. consequently, they're getting out of that market. for parents like the disabled veteran in wyoming that i mentioned in my opening statement who need to buy a plan, it's absolutely devastating. the outcomes unfortunately

predictable as a result of the drafting, one of which things would allow a person to buy a policy on the way to the emergency room. so there's some incorrect drafting and incorrect implementation. do you have any specific steps that you're going to take to fix the problem in those 20 states? does congress need to change the law? >> well, senator, we have done a lot of outreach with insurers across the country, and while there was an initial flurry of announcements, many insurance companies are reconsider iing their initial plans to leave the marketplace. i would suggest it was, in some cases, a pretty cynical notion that you would only insure as a health insurer, children without a preexisting health condition. and keep those policies in place. parents' coverage is often

available to many of the children who had child only policies. we are finding that a lot of children are being insured again through their parents' coverage, which has now been extended as you know to the age of 26, which has been a huge boon to a lot of families. a number of children are also eligible for chip coverage and the new high risk plan, so there are a variety of strategies in place to make sure that children have coverage. we are continuing to work closely with insurance companies to help rethink the strategies between now and 2014. 2014 there won't any longer be any ma barriers for anyone with preexisting condition to have coverage. the child only provisions kicked in initially this year. >> you're saying there is no need for changes? >> well, senator, we will continue to look at the situation, particularly in states like wyoming, if all the companies have moved out. i think it's untenable for

parents not to have coverage, but i would suggest, i would hope that we could call on the companies who have made ample profit selling child only policy s to children who were not ill or had any preexisting condition to reconsider their efforts to leave the market and a whole series of companies have indeed done that. >> i would hope that we could make a fix in the law as well so that people don't buy their insurance on the way to the emergency room. yesterday, before the house budget committee, your department's chief medicare actuary, richard foster testified that the new health care law will not hold down health care costs and will not allow everyone to keep their current coverage. specifically when asked about the claim that the law reduces cost, mr. cofoster described its false more so than true, regarding the claim people would be allowed to keep their current coverage, mr. foster described that claim as not true in all cases. is mr. foster wrong in his

analysis? what information do you have to counter the detailed analysis he's done of the new law? >> well, senator, i have not had ray chance to thoroughly analyze mr. foster's testimony. i know in the past, when he has testified about the quarter of a trillion dollars in deficit reduction, he has speculated that if indeed the laws change somewhere in the next ten years and if indeed congress does not implement the law as is, then the quarter of a trillion dollar savings would not be realized. we are standing by the congressional budget office analysis, your budget office analysis which has had a series of numbers about not only the impact on families and says the cost will go down, the impact on individual business owner's premiums that says the cost will go down, but the impact on the

deficit. the budget office says the costs will go down. >> you and i know that the congressional budget office is limited by what documents we give them to make their maanalys on. the doc fix alone creates a substantial loss but they weren't allowed to consider that in the testimony. in your testimony, you noted the new laws strengthen the economy. my time has expired. i will be submitting some questions if we don't go additional rounds. >> thank you. >> senator mccain? >> thank you, mr. chairman. madam secretary, the president said on tuesday night that he was in favor of repeal of 1099 and also believes that medical malpractice should be an issue that we should be addressing. do you agree with the president? >> yes, sir. >> would you submit perhaps for

the record some idea of what the parameters of medical malpractice reform might be that suggestions the department might have? >> well, senator, as you know, the department has had authority -- >> would you -- the question is would you submit for the record? >> would i submit them? sure. >> thank you very much, since we tried repeatedly over a year to get some kind of addressing in the 2,700 some page document some action on what most experts agree contributes sometime 20, 30% to the additional costs of health care. you have granted over 700 waivers. now for employers and union plans from the "annual benefit limit restrictions in health reform bill." why not make those permanent? >> senator, the goal of the law

in the area of the annual limit benefit granted our department the discretion to look at situations which would cause not only market disruption but a dramatic increase in premiums. what we have done on a case by case basis is receive information, particularly about the so called mini med plans that are employer based coverage throughout the country. grant waivers where the employer indicated that there would be an enormous rate increase. >> i understand how it works. i'm asking why you wouldn't make them permanent. i appreciate if you make your answer short. >> why wouldn't we want to make them permanent? >> yes. >> we're taking a look at the marketplace. they assured us they could gradually phase into -- >> they've assured you of that?

>> that's my understanding, yes, sir. >> as you know, the states are having great difficulty with their budgets and there is some conversations about some states even having to go into some kind of bankruptcy, et cetera. there are a number of states that have great difficulty in complying with the act, as you know. in my home state of arizona, we are facing a serious budget crisis. our governor has written you a letter asking for a waiver. she believes she's asking for your assistance in providing arizona with a waiver from the maintenance of effort requirements of the patient protection and affordable care act. she goes on to say "i'm respectfully requesting that arizona be allowed to reduce its medicaid eligibility for certain nondisabled adults in order to preserve its underlying medicaid

program." would you give serious consideration to the governor and i'm sure other governors' requests that states be able to exercise the flexibility that they need to meet their compelling budget requirements and probably know best in the view of many of us, how to provide the best health care at the least possible cost for our constituents? >> senator, we're working very closely with governors across the country. i just received yesterday governor brewer's request, which we are taking a very careful look at and also taking a very careful look at the law. i can tell you that we are actively working with states around the country with new governors particularly about the flexibility that they have many of them aren't aware of the wide range of flexibility that they have to have cost savings in their medicaid programs and we are actively working to provide teams of folks to go through the

potential cost savings that other states have already implemented. >> i'm told that you have given a full waiver to three states. is that correct? >> not of the maintenance of effort, no, sir. that has not ever been raised before. >> thank you. again, senator enzi raised this, but something we all knew about cbo garbage in, garbage out, but the people we give the responsibilities to, medical expert said both assertions that the cost will be brought down and let people keep their current health insurance if they like it, he strongly disagrees. i of course disagree, since there's 300,000 citizens in my state on medicare advantage. there's no doubt that their benefits under that program will

be significantly changed, if not eliminated. i see my time has expired. i look forward, secretary -- madam secretary, on this issue of medical malpractice reform. president told the american people tuesday night that he recognizes that this is an issue that needs to be addressed. we're going to find out whether the trial lawyers run this place or whether the american people and affordable health care is reachable for them, because without medical malpractice reform it makes that issue, if not impossible, certainly extremely difficult. we look forward to hearing your proposals as to how we can implement, such as been implemented in the state of texas. i thank you. >> i next will turn to senator franken. >> thank you, mr. chairman. speaking of the state taxes, just to pick up from senator mccain. my understanding is that the state of texas has this pretty

dramatic tort reform, health care there is much, much more expensive than it is in my stat? >> i think that is correct, senator. >> i want to address the ranking member who said that there's just like a few paragraphs that people like in the bill. that's what we keep talking about. and as -- no, that is what i heard from the ranking member. if you go back and look at your opening statement, you'll see that, that that's what you said was in the marketing. is one of those paragraphs, i would think that people do like is getting rid of preexisting conditions is a reason to discriminate against a child or patient, right? that's pretty popular, isn't it? >> i think it's very popular with the american public, yes, sir. >> then the ranking member

talked about the ability to buy the policy on the way to the emergency room. now, i've heard that and what that is about is, well, if you have preexisting condition, you don't have to buy a policy until you get sick. that's what that characterization is, isn't it? i mean, is that your understanding of it? >> i think that's what the senator is referring to, that you can opt in and out of the market and only purchase coverage when you were sick. >> so isn't that the reason for the mandate? so in other words, when i he hear -- when i hear my friends who are opposed to this reform say people like -- we really like the nondiscrimination against people with preexisting conditions, but you can -- then you can buy a health policy on the way to the emergency room.

well that's why you have the mandate, isn't it? >> well, the idea is to have a stable insurance pool and to pool risk. as a former regulator, that's important to have folks who have coverage and some use it and some are not using it simultaneously. it would be like buying car insurance after you've had the wreck. >> right. so if you think of health care reform as a three legged stool, tell me if you agree with this analysis. first leg is you can't discriminate against people with preexisting conditions. i hear everyone say that they want that. the second part is, since that means that you could buy an insurance policy on the way to the emergency room, if -- you need a mandate so that everyone has insurance, so you can't buy insurance policy on the way to the emergency room, everyone

would have it, right? the third part is subsidizing people who can't afford it. that's why we have a sliding scale? is that a good analysis of what comprehensive health care reform is? >> i think if you look at the parts of the market that don't function very well right now, for individuals buying coverage and for a lot of the small business owners, having a much larger purchasing pool, having more people involved eliminating the preexisting condition limitation and then having everybody in is certainly the way to stabilize the private insurance market. as you know, that was a discussion that the insurers had and since this plan is built around the private insurer's market, it adopts that strategy. you can get rid of the preexisting condition if everyone is in the pool. >> exactly. i think this is really a discussion about a comprehensive

health care reform and not just cherry picking certain paragraphs. i want to ask you about the medical loss ratio and the implementation of that. as you know, i fought for that, which basically says that insurance companies that have large group policies have to use 85% of the premiums that they get on actual health care. 15% can go to marketing and administration and profits and 80% if it's an individual or small group. can you tell me a little bit about the implementation of this provision? >> senator, the provision has just been outlined. as you know, the congress and the affordable care act directed the nation's insurance commissioners who are elected and appointmented across the country and who regulate the private market to recommend a policy to us about the medical loss ratio provision which

you've just outlined. they had a unanimous recommendation about what were the categories of health costs that should be included as medical costs, what should be outside and how it should be implemented. we turned around and adopted their recommendations and that is really the policy that's in place. and this year, for 2011, data will be collected by our department about companies meeting that ratio and at the end of the day, companies who fail to meet the ratio will owe their policyholders a rebate, but the rebates do not start until 2012, until data has been collected. >> thank you. my time is finished. thank you, mr. chairman. >> thank you very much. madam secretary, thank you for being here. let me ask about an issue that

is a little bit off the subject of your direct testimony here, but is a very important part of the bill that i would like to see us move ahead with. relates to implementation of the workforce provisions that are contained in title v. central part of the reform, as i saw it, was creation of a new independent and nonpartisan national workforce commission. this is something which is not under your department directly. it's an independent commission. it's tasked with providing congress and providing congress and the administration with clear information and guidance on how to align our federal resources to meet the health care workforce needs of the nation, based on recommendations at the institute of medicine made, and modeled

after med pac, which, of course, provides us with expert guidance on medicare payment issues. it had strong support, i believe, bipartisan support when we included it in the bill. it is my understanding that the commission members were selected by gao. dr. peter burhouse is the chair. commission may provide a report as early as october 1, but the commission cannot begin its work until it gets funding to do its work. the appropriations bill that came out of the labor hhs subcommittee and that came -- we tried to pass on the smenate floor included $3 million for operation of the commission. it is unclear now what the funding status is. and so i wanted to just flag this issue for you.

i know as i say this is not your responsibility, directly, but i think it is very important, a very important part of health care reform is dealing with the problem of how to -- how to -- how to channel federal funds to use the most effectively to meet our health care workforce needs. so i wanted to just flag it for you. i don't know if you are familiar with the issue, if you have any comments you would like to make, but glad to hear those. >> well, senator, i think that the issue of the health care workforce is an enormous issue whether or not we had passed an affordable care act is an issue that's been looming on the horizon and frankly for decades where are the providers that we need for the future what is the pipeline, how do we get there in an expedited fashion and what is an accurate snapshot in t?

the workforce commission, i have seen the members' names and bios and it is a stellar group and one that we look forward to working with. the health care act also expanded the national health service core, which allows in exchange for scholarship and loan payment, providers who serve in underserved areas which is a significant step forward. it increases thanks to the prevention and wellness fund. there was $250 million investment and, again, additional primary care providers which will train about 16,000 new providers over the course of the next five years. we have, as part of the act, some nurse-led community health centers, increasing nurse practitioners and providers, but i think that the challenge of making sure that all americans have access to health care

providers and particularly primary care gerontology, mental health providers, if we're shifting to a wellness system, we need the providers on the ground who are able to deliver that care and that is certainly part of the effort that you all have begun with the affordable care act and accelerated what has been a long-standing challenge, but one that we are paying very careful attention to. and the president has, as a high personal priority, to make sure we have the workforce needed by the american public. >> could i just ask that you maybe have someone on your staff look into the issue of how we can get the funding for this commission to do its work? as i say, i think they're up and ready to go, they obviously need some staff to assist them, and they need to pay that staff, so it is not a substantial amount of money, but i do think it is a very important task that we have given them and if you could look into that, i sure would appreciate it. thank you. >> be glad to.

>> thank you, senator. senator bennet? >> thank you, mr. chairman. i would like to thank you and the ranking member to hefor hol this hearing. madam secretary, thank you for coming back. if i had to sum up the last two years of the town hall meeting in colorado on this issue, i would say that what people are saying is we hated this system as it existed, the health insurance system, and we also believe deeply in your capacity, my capacity, not yours, to make it even worse than it is now. and i think the rancor of the debate on health care didn't do much to create a level of confidence in all of this. and one of the things i talked about was that when people said -- we don't believe government can do a good job here, look at what government has done before, i said, you have a point. at the heart of this reform in many ways is an attempt, a rare attempt, to actually change the

incentive structures so that we can deliver higher quality at lower cost, something that we have historically not done, but something we have to do, not just for the health of our citizens, but for the quality of the care that we have got, and so we don't bankrupt the united states of america. so one of the things i learned during the health care debate was because of the way the incentive structure worked, one out of every five medicare beneficiaries that went to the hospital were readmitted within a month for conditions that were completely preventable and medicare, as a result, was spending $17 billion a year on these hospital readmissions that could have prevented. it is one of the reasons why i work so hard on something called the community-based care transitions program, this innovative model ensures each medicare beneficiary at risk of being readmitted is assigned a coach to make sure they go in and out of the hospital, nursing home, and even their own home,

and that they do the follow-up care and take their medications. this practice known as transitional care has shown a reduction of up to 50% in places with high readmission elivery ml to create higher quality at a lower price and what can we do to accelerate that work? >> well, senator, i think that's a great question. the earlier discussion really focused on some of the market insurance market changes, but i think the underlying health costs and the amount that is spent on things that may not lend themselves to the health of anyone are areas that providers

and employers and others are eager to work on. and the case of this, you know, coordinated care strategy, once someone leaves the hospital, we know it works. it is in pockets around the country, but never really taken to scale. it is better for patients. it is better for their families. it is better for their health and certainly lower costs of unnecessary readmission. so having an opportunity to employ those best practices across the country, deploy those tactics, that bundle of care, the medical home model which we know is, again, very successful, the kind of early intervention, a lot of those strategies are incorporated into the affordable care act. and give direction to our agencies to implement those across the board. and i think that will be very good for the american public's health and for our health care costs. >> i agree. and i will say, i think it has been lost in the debate, which is why i raise it here today. and the providers in my state that are working on these

things, and in many ways have some of the most forward-leaning approaches to this are really excited about the possibilities here. and that really brings me to my second point, which is that we have heard discussion on both sides today and throughout the debate about the cbo numbers. does this really save money? is it going to save money over time? i think the honest answer to that question is it depends on how well we execute. it depends on how well you execute. it depends on how well the states execute it. it is one of the reasons why i work with senator hagan and senator warner on a fail-safe amendment that would have said, look, if we don't save the money that we are committed to saving, that we said we would save, that we will look at it again as a congress and make sure we have those savings because we want to keep faith with the american people who reasonably are saying, we're not sure what to believe. we're not sure which side, you know, is right. since it is a projection, we don't really know. my own view is that if we put more of these transitional care

models in, we may save even more money than we're talking -- we have talked about. i wonder whether you would be willing to work with me and senator hagan, senator warner and other members of the committee to see whether we might be able to write a piece of legislation that could give the american people confidence that when we say we're going to save the money, we mean we're going to save the money. >> i would be delighted to do that. >> thank you. thank you, mr. chairman. >> thank you, senator bennet. senator roberts. >> seems to me that i want to ask richard foster to join that group, save a lot of talking back and forth. madam secretary, thank you for coming. i should inform my colleagues that the secretary and i go back quite a ways from a family standpoint, and also from serving at the same time with the distinguished secretary when she was governor of kansas. i work for her father-in-law

when he was in the congress and worked with her husband, gary who is now a very prominent judge when he was a rather rowdy student. >> just say he was younger. >> when he was younger at kansas state university, home of the ever optimistic and fighting and losing wildcats. and -- >> i wore my purple for you. >> thank you. appreciate that. thank you. we have a mutual friend who has a precondition that we all know about, and rudy verdesco called and indicated he would like to talk with you, talked with me for about an hour. so i transferred him over to your office, so you can -- >> thank you. >> you can visit with him. i understand that dr. bere wick is back, he's not parachuted in, he's going to be recommended by the president or has been recommended by the president to again be the head of cms.

is that correct? >> he's been renominated. >> he's been renominated. g good. i hope in the finance committee we can get to the challenges we face. dr. berwick has unfortunately been tagged with the title of the chief rationer with all of the regulations that are pouring out of your department. i understand a couple of weeks ago that some boxes were moved and he is now in charge of oversight of the regulations. they would have to be approved by you, but it was in the secretary's office and now it is under dr. berwick, is that correct? >> the office of -- >> cms. >> yes. yes, sir. >> so that's a recent development. i don't know that gives me pause or what, but at any rate -- >> senator, we did that to maximize, i think, efficiencies. it was going to be an independent office and once we looked at overhead costs of duplicating everything from front office help to legal,

staff, it was seen as an expedited way to maximize and leverage our assets. >> maximizing dr. berwick does give me pause but let's go on to another subject. as former governor of kansas, i know you're very well aware that we have 83 critical access hospitals out in our state, most of any state, fully two-thirds of our hospitals and you also know that the critical access hospitals are not, not part of the five-year exemption from the ipap review, the independent -- >> payment advisory board. >> yes. very independent to say the least. i'm not happy with that. i think we are obligated our responsibility as individual members to set the medicare reimbursement rates as best we know them. that is a battle we lost in the health care reform and so we have ipab. but the critical access hospitals of which there are

many in wyoming, iowa, everywhere here, are not part of that five-year exempt, from the ipab review. should the ipab recommend reductions that take funds away from these rural community hospitals, i can assure you congress will act. it is a rather byzantine kind of way to do it. i'm sure the house would do it. if you did it. the president would veto it. ash lean abilene is a good example. you know these folks and they know you. would you support such a recommendation to at least include the 83 critical access hospitals? >> well, senator -- >> i don't know why this happened. and max bachus doesn't either, pardon me for interrupting you. even on reconciliation i tried an amendment that would at least make them consistent with other hospitals and that was during

the time that, you know, all those in favor, aye, aye, all those in favor no and there was a resounding no and that's the way it went. so what do you think? >> well, i share your belief that critical access hospitals are incredibly important in states across the country. and i would just say that i'm committed to working with you to take a look at what the gap is and what can be done about it, short-term and i think it is important that those hospitals not be jeopardized or the care they deliver be cut off from citizens around the country, including in kansas. >> most of us were very pleased to hear about the president issuing an executive order and applying the principles that each agency is directed, using best available techniques to quantify tests and costs as accurate as possible. but as we later found out, each agency, as they put up the yardstick to figure out the cost

benefit ratio or situation with any regulation, there is another -- there is more language and it says, and this is the part that i have the most concern. also to be considered are values that are difficult or impossible to quantify clueing equity, human dignity, fairness and distributive impacts. are you anticipating you'll be able to determine which regulations including the ones recently released from the health care regulations that hhs would fall under this exemption? are you exempt, are you not exempt, are there regulations you're taking a look at? where are we here? >> well, we certainly don't consider hhs exempt from the directive by the president and we have already launched a process to examine the whole host of regulations with parameters that he outlined. so, no, we are definitely not exempt from that regulatory

review. >> thank you, senator. >> i have a list that i would like to share with her, not now, but, hey, i will send you a list and i look forward to working with you. thank you. >> thank you, sir. >> senator. senator reed. >> thank you, madam secretary. thank you, mr. chairman. recalling some of the discussions in the health care debate, one of the issues around the elimination of pre-existing conditions was the need to have essentially mandatory coverage. i think that was an issue that was pushed very aggressively by the insurance industry. >> that's correct. >> and in fact their view basically was that if we provide this benefit, which is -- could be the most popular, frankly, the popular -- most popular aspect of the health care reform, if you have the resources, you can buy insurance regardless of your health care

condition. it was, again, just a little -- to put it in context, it was as much the insistence of the insurance industry than it is any sort of policymaker here in washington that mandatory coverage has to be part of it now. >> i think, senator, it was brought to the table by the insurance industry, by the association of health insurance plans and others to guard against anned aversionly selected market place if only the sick are in an insurance pool, it is immediately unaffordable. >> so, you know, looking at sort of -- turning it around and the logic of this is that this provision, which people say is -- we really like that, i don't know if you've seen the polling data, i assume it is in the 80s, 90%. you've got to keep this. it would require that this universal approach to coverage through private markets has to be maintained also, is that your

view? >> to have a viable private market, you have to have a pool of sharing the risk, yes, sir. >> but, i mean, again, there has been lots of discussion about what is popular, we'll keep what's popular, we'll eliminate what's unpopular and that popularity is in the eye of the beholder, but in order to have a comprehensive system, where everyone can receive coverage, can buy it through the private markets with assistance if necessary, you have to have essentially the framework you've set up that the interchanges and the requirements to participate fully. >> it is part of a market strategy that keeps a market solvent. >> one of the issues that senator enzi brought up which is very important is the issue of child only plans and there is some states where there is actual departure of companies with these policies or threatened departures. i'm wondering if there is anything the states can do. we passed significant reform,

but you are a former insurance commissioner. and up until the passage of this act, most of the action of insurance health care and otherwise at the state level, the other aspect of this question would be what about the 40 states where some, i know, don't have the child only policies but have done things to ensure that children are protected? >> well, senator, you're absolutely right. again, the affordable care act doesn't change the fact that states have the leadership position in this framework, so whether it is setting up the insurance exchanges or the high risk pool or regulating their marketpla marketplace, it is a state-based strategy and we're working closely with those state regulators. and many states, since the passage of the affordable care act, and many of them before had taken action to say that it will -- if you want to sell insurance in our state, you must offer policies across the board. and a number of states have actually passed that legislation

since the affordable care act and the companies threatening to leave the marketplace, feeling that that is a very discriminatory position for insurance companies to take. so that is, indeed, being contemplated. and as i said earlier to senator enzi, there also are a number of companies who immediately said that they would likely not stay in the market who have reconsidered that position and are indeed very much in the market. >> madam secretary, again, thank you. i think you've been given one of the most challenging assignments in washington. and you have been working tirelessly to get it done and i appreciate very much what you and your colleagues are doing. and i anticipate that the challenges will continue to appear along the road. but thank you so much. >> thank you. >> thank you, senator reed. senator burris. >> welcome, madam secretary.

when senator enzi asked you a question about cms' projections, specifically they were that this would bend the cost curve up $251 billion and the national health spending would increase $311 billion. i heard you say, i think, that you disagreed with the analysis that came out of cms. >> again, richard foster, yes, is an independent actuary. >> what is the administration's position on fixing the sgr? >> the president has said since elected he would like to see a permanent fix of the sgr. >> you used to make your case to senator enzi, cbo. now, cbo says in their estimates they failed to take into account a $250 billion that would be necessary to fix sgr. if the president's commitment is to fix sgr, then, in fact, that eats up all the savings you've

talked about. is that correct? all the savings that come from health care reform will be eaten up by the addition of a fixed sgr, just by your numbers. >> it would cost -- yes, i don't know what the cost is, but, yes. >> the health care bill create cretes s a new tax on medical devices. would you be supportive of repealing that tax? >> no, sir. >> well, let me ask you, does that not fly in the face of what the president said tuesday night to congress and to the country, where he talked about winning the future, and outinnovating the rest of the world. does that not make us uncompetitive and force innovation out of the country by taxing innovation? >> sir, i think there are tax on a lot of innovative products that actually don't deter the innovation from moving forward. i don't necessarily think that

you have to remove all tax payments. as you know, the medical device equipment initially the congress looked at a significantly higher tax and in the course of discussion, and input they decided to significantly lower that tax and not to -- to not impede progress. >> this is a new tax, on medical devices, that are being used by patients, which is one of the contributing reasons that the actuary says health care costs is going to go up because we have begun to increase the cost, not just of the delivery, if we fix sgr, but the actual cost of the products that are in the health care system. so let me ask you, nih is just talked about a new program where nih is going to get involved in some degree of drug development. isn't that something you're supportive of? >> well, senator, i have been involved in accelerating drug

development. >> they have been involved in research, of promising compounds and directions. >> that's correct. >> but i sense a distinct difference between that and drug development which is something that the private sector or academia has been engaged in almost 100%. >> well, senator, i know that you are -- come from a state, as does senator hagan, who has a lot of knowledge and expertise in drug development. i think what dr. colins has identified is that there are still way too many promising ideas that die somewhere on the vine between the microscope and the marketplace and is trying to mobile i mobilize teams, activities, any incentives that can make sure we can actually get the patients those breakthrough drug developments. and too many of them never make it to the market. >> clearly i think that will

have a cost involved in it. but it will also have a cost on the private sector's inability to chase those promising things if we choose to do it as government. madam secretary, i think we can all agree that there are many things that if we sat down today, we could tick off in this bill that we could all support. we could eliminate pre-existing conditions. we could make sure that every state had a risk pool. we could agree that children should stay on their parents health care plan until age 26. now, i lived it. i'm a federal employee. i'm a participant on the largest employer in the country. my kids were kicked off my insurance at 22. i guess i would ask you, for those members that were here until this plan was passed that are critical of the private sector having their insurance that limited children's inclusion to 22 or 23 or 24, but not 26, are they hypocritical in questioning that when they had

the opportunity to change the opm guidelines and change the largest employer in the country to age 26 before this massive health care reform plan was passed? >> well, senator, i don't think it was hypocritical. i think it is an unfortunate oversight and we found that the contracts precluded us from changing as rapidly as some of the private market plans could change, but that change will be made and federal employees across the country including members of congress can look forward to keeping their children on their plan. >> in conclusion, mr. chairman, we have over a thousand employers who have applied for a waver. 700 plus have been approved. 50 plus have been denied. in addition to that, cms estimates that the grandfather -- in the grandfather of regulation, it is estimated -- your own estimates, 80% of small business could lose their grandfather status.

i'm not sure what happened, if you like it, you get to keep it, but you said, and i quote, americans will have more control over their health care. my conclusion, after reading the plan numerous times, what we have done is the federal government has more control over health care, not the american people. i thank the chair. >> i thank the senator. senator isakson is gone. senator sanders. >> thank you, mr. chairman. madam secretary, thank you for being here. thank you for excellent work you've been doing on the very difficult circumstances. just two lines of thought that i want to pursue. in the health care reform bill, some of us, including senator harkin and many others on this committee work to expand community health centers. we believe one of the great crises in this country and one of the reasons that 45,000 americans die every single year is they don't have access to health care and in fact some of those people have health insurance. so we saw a crisis in primary

health care as a result of this legislation we doubled the number of community health centers, opening up an opportunity for 20 million more americans to get good quality health care, dental care, mental health counseling and low cost prescription drugs. can you give us maybe an update as to how progress is coming along in terms of community health center programs? >> certainly, senator. again, i applaud your leadership on this issue. it is an incredibly important framework for health care improvements across the country. and i try to visit health centers every trip i make and they are impressive neighborhood community organizations, delivering high quality, lower cost care to millions of americans. we are working very quickly to implement the strategy that is laid out over the next five years. the first step was to put money in the pipeline for important improvements and additional services, additional dental

care, mental health care. we have been putting out the new access point grant proposals that will be released this year and over the next several years. and also an important feature of the community planning proposals are going out the door in 2011. so those communities which haven't quite gotten the wherewithal to actually make the full blown proposal will have an opportunity to bring together providers and community groups. but certainly that footprint of community health centers expanding across the country and new sites. it will be both new access sites and mobile sites connected to existing health centers, schools, vans or other -- >> i should tell you, madam secretary, vermont would make a real success. if you're really nice to us in the next couple of years and grant a few more requests, every part of the state of vermont, every county, every area in the state of vermont will enable its

people to have access to community health centers, which we think is a real step forward. would you be in agreement with the study coming out of george washington university which says that the investment that we made in fact is going to save substantially more money than we spent because we're going to keep people out of emergency rooms, we're going let them get to a doctor when they should, not get very sick and end up in a hospital at great cost. >> i haven't seen the study. but i certainly have seen that practice in place. and in fact, some of the most creative and i think beneficial work going on around the country is health care -- health community health centers working in collaboration with community hospitals. and appropriately sort of reassigning folks to care that -- >> other than utilizing an emergency -- >> you bet. you bet. >> let me switch gear and pick up on a point that senator mccain a moment ago and i'm sorry he's not here. as you may know, the state of

vermont is giving serious thought to moving forward to a medicare for all singer payer program. our approach and our request for waver may be different than arizona's. we do not want to throw people off of health insurance, we want to make sure every person in our state is covered. we believe that that approach, and it was a study that just came out by dr. shout, who you may know as an economist at harvard, developed the health care prom in taiwan, we believe we can save many, many hundreds of millions of dollars through medicare for all single payer program. and i know that we have to work on that waver legislatively. that's not something you can give us on your own. but would you be prepared to work with us as we walk down that road saying that in a federalist nation, we have 50 different states, that maybe the nation can learn from what vermont or other states are doing with increased flexibility? >> well, senator, i was appreciative of the meeting that you attended with your newly

elected governor. and applaud the work that vermont has done. states across the country often have been well ahead of the federal government in terms of creative health strategies to expand coverage to citizens and we very much encourage the kind of flexibility, the state-based approaches which this bill is built around and i look forward to working with you. >> our goal there is to maintain the high standards of the national legislation, but to give states flexibility to show how in their particular areas they may be able to do it better, in a more cost effective way. we would appreciate working with you. with that, mr. chairman, thank you. >> thank you, senator. senator hagan. >> thank you, mr. chairman and madam secretary i want to thank you for all the hard work you've put in to date.

i want to talk for a minute about having the young adults on the parents' policies until they're aged 26. the state of north carolina actually has done that for years for state employees. if the students were still in school. and i know that when i switched and became a federal employee, that i had to find -- my children had to find health insurance. and one son and one daughter and it was incredibly more expensive for the young woman to buy health insurance than it was for the man. so i'm very pleased that when you think of two young people going out into the workforce, getting the same pay, the young woman was drastically affected in a different way month to month because of her higher increase in just purchasing health insurance. i'm pleased that that has been changed. in your testimony, you mentioned that the new benefit impacting hundreds of thousands of families from across the country

allowing these young children to remain on their parents' insurance until age 26. and we do have about 37,000 of them that continue to be insured under their parents' health plans, and i know in the next panel we'll be hearing about the impact of this new benefit, but i understand that it is so popular that congress extended that benefit to military families last year. and with that, i'm wondering if you could elaborate on the impact of this benefit and how many adult children do you know that might be participating across the country and could you provide some thoughts on what would happen if this benefit happened to be repealed? >> well, senator, i think the situation you described in north carolina was in place, again, in a number of states, but often was tied to school, full time school. so if kids aged out of their policy at 22, and were not in school, they, again, lost their coverage. this is impacting lots of

families, lots of different ages, and a very beneficial way. and, again, i think it is a great illustration of putting back together a larger pool of folks and bringing them back into the marketplace because the number of young americans was the second highest category of uninsured americans, the highest was those 55 to 64 often who were really priced out of the market, but young americans were the second highest category of uninsured in this country. so this family strategy, i think, goes a long way. i can't give you exact numbers today. we would be happy to try and collect those for you. but i think clearly this is impacting millions of young adults around the country and a very positive way. and allows those young adults to think about being an entrepreneur, start their own business, or strategies that, again, were impeding their

ability to really launch into a professional career if it did not come attached with health insurance. like you, senator, i have two 20 somethings who lost their coverage once they got out of school. and we were lucky because both my boys were healthy, but they had friends who were not so lucky and not so healthy who had a terrible time finding and purchasing health insurance. >> and on a whole, young adults are typically very healthy individuals so it helps from an actuarial standpoint to have more of those on policies. but also in your testimony, you mentioned the pre-existing condition insurance plans. and the inclusive health is running that -- the north carolina plan and has currently right now over 800 participants to date which i understand is one of the highest in the country. however, i know one of their challenges has been raising the awareness and getting those who

are uninsured enrolled. and my question is, could you talk about some of the challenges that states are having in getting people enrolled and some of the other efforts that they are making to raise awareness among the uninsured population. and does hhs offer guidance to states on ways to increase this awareness? >> great question, senator. i think one of the challenges is -- as you say, that a lot of people weren't aware that these even existed. so we are certainly trying to help amplify that message that in every state, in the country, there is now a new option for adults who still are locked out of the market with pre-existing health conditions and we'll continue to do that. we have also done a loot in conjunction with states with outreach to disease groups, to faith-based communities, to community leaders, to, again, make them aware that these are new and many states, the

benefits just became available late this fall, so we're talking about the early couple of startup months. but we don't miss an opportunity to remind people that this is one of the benefits of the no affordable care act that did not exist before. and actually because the rates are pegged to market rates can be a much more affordable option for those who have been uninsured for the last six months. >> i will say north carolina, we had -- we put that in place earlier, though it is still a pretty expensive policy. >> right, right. >> thank you, madam secretary. >> yes. >> thank you, senator. senator murray. >> thank you very much, mr. chairman, for having this hearing. madam secretary, thank you for the tremendous job that you and the folks at hhs are doing of implementing this law and helping people get access as we had envisioned. i know we have another panel. so i'll ask one question and go back to your testimony. you talked about the new resources that the affordable health care act is now providing

to states to help prevent unreasonable premium increases. and you mentioned that grants have already started going out to our states to help strengthen their ability to review and reject unreasonable rate hikes. can you talk a little bit about how this process will -- how this will make the process of premium increases more transparent for all of health care consumers? >> certainly, senator. this is another area where the bill that you all helped to put in place contemplates that states are the leaders in the health insurance market and states are the regulators of their own health insurance market. but also recognizes that often those resources are not adequate to do a robust job of rate review, particularly tough budget times, a lot of states have cut back. and so there are additional

resources available, and taken advantage of by virtually every state in the country, to increase and enhance the oversight provided by those state regulators. what we are doing right now with health care.gov is publicizing rates for the first time. consumers can go on a website and get an overview of what rates are being charged by what plans in their particular jurisdiction. but two other very important pieces of information, how many people are denied at that rate, what percentage are not offered a policy at that rate, and how many times the rate deviates from that. so that, again, is available and updated on a regular basis. and insurance commissioners are also committed to now, on websites, and their plans, making the rate review process far more transparent, asking for

underlying actuarial information from companies, holding hearings, having available to the public what has often been a very opaque, very misunderstood system, much more transparency, much more openness, much more oversight, and the combination of consumers being able to pick and choose finally, line up plans side by side and choose what is best for them and much more rigorous review has already yielded results where excessive rates have been turned down and new rates have been submitted that are far less impactful on the consumers with those policies. >> well, i applaud you in that because we always hear about competition is what drives the cost down. if you don't know, it is pretty hard to know how you can impact that. but i think this open transparent way that people can now view insurance policies is what we envisioned helping to bring those costs down. so i really appreciate your work on that. >> one could argue you could get more information on the toaster you bought than the health insurance plan for yourselves

and your families and we're trying to work very closely with our partners at the state level and give a very transparent, very open system and just lining the prices up side by side really does begin to change strategies of companies. they don't want to be the top price in the marketplace. so that in and of itself has been very helpful. >> great. thank you very much. thank you, mr. chairman. >> thank you, senator. madam secretary, thank you very much for your aappearanppearanc and answering questions in great order. as i said, we leave the record open for ten days. some senators may want to submit questions in writing. i want to personally also thank you for your great leadership in all areas of health care and human services. but especially in the area of implementation of the affordable health care act. >> thank you, mr. chairman. i look forward to working with

you and the committee. >> thank you, madam secretary. next we'll call our next panel. greadistance and i appreciate your patience in sitting through the testimony. i hope that it was informative for you as it was for us up here.

our second panel, left to right, we have miss lisa grasshoff, she works for the paragon hemophilia solutions in houston, texas, a home health company focusing on those with breathing disorders. miss grasshoff's experience with breathing disorders is personal as her son joshua suffers from two of these diseases. hemophilia a and type 3 van vulaban disease. she's accompanied by another member, miss tammy davenport. is that correct? thank you for being here and sharinyour stories. emily schlichting, junior at the university ofnebraska, neighbor to the west, majoring in political science and communications. miss schlichting suffers from a chronic autoimmune disease call beshays syndrome. she knows firsthand the anxiety of obtaining health insurance while suffering from a dangerous disease and we thank you for being here and we look forward to hearing your story. i will yield to senator reed for

the purpose of introducing commissioner koller. >> thank you very much, mr. chairman. i'm just delighted to be able to welcome chris koller to the panel. he is the -- officially the first health insurance commissioner for the state of rhode island. he was appointed by a republican governor, reappointed byan independent governor, and hugely supported by the democratic delegation of rhode island. so he's managed to bring everybody to the table. before chris became the rst health care insurance commissioner, he was instrumental in setting up the neighborhood health plan of rhode island, a safety net insurance plan which not only is effective in providing care, but it is also recognized of providing excellent care. it is a bulwark of our medicaid program in the state of rhode island. he comes to this task with extraordinary skill. he's a graduate of dartmouth college and yale university.

and in a given day he needs both, theology and management to get things done. i just say personally i've had the privilege of knowing chris and being a friend. there is no one with more intelligence, integrity and dedication and selfless dedication than chris koller. i'm just honored i could introduce him, mr. chairman. >> thank you very much, senator reed. i'm aware of the travails you went through to get here. i was following your travels yesterday, and my staff kept advising me because of the weather, was unable to take your flight, and as i understand, it took you ten hours on the train to get here. so we really appreciate your diligence and effort to be here. last we have mr. olivo or ivo? olivo. our final witness is mr. joe olivo. he is the president and co-owner of a burgeoning printing business, perfect printing.

mr. olivo co-owns the company along with his wife, mother and two brothers in new jersey. he's grown his business from 10 employees to 45 employees. wish we could do that all over the country. thank you very much for coming, mr. olivo. and so, again, as you know, we'll take all your testimonies as they are written in order and they'll be submitted to the record in their entirety. i would like to ask as we go through, if each of you sum up in a few minutes, i don't have a distinct cutoff time, but five minutes or so, what it is that you want us to know. and i know -- i always say this to a lot of times to witnesses who ha come a long distance and all of a sudden senators have disappeared. i assure you that their staffs are here. i can assure you of that. and i can say this, there is an old saying around here, that senators are a constitutional

impediment to the smooth functioning of staff. so our staffs do a lot of the work and i want to assure you that your testimony, your being here is being well noted and important. >> thank you. >> again, we'll start with miss grasshoff. welcome and please proceed. >> thank you, good morning, chairman, and fellow senate committee members. thank you for inviting me to share my story of the positive impact of the affordable care act has had on my family. it it is an honor and privilege to have the opportunity to address this committee and have my voice heard. again, my name is lisa grasshoff, and i live in houston, texas, with my husband, danny, of -- and our 20-year-old son. danny and i have been married for 36 years and after 17 years of marriage we were blessed with the birth of our only child, joshua. surrounded by many family and friends, joshua was born five weeks premature and immediately i noticed that my baby was

bruised above his eye and had numerous bruises on his body, which didn't make any sense because he was born by c section. after extensive testing, joshua was diagnosed with moderate h e hemophilia a which is an inherited genetic blood clotting disorder. joshua -- to tell you a little bit about joshua. he's an only child and only grandchild on both sides of our family and he's not spoiled, of course. so, you know, obviously he became the focus of our world. and therefore hemophilia bleeding disorders was a topic of conversation and we began trying to put the pieces together to figure out how and why did this happen, because there were -- we had no family history that we were aware of. thus began my journey, my 20-year journey into the bleeding disorders community. which is where it all began.

hemophilia is a very rare and chronic bleeding disorder that affects about 23,000 people in the united states, mostly -- most ofhich are male. people with bleeding disorders require life-long treatment with high costs, clotting factor therapies, which replace the missing other deficient blood protein that allows our blood to clot. proper treatment, which must be administered intravenously, can prevent debilitating injury and life threatening internal bleeng episodes and a lot of these episodes can occur spontaneously without trauma. factor replacement therapy is very expensive and in eess of $300,000 annually, just to sustain the normal clotting process that most people take for granted. and that is without any hospitalization or any trauma induced injury whatsoever. and $300,000 a year is

unbelievable. our community population is relatively small and therefore there is a limited number of pharmaceutal companies that produce factor. our costs will never decrease for factor and we pay for it per unit. our costs will only increase and currently in infusion for my son joshua runs about $8,000o the insurance company. and that's a lot of money. and, you know, there is not even a promote possibility that a generic medication will ever become available, like becomes available for so many other meds. in order for everyone to truly understand why i'm here today, it is important that you really understand my family's story for the last 20 years and how

important the affordable care act is for my family as well as the bleeding disorders community in general. in march of 1994, at the age of 3, joshua suffered a life threaten iing abdominal bleed. it came on spontaneously. he had 17 bleeding ulcers in his stomach, with -- for no reason. the doctors at the houston medical center have never seen that before. he required a seven-week hospital stay, two surgeries, numerous blood infusions, blood transfusions, massive doses of factor replacement to stop the bleeding. during that time he literally coded three times and by coded i mean h died and they had to bring him back to life. that was one of the worst times

of my family and friends' life. it was very, very frhtening. aside from that, our hospital bill was in excess of $800,000. and i had a million dollar policy. and however the medication expense didn't stop when we ft the hospital because they could not explain why he had these abdominal -- why he had the abdominal bleed, we had to continue treating him prophylactically to prevent -- hopefully prevent future bleeds so he had to receive factor on a daily basis for the next four years, every day of his life and every other day until he was 10 years old. currently today, joshua treats prophylactically three times a week so, again, we still have the costs.

and this, again was in 1994. unfortunately joshua continued to bleed spontaneously whether it was his mouth or whatever, & we couldn't seem to get the bleeding under control so we underwent further genetic testing in 1995 and that's when he received a second diagnosis of type iii von willebrand disease and he's missing the complete von willebrand protein. it wor in conjunction with the factor eight protein to form a clot. and joshua has no von willebrand protein and 4% factor eight protein, which is a very -- which is considered moderate hemophilia. and they have to work together. and without having one factor, the other one doesn't work. but also at the same time my husband and i received the

diagnosis of mild von willebrand disease. we had no idea that we h von willebrand disease and it was quite a shot, quite a shock because we never had any symptoms of having that disease. when joshua was 16, he had his spontaneous head bleed the day before thanksgiving. it is another day in my life that i'll never forget. it started with a really bad headache that we thought were migraines because he also suffered from migraine adaches. long story short, we went to -- i took him to the er almost immediately and they did a cat scan and he was having a brain hemorrhage. he was air life flighted to the medical center because i had taken him to an outlying houston hospital. and from that point forward, his life has changed. since that time he has had three

more brain hemorrhages, and the reason he continues to take factor three times a week currently is to prevent the head bleeds, hopefully prevent the head bleeds. and fortunately we have done that. now, that affected his life in school. because he missed so much school. and the treatment for von willebrand disease idifferent than hemophilia. it requires a different type of factor. and by the time josh was 7 years d, in 1998, we had maxed out three insurance policies that had a million dollar cap because medication is so very expensive. and but to sustain our son's li, what do -- that's a no ainer. you do what you have to do. and during that period, when i maxed out my policy, fortunately

at that time in 1991 you could afford to hav two health insurance policies because the premiums were so low, so therefore joshua switched over to his father's policy. we maxed that policy out. my husband had to change jobs because of the insurance. took a lower paying job. we maxed out that policy. again, he had to take a lower paying job, as i did as well. and, you know, we work for health insurance is what we work for. and because my husband has had to change jobs so often, and we know how that looks on a resume, and the fact that he's 57 years old, and he's currently unemployed, laid off in june of '09, he does -- is working a couple of part-time jobs now, but he has not been able to find full-time employment, and, you know, i'm, you know, it's --

it's hard. the pre-existing condition, the elimination of the pre-existing condition is totally awesome for us. it will make a world of difference. the affordable care act prohibits insurance companies from limiting how much they will pay for joshua's lifetime and phase out annual caps over the next few years. and the fact that he can stay on our plan until he's 26 is phenomenal. and that should give him enough time to become financially independent and get his college education and find -- find his passion in life. but more importantly, my husband and i now have peace of mind knowg that joshua will continue to have coverage because of his bleeding disorder, and having access to affordable health care and quality medical care will help him lead a full and active life. and his future is much brighter today than before t enactment

of the affordable care act, and for that i am very grateful. he now has the opportunity to reach his economical potential without health insurance rules dictating his choice of professi profession. his hopes and dreams are now without restriction. and thank you very much for inviting me and listening to my story. >> well, thank you very much, miss grasshoff for coming this great distance and sharing your story. it is a very poignant one and right tthe point of what we're talking about. >> thank you. >> miss schlichting from my neighbor from the west, welcom and please tell us your story. >> good morning, everyone. my name is emily schlichting. i'm 21 years s old and a junior university of nebraska. i'm here today because my life has drastically changed for the better thanks to the paffordabl care act. i'll start he beginning.

the summer before my seen why are yesenior year of high schoo my simple stops started with you will vers that would get painfully an dangerously infected. it intensified to include high grade fevers, swollen sdwroint joints, i'd get large lumps on my leg which is hurt a lot. an just a lot of other symptoms that never really fit together. and so after about two years visiting multiple specialists, receives mris, cat scan, topped off by a week long stay in the hospital my freshman year of college, i was finally diagnosed with bashay's syndrome which is an auto immune syndrome. that's kind of a lot to have dropped on your head having barely moved out of your parent's house at the age of 18, but despite going through all of th, consider myself extremely lucky because my parents have

amazing health insurance and my condition, because of that insurance, was completely covered when i got sick. i think something that really needs to be stressed here is that being sick a hard enough in and of itself. i was 18 years old and all of a sudden i had swollen join like an 80-year-old man. i was taking medicine that made two-thirds of my their fall out and i couldn't question out on the weekends because hurt to get out of bed and walk. so i didn't have to worry about where my care was coming from while i was dealing with all of that other stuff because of my parent's insurance. however, when i did start to get high body under control, it became clear that just because i had good health care under my parent's plan didn't mean that i wasn't going to immediate to worry about where my care was coming from because i was soon to be off tha plan. when you're chronically ill, young and your health care is tied to your employment, your

job prospects become a lot more limited than you might imagine. suddenly taking a few years off to work at a nonprofit before going graduate school was no learning an option. beyond that, i could never drop off of an insurance plan because if i did, given the condition that i've been diagnosed with, it would are have been almost impossible to get back on a plan. pay for my own health care would pretty much bankrupt me. i see regularly several specialists for my condition because it's very rare and there is no one doctor that specializes in it. add to that all the medicine and tests or just general check ups, it's really expensive. and that's when things are going well. so the passage of the affordable

care act has made all of the issues go away for me. it's god send. i can stay on my mother's insurance until i'm 26, which hopefully i won't have to, i'll be on my own feet, but having that security, why think there are words to describe how important that is. but if i want to pursue and work for a couple years before i go back to graduate or law school and having the time to gain that experience is invaluable it me. i felt that i was being pushed into grad school to stay on an insurance plan or forced to go uncovered and then not ever have insurance because of something that i couldn't control happening to me p i believe allowing people to stay on their

parent's insurance gives us free to work towards our goals without being uncovered. but even more important is the fact that i can't be denied coverage for a disease that i can't control having. i can't put into words for you ho scaries to think about being 25 and bankrupt and sick. so i'll just let you take my word f it that it's absolutely terrifying. i can tell you other than and over how much health reform has positively affected my life, but i'not the only young american that has been affected by this la i'm one of millions and millions of yuoung americans who have ben helped by this bill. i think a lot of the issue is that health care is something that'seally easy not to think about when yu're young and you're healthy.

eventually we all get old and mostf us get sick. and when that happen, health care matters more than anything else and i can testify to that because i've lived. most people my age don't think about health on a daily basis. and to be honest, i'm jealous of them that they don't have to. but that also means that my generationdoesn't fully appreciate just w much this will bill works for them. we are one of the first generations given being a stoves free life time preventive treatments and care that will prevent life threatening illnesses before they start. and i think that senator hagan made a great point. we need to make sure that young americans know these things are out there and they're getting the word out because in order for us to win the future as president obama so artfully said on tuesday, we need to have a generation of americans who are healthy must have to do so. and will this legislation makes

that a reality. and i'm extremely gratefulhat it was passed. thank you. >> thank yyou very much for a very poignant presentation. and passion that the presentation. thank you for being here. mr. color, welcome.a that the presentation. thank you for being here. mr. color, welcome.t that the presentation. thank you for being here. mr. color, welco.ethat the presentation. thank you for being here. mr. color, welcome.hat the presentation. thank you for being here. mr. color, welcome.at the presentation. thank you for being here. mr. color, welcome.t the presentation. thank you for being here. mr. color, welcome. the present. thank you for being here. mr. color, welcome.theresentati. thank you for being here. mr. color, welcome.he presentat. thank you for being here. mr. color, welcome.e presentati. thank you for being here. mr. color, welcome. presentatio. thank you for being here. mr. color, welcomkcolor, welco,. >> thank you for the opportunity to speak on this important topic. i think my job here is to give a view from the states. i find that following this testimony that i've heard, it's just like my job at work. you listen to passionate stories and you end up having to work

the machinery and of course the rules behind the scenes. so hearing the testimony like this makes it -- give us the fuel to do o work in the states. i'm going to talk about into tw things. i'll try to talk a little bit about what the effects have been at least if ron roahode island. what i want to emphasize, the legislature gave it a broader charter. they asked the office it look a in addition to solvency fair treatment providers and looking at the system as a whole and thousand improve it and i think that's what reflects we've heard today, is that health insurance is fundamentally different from other kinds of insurance. we don't ask our au insurance to pay for our preventive health, to pay for our routine maintenance. and if you can't afford it, we simply walk. we don't want to see that option if the kind of patients we've talked about today and i think the legislative recognized that.

so as i said, i must speak to two things. second sebelius gave you an overview of the consumer protection and i want to speak as an insurance commissioner. i am him a member of the national association of insurance commissioners. what i say here reflects my experience. i'm proud of the niac's work, but what i say is not the official position of the naic. so as a rule, regulators have worked really hard to view this as an implementation task. we have a job to do and we've been looking what the we have to do to implement these rules. it's not partisan. it's just what we got to do given the laws that are out there will. and when we've done that, what we tried to do is look at the process that we have in place existing. notefully our process of reviewing forms. how do we change the subscriber contract it s to comply.

and that's been modifying our checklist. of a greater challenge has been refining the appeals process, working around implementing within our local laws, and particularly idoing rate review and particularly with tight state budgets. so the resources that have been provided to the state, particularly for myself, we have a small office, have been greatly appreciated. and you asked for punch lines. my takeaway is that the guidelines and standards for the affordable care act have to come from the federal government. they should be marked by clarity, consistency and sensitivity to local markets. they haven't worked flaw stlesslessly to date, but i think the states have been marked by mutually respectful, competent and well

expens efforts that are meant to adhere to the statute. i think secretary sebelius and her staff have shown admirable flex and in working with the states to adjust to their local conditions and deal with transition issues as they go through. but inmplementation enforcement is up to the states. we are closer tthe consumers and health plans. we can work more effectively through a series of relationships and i think that was the wisdom in the act that you passed to leave that flexibility in that enforcement to the states. in terms of the pekts to consumer protection, senator murray talked about rate review. we have a comprehensive rate review process. the insurers have to come up with their rate factor, they have to be posted on the website. i collect testimony before i make a decision on what the tes can be going forward. the effect of this is to

increase the accountability of insurers, shift the focus of the conversation from how can i shift costs, how can i get rid of sick employees and how did we address the underlying cost of the system. and that's what we've done in road islands, we've taken ideas from colorado. yesterday i had a conrsation with commercial insurers about how do we take tideas and put i forward. i have the authority of rate review. it means when i speak, they have to take into considers what i say. rhode island has to take latively small steps to do this.rhode island has to take relatively small steps to do this. that won't being the same for our other states. we took a lot of grief going forward. it's taken time. we have to help them understand

what's going on. but as a result businesses have a stable market, they understand what's driving their costs. they have a choice of products with consistent rules for pricing. i can't emphasize how important that is, to change the rules from how do i get rid of my high risks, how do i find someone who knows somebody who can get me a special deal, to focus on the underlying costs. we know what drives health insurance costs for folks. we just have to decide if we want to be fair and allow people to be part of the insurance pool or not. that's what these rules put in place. so i'll just finish by urging you to keep not only the individuals in mind, but the why is that we're creating a consistent state of rule so is we can get at improving our underlying health system and allowing individuals to go forward with confidence in the way we've overheard today. not to worry about is health care going it bankrupt them going afford. i believe that we did not get

this right at the first. i think we'll have to make corrections going forward. i think the that jeker to i the right way to do it. and we continue to look forward to implementing the measures of the act going for. you for yourn getting here. >> thank you to the committee for not only the opportunity, but the honor to speak on you today. i'd like to share with you my early experiences with the health care law. how it's already gun affebegun g my xoep i'm the president and co-owner of perfect printing. the business was started in 1979. i co-own the company along with my wife, my two brothers and my mother. i've been running the company for the past 23 yes. we've been very fortunate, we've been able to grow the company to a high of 54 employees prior to

the economic downturn where we had to down size, but we currently have 45 employees. within of t one of the main concerns i have is how it's going to affect the current coverage that i offertot pie employees. i'm away to pay 100% of the premium costs and 56% toward their dependent os costs. the reason we've been able to do this is by use of a high deductible health savings account plans. we heard numerous times that they could keep the health care that they had. within 30 days of the passage of the lelgs lakes i received a tlaert our plan would no longer be offered. because of the preventive care portion, it was no longer in compliance with the health care law, so as far as i'm concerned,

that has proven to be untrue. another area of concern for me is the taxes in order in which to pay for -- pay for this. how, 45 employees, we're certainly laer than lot of small business, but i don't think might be would describe my company as a large company. i've had conversations with other fellow small business owners, i was speaking a couple weeks ago to the oernl of a three employ yae bridal shop thatted spoken with her accountant. she's note eligible for any dollars in tax credits. so i don't and it is pay the that being of assistance to my business or my employees. a third area of great concern is compliance with the 1099 law. this law requires knee submit a report for every vendor that i spend accumulated expenses of $600 or more per year.

this will require myself as a business other than monitoring this and waste my time monitoring receipts and keeping track of this. to future in perspective, in a good year my profits are three cents over dollar earned. every time there is a new legislation or regulation from washington like this, a good portion if not all of that comes out of the profit of my business. it affects my ability to get give my employees raises and pay for future benefits. then there's the issue of whether i should even decide to agree my business. we're at 45 employees. if i go over the 50 employee threshold where we were just two years ago, it's my understanding that i would have to face a penalty for not providing that insurance. it's also my understanding that

i could possibly be penalized even if i do provide insurance. so i find the inic part about this portion of the law is is that it's supposed to encourage or mandate employers to provide insurance, i guess when you look at the cost of the penalty versus what i pay for premiums, it's actually -- my employees. so these issues currently affect my business. it's the unknown that is even of more concern. to put it in perspective, when i decide to grow the business, i have it know cost certainty because i put my family and he house on the line and all my personal assets on the line. can i i cannot afford to be wrong.

so when you have a health care law like this with so much unknown, it creates me to be much more hesitant to invest my money and i think you're seeing the cumulative effect of this will in why small business is not participating in growth of the economy. so i'll leave you with it this. my story is personal. it is by no means unique. there are hundreds of thousands if not millions of small business owners going true thro the same issues that i am. thank you. >> thank you, mr. olivo. first, ms. grasshoff, thank you very much for telling the story about your son, joshua. you mentioned that your husband was forced to change -- to take less money and so were you. how that affected your family's financial security.

obviously you have to be looking forward to your own retirement years. i just wondered how that might have affected your own psonal financial security. >> it recusdueced our income by approximately %, but yet our bills didn't decrease by 40%. and i'm just speaking of the necessity hes, the groceries, the gasoline.iey hes, the groce the gasoline.sy hes, the grocer, the gasoline. hes, the grocerie the gasoline.hes, thgroceries, thgasoline.es, the groceries, the gasoline.s, the groceries, e gasoline., the groceries, the gasoline. utility bills. it really took away from any outside activities that we would do as a family such as, you know, going to the matinee movies. we had to be very, very frugal. but you do what you have to do. >> now, is joshua aware of the health care law and how it's going to affect him? >> yes, sir, he is absolutely is aware of it. >> is it giving him a little bit

more security? >> yes, it is. it has gefb hiven him a lot mor security because he sees that it's given his dad and i the security and the peace of mind knowing thate'll be covered on the health care plan unfortunately, he's not yet been able to start college due to some medical issues and he's loing forward to starting college. and this gives him a little more time to decide you know -- again, he might go to school if a year and then want to be a rock musician or -- but, you know, it gives him security and his dad and i security knowing that he will have coverage. >> or he might want to go to work for a nonprofit or -- >> he very we could. i'd love for him to follow in my

foot steps. >> you're quoted as saying it's not just middle age families affected by the reform. it's america's young people. >> absolutely. >> the largest group of i uninsured americans. not too many think about the young people that are affected by this. and i think you give again evidence of what it means to young people. >> i would definitely agree with that. that's something that i see a lot just like at home with my friends and the girls that i love with in my sorority. i remember when this law was passed standing in the kitchen at breakfast being extremely excited and no one else a around meed a any idea what it meant and how big of a deal it was.a meed a any idea what it meant and how big of a deal it wa aro meed a any idea what it meant and how big of a deal it was.a

and how big of a deal it was. young people are by and large hethy, but that's not the case for everyone. there are young people who get really sick. and giving the securities to them at that age that gives them stability at a young age so they can go on and do productive things with their lives, it's wonderful. it's great. >> young people never think they're going to get sick. >> not at all. that's definitely something most of all my friend, it's at part of why it is hard to be -- they can't relate to you. i can't tell you how many times i've been called you're acting like an old woman because i'm like swollen joints, don't want to go out that night. you get used to it and you deal with it, but most young americans don't have it on their

radar. >> mr. olivo, you didn't say this, but by 2014, every state will have an insurance exchange, a one stop shop where small businesses like yours can get the same leverage on rates that large corporations have. as ich discussed it with small businesses, the first question to me was why do we have to wait until 2014. it just had to do with the way legislation is done around here, i guess. have you looked down the road to see how that might affect you in 2014 andor employees, what that exchange system might mean to you? >> i've looked in to it, but i

have no way of know wlag the costs are going to be. my understanding with the law is that the policies being offered will still be very heavy in mandate and preventive care items that don't really open up to true -- will it's not a truly competitive product i'll be buying. that was one of the things we have with high deductible hsa plans if my employees that fit our demographic of our company and i was able to combine a plan that was best for them. with the exchanges i'm no the sure -- i'm from new jersey ere we have one of the most heavily regulated insurance in the nation. we have i believe the top three insurance premiums in the company. so i'm in the very optimistic that heavily regulated mandated insurance exchange will be a benefit to me. >> well, again, companies come

on the exchange, compe for business and plus as younow we're also mandating that i think the secretary testified earlier that as of january the 1st of it yethis year, insuranc companies have to put 85% to health care. so they have to start meeting that threshold right away. so it seem it s to me that coup with the number of exchanges out there, even though there are n mandates the reason we mandate on the prevention side is because we know from all the evidence that an ounce of prevention is worth a pound of cure. we put more in the front end, it will save more on the back end. everybody understands that. so we're trying to move on a system whereby people get more up front interventions early on so they don't get the system

later on. that's why we have the wellness prevention end of it p. we were hoping, and i don't know, but i was hoping that as we pass this that we might have some really true competition now out there that comen the exchange, be transparent. your business might be on the change with others that can join together and actually get lower cost but higher quality because everybody's going to be competing for your dollar. right now i don't know that that's really true in the present system that we have. if you have any response to t t that -- >> i like the opportunity to buy out of state, but as a business owner in new jersey, in in 1993, our state went to a guaranteed access community rated insurance

policy and the politicians in m state have been promising for the 18 years that our premiums would go down result. not one year has our premiums gone down. >> thank you very much. i went way over my time and i apologize. >> thank you, mr. chairman. and i thank the panel for their testimony. i'm going concentrate on trying figure out what we need to do to eliminate unintended consequences of what we're canning. so i appreciate mr. koller's comments. and i appreciate you have a brother in wyoming, so you must a little understanding of our area. but i'll be asking in writing for you to list out those fixes that you see as being needeand i appreciate that you mentioned that. one of the comments that i get from people in wyoming is that the is it this new high risk pool, that thi can't get they cn

it unless they go without insurance for six months and they can't do that because they have problems similar to what we heard about today. i want to get a little bit of clarity on some of these things. mr. olivo, you said that the 1099s as the accountant in the senate and i'm now joined by senator johnson who is also an accounnt, so we'll have an accountant's caucus, i am familiar with the 1099s. and i wondered if you had any evaluation on what potential cost is for you on those with the equipment and things that you might have to put in or hire a person. i know it's important for you to do a evalue on that but do you have one? >> i don't have an exact dollar cost, but to give you an idea, i can't afford to hire an hr consultant or an accounting consultant. so i'll have to do it myself as a business owner or assign someone internally.

just to give you an idea, my trip down here, i took a train, i took a cab, i stayed in a hotel. i had to monitor did i go over $600 staying at a marriott thoel this year, is it franchise owned, corporate owned, try track down the owners are, send them proper documentation. it's a logistical nightmare. >> i rlly appreciate that and i know that the purpose of it supposedly was to find 6.9 billion in fraud that people are doing and as an accountant, i can't figure out exactly how that's going to do that. but my calculations define that $16.9 billion is going to cost individual businesses about $25 billion to collect the information. that's not cost effective. i noticed in your testimony that you obviously have looked it at the 2700 pages and i appreciate

whatever of them you were able to go through. i know as a small businessman, and i was in the shoe business for years and year, that it's difficult to keep with the federal government. but i appreciate that in your testimony you had the five questions in there that are rtinent for small business because we don't look at these things from a small business perspective veryften. and i wondered if you wanted to enlarge on tse just a little bit or mention them. i will be checking on all of those answers for you and appreciate that you were able to list them out so concisely. in this job market that's been decimated and shed millions of job, youpoke about the health reform law making you think twice about hiring new employees. we know that almost two-thirds of jobs come from small businesses. so if we're going to see our

economy recover, it's the small businesses that will lead the way. but as you point out, the health reform law created a very large tax penalty for small companies that doesn't afford to provide health insurance for their employees. so can you expand a bit on your concerns about hiring new employees as a result of the health care refrm law? certainly. just to give you an idea, when there's uncertainty, and some of the questions i had put in is what portions of the legislation are applicable to my company. exactly what happens if i go over 50 employees. if i have a part-timer, he's 30 hours or 20 hour, allhese questions add up it costs. when i invest in my business, when i hire new employees, i take a loan and that payment is fixed. i have to pay that loan every month. the bank doesn't want to hear, sorry, may a little mistake in my calculations, i can't afford it this month. when you have all of this uncertainty and all of this unknown, it's just creating a

much bigger koocushion of which choose not invest and it affects my proceed employees. we haven't had a raise in two years and it makes it hatthat m more difficult to grow the business. >> i appreciate that. you were asked about the exchangele pooling that will bring down your cost. i understand there will be a place on the internet that you can go to and put in the can different criteria of the business an you will be shown the list of companies that will be able to sell you insurance because they will meet the federal minimum standard. i don't see how that will drive down the health care costs for small businesses, but i have a

bill that a would allow small businesses to pool their businesses across state lines d the cbo said that would slash premiums. do you think the cost of your health insurance will decrease if are you able to get into this exchange? >> as the exchange is currently set up, i'm not optimistic. i'm a little leery of it because it's not true competition when it's a mandated product. we've had the same thing in new jersey for the past 19 years. it was supposed to be -- there's lot of heavy mandates and prevent difference care costs. and my average increase has been 20% and it rangeses from 12% to 49% on any given year.ifference. anmy average increase has been 20% and it rangeses from 12% to 49% on any given year.veifferen. and my average increase has been 20% and it rangeses om 12% to 49% on any given year.fference . and my average increase has been 20% and it rangeses from 12% to 49% on any given year.erence ca. and my average increase has been 20% and it rangeses from 12% to 49% on any given year.erence ca. and my average increase has been 20% and it rangeses from 12% to 49% on any given year.rence car.

and my average increase has been 20% and it rangeses from 12% to 49on any given year.ence care c. and my average increase has been % and it rangeses from 12% to n. and my average increase has been 20% and it rangeses from 12% to 49% on any given year.ce care c. and my average increase has been 20% and it rangeses from 12% to 49% on any given year.e care co. and my average increase has been 20% and it rangeses from 12% to 49% on any given year. care cos. and my average increase has been 20% and it range i see what mandates have done to our state and i'm leery when i see the same type of thing on a federal level. >> i appreciate that and i would mention that in the health committee bill senator harkin and i had an amendment that would have allowed to some flexility for incentives which could have provided for some preventive care. i did notice that that was accepted by the committee. i did notice that after the august recess when the bill was actually printed, that was no longer in there. so doesn't appear in anything at this point. so thank you very much for your testimony. i' have more questions for all of in yyou in writing and hope you'll answer. >> senator reid and then senator franken. >> i, too, want to thank the commissioner. you left out the dog sled, but that was the final thing. commissioner koller, within of the issuone of the issues we'ven talking about is ensuring that this system covers everyone in the state.one of the issues we'

talking about is ensuring that this system covers everyone in the state.f the issues we've beg about is ensuring that this system covers everyone in the state.the issues we've been tal about is ensuring that this system covers everyone in the state.issues we've been talking is ensuring that this system covers everyone in the state. how important do you think that is in terms of both delivering effective and cost effective health care service? >> thank you, senator reed. in our state, we have seen our rate of uninsured in the last six years go fom 6% to about 14%. that is completely an effect of the economic downturn which as you know affected rhode island particularly severely. it is not a result of increasing health care costs but certainly it has con tributed to it. but those people who are uninsured, we still pay for. when i look at -- and this is after a xlen sif rate review. when i get a rate request, an annual estimated inflation of

12% and then about four to five points of that is the hospital and then when i go and i ask the health insurers what's that about, they say we got to pay the hospital 9% more in price increases. 1% for utilization, but 9% in price increases. and then say what's that. -- or i say that's that come from. they say that's from the number of uninsured. the hospitals have not gotten paid for their unred, so they're looking for commercial insurers to make up the bill. and so we pay for the cost of the uninsured. i also thi we pay long term with poor public health. you have been strong advocates for community health, no hing comprehensive primary care. that has to be the point of entry for this. and uninsured people are for the getting good primary care. that's what's got to be our focus. >> in effect, in one consequence of not covering everyone is that

the uninsured will get health care, but extensively through hospitals and that is shifted directly to private insurance mpanies who in tur recoup that from their customers. is that these 20% as mr. olivo pointed out, 020 to 40% increases are trace back to the fact that a whole group of people who don't have coverage still get care.are trace back t a whole group of people who don't have coverage still get care.increases are trace back t fact that a whole group of people who don't have coverage still get care. >> and if you look at who the uninsured are, they are working single adult, but they are paging an economical could you race ba calculation based on their circumstances to go bare because they're given the opt ion to op t.based on their circumstances go bare because they're given the option to opt out.

those are the folks we want in the pool to make it work. >> one of the things we have to do is it reform the delivery of the health ce. in your capacity, you get a unique perspective. you' actually run an hmo health insurance company and now you regulate them. what are some of the delivery improvements that you see your way around and are they -- will they be presentotedy national health care reform or accelerated, are there other things that will be possible? >> the most important thing i feel that we've done in rhode island is to say that health insurer, if you want to work in this state, if you want to get the rate increases that you're seeking, you have to put more money in primary care. primary care is the only part of our delivery system where the who are we have, the lower our costs are and the better our health is and yet we democratically pdemocratic

systemly pay it less over time. so we have told the commerci commercial -- we've spent 6% of our insurance premiums on primary care. only 6%. other kcountries, it's 15%, 20% 25%. i think the other thing is to change the way the hospitals get paid. it is pot in a hospital's financial interests to reduce the readmission rate. that is money in the bank. and so when you go to hospitals and you say 20% of your medicare patients are being readmitted, they say, yeah, i know and for knee work on that is financial suicide. so we have to change the way that we pay them and there are absolutely things within the affordable ce act. changing the way that hospitals get paid. we need that kind of federal leadership so we can tell the

commercial insurers do the same thing. >> again, i thank you. my time has expired. this has been a very informative hearing. i want to thank all the witnesses for your first hand testimony and go custers, is that the right term? >> go big red. >> all right. takecare. >> anyway, i just wanted to clear up one thing will, if you don't mind. mr. koller, you said 6% went to primary care. is that 6% of the premiu dollar? >> 6% of the premium dollar. actually, it's even less. it's 6% of the medical experiences. so 6% of the 80% or 85% goes to primary care over time and yet it has to be absolutely at the core of any kind of delivery system. and i would say your point my

brother and i ve spirited conversations about the fact that you can fit the entire state of rhode island into one of the counties up in wyoming, so i have a healthy respect for the importance of flexibility. they recogze in wyoming and anyplacehe response of primary care. that doesn't change. that's not something that we can be flexible about. >> senator franken. >> thank you, all of you, for your testimony ms. grass off, for your testimony about your system, josh warks ms. swlik continui schlichting for the importce of what year doing in terms of not discriminating against people with pre-existing conditions. the importance of life time

caps. rhode island can fit into most state's counties. so don't give me just wyoming. mr. olivo, thank you for your testimony. my can tad worked for a great printing company for 30 years in minneapolis, johnson printing. a prints salesman. we got our health insurance through johnson printing. we got great health insurance for our family and your testimony about the 1099s both here and in your written testimony, this is why i've co-sponsored a bill to get -- actually get rid of that burden. and i think we will. so thank you and thank you for contributing to our understaing of that. wrou you wrote in your written testimony that your health care insurance premiu increased by an average of 20 parse year over

the last 17 years snart. >> that's correct. and what i mean is renewing the same type of policy, it uld typically come in over the average around 20% over a ten year period. >> and that happened when there was no health care reformat take poin point. with a if i told that you monthly premiums for massachusetts businesses at take point. with a if i told that you monthly premiums for massachusetts businessestke point. with a if i told that you monthly premiums for massachusetts businessesthatke . with a if i told that you monthly premiums for massachusetts businessese poin. with a if i told that you monthly premiums for massachusetts businesses point. with a if i told that you monthly premiums for massachusetts businessespoint. with a if told that you monthly premiums for massachusetts businesses affair at the they passed their health care reform, that the average monthly premiums rose on an average of 6.9% from 2006 to 2007 and by 5% for 2007 to 2008. would that be better than the 20%?

>> from simple economic, that would be better certainly. >> well that's what happened. after they imposed a mandate that the percentage of massachusetts employers who offer health insurance to employees has increased to 76% from 70% while during the same period nationally has declined from 6% to 60% during the same period, would that -- might give you some hope?8% to 60% during period, would that -- might give you some hope? once again, coming from new jersey where i've heard these tale of mandates for 18, 19 years saying we're going to mandate and lens late, we're going to legislate our way towards lower premium, i swrnt en it happen in my experience for that to be the case. >> the massachusetts mandate is almost exactly precisely what the national mandate is. and do you understand for someon like ms. schlichting, if

there wasn't a mandate, that it would be impossible to provide protection for people with pre-existing conditions because then only people with pre-existing conditions would get good health care. there would be no reason to get health care until you got sick, right? >> i certainly understand that. in my point of view, keeping in mind i'm a small business other th that pays 100% of my employee's preum, i'm worried about telling my employees ya affo your position anymore because of the new health care law. so i'm well aware -- >> why h- >> i'm concerned for my own employees right now. >> i'm sorry. why did you provide-hch- >> i'm concerned for my own employees right now. >> i'm sorry. why did you provide- >> i'm concerned for my own employees right now. >> i'm sorry. why did you provide >> i'm concerned for my own employees right now. >> i'm sorry. why did you provide- >> i'm concerned for my own employees right now. >> i'm sorry. why did you provide -- why did i

provide health insurance? >> i look at it as annen investment. i've chosen to invest in my employees. i wouldn't perform on tell another business owner how this sthee invest. i would say by choosing to do this, it has affected the ability of my business to grow. >> but you feel it's better if my business. >> for me personally, it is. i think it's good business if me.>> for me personally, it is. i think it's good business if me.fif me.orif me.f me. me. >> so why would you suddenly when there was a penalty that you have to pay if you dropped them, why would that incentivize you more to drop them than you've had before? that doesn't quite add up to me. >> my competition begins doing it and that's a veryreal possibility and they all of a sudden have a less expensive expense structure and are gaining profitability where i

don't have it. natural capitalization at work where it's something i can't ignore because it will gatively affect my company's ability to earn and have my employees further prosper. >> and are you aware that there is a penalty and it very much parallels this will bill and yet ntrary to the rest of the country, since massachusetts has adopted its mandate, more companies, more employers are employing their employees -- or insuring their employees in complete opposition to the rate in which it goes in the rest of country, which is less companies have -- a lower percentage have been insuring their employees. in a way, that would then mean that you don't have to km pete -- you have it compete against fewer companies that

weren't employing -- weren't insuring their employees. so it would help your competitive advantage considering that you're already someone who does the right thick. and i applaud you for that. >> i've read things about the massachusetts that aren't wering out well. i look at new jersey. i dot know enough about massachusetts that -- to really comment on that. can i just say as a small business other than with the way this legislation is set up right now, i only see rising costs to my company. i don't see where i'm going to gain lesser expense. whether that may happen in time bears it out, that could be. i just don't see it. >> thank you. really, all of you for coming day today and my time has interest pired. >> i thank all our panel liistso are here for your testimonies and also how this is affecting small businesses.

i agree we're going to do something about 1099s. i've said men times theany time not the ten commandments written in stone. laws get changed. we modify things as poinformati comes to us. and so i'll refer to the health care reform bill as a starter home. got a pretty good foundation, a pretty good roof, about but maybe there's some other hinges immediate to be filled in and built into it. so that's why sessions like this are i think important fors to hear from people about some of the good things or maybe about some of the questions people have that we should be paying attention to as we modify, change things as we move into the future. so again i thank you all very much for being here.

thanks for your excellent testimony and if thereis no other business, the cmittee will stand adjourned. thank you.@ [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> on cspan today, last night's debate between the chicago candidates for mayor and today's "washington journal"