success? guest: if we get the rules done. host: sheila bair, thank you for joining us. this is part of a long range discussion that is continually. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

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>> so far, we are seeing orrin hatch as they get set to begin a conversation about health insurance executives talking about that doctor payments for medicare-related services. the reimbursement rate is set to expire at the end of the year making it an element of what some are calling "the fiscal hich excludes -- includes the end of the beshear tax cuts. this will get under way.

coming up at 12:30 p.m., we take you live to the faith in freedom conference in washington amongst the speakers, senator robb portman and can blackwell and jim demint. jim demint speaking at 12:30 p.m. then, we hear from president obama in cleveland, he is making a major speech on the economy. we will have that for you at 1:45 p.m. also, we will take you to the second part of the senate foreign relations committee hearing on the law of the sea treaty. they have been looking at the issue. that will be on c-span3. the afternoon session will be on c-span at 2:30 p.m. among those testifying will be former secretary of defense donald runs fell. -- donald rahmumsfeld.

senator ben cardin -- they are about to dabble in to look at medicare payments to physicians peer representative storm by different organizations are there. it is about to get underway. the chairmen, senator max baucus.

>> alright. it is on. ok. thomas edison once said, to have a great idea, have a lot of them. [laughter] today we hauled our second round table on medicare physician payments. the payment system medicare currently uses is broken. there are a lot of ideas about how to fix it. we know that th-- this causes seniors to fear losing access to their doctors and threatens physicians with payment cuts year after year. we need to look at the underlying fee-for-service system the medicare system uses to pay physicians. fee-for-service rewards physicians who do more tests and procedures even if those

services are necessary. it does not encourage physicians to coordinate patient care to save money and improve results. we need an efficient system that rewards physicians for providing high-quality, high value care. today, we hear from five organizations that have developed innovative physician payment systems. these organizations are changing how they pay physicians to create incentives that will improve patient care. we are rewarding the physicians to keep patients healthy and cut down on emergency room visits and hospital remissions. these results not only save money, but they mean better care. we want to learn how these ideas also can be applied to the medicare program. medicare needs solutions that will work in a range of settings from cities to solo

practitioners and specialists. in california, it may not work the same as a dozen montana. our panelists can describe the use that have worked in many different areas of the country and we look forward to their suggestions. thank you. >> thank you. thank you for convening the a's round table. we continue discussing the options to improve the way we pay physicians and improve the quality of medicare. is critical we speak with the folks in the private sector. the chairman and i agree that we must find a better way to pay physicians and medicare. we must repealed the sgr system.

this is not an easy task. our physicians and patients deserve better. we must establish a more foundational system for physicians. our current system provides little financial incentive to manage care properly. instead, the current incentive is to increase the volume of services. we have learned that more care does not necessarily mean better care or better outcomes. today, we have the opportunity to hear from the top performers in the private sector. these industry leaders are making real advancement in care, every, physician payment. they are showing that you can improve quality and lower cost in a collaborative way that does not alienate the physician community. chairman bachus, i want to thank you again for a rescheduling - schedule- in this series of round tables. i hope this provides us with another opportunity to learn about the best practices in the

private sector. i look forward to hearing from our witnesses in hearing about their efforts and thinking about how to relate their experiences to medicare. >> thank you. today, we will hear from our panelists. mr. peter edwards, president. senior vice president and chief medical officer at atena. care first blue cross blue shield, maryland. and, ceo of a medical group in northern california. please begin.

summarize your statements and tell it like it is. >> [unintelligible] >> i do not know if your microphone is on. these are tricky. >> ok. thank you. my name is dana safran, vice- president at blue cross blue shield of massachusetts. i appreciate the opportunity to discuss the payment reform model that blue cross blue shield has been implementing since 2009. the model known as the alternative quality contract employees a population based global budget together with substantial financial incentives on a broad set of quality and outcome measures.

rates of inflation on budgets are negotiated up front for five years. thereby creating much credibility in medical spending growth. the budget and quality targets are designed to accomplish our twin goals of significantly improving health care quality while at the same time slowing spending growth. the aqc is a corporate on a payment model, in place of 8% of providers statewide. these organizations vary enormously in size, scope, composition, and geography. most of them comprised of small practices united through a common leadership. with two years of this, the aqc will cut spending trends in five years. a formal evaluation led by harvard medical school economist found that even in year one, aqc provider slow spending growth by 2% while

simultaneously improving quality. the savings and quality improvements deep in in year 2. providers are achieving savings through significant changes and utilization. in 2010, aqc provider saved more than $10 million by reducing avoidable hospital admissions, re-admissions, emergency room visits, high-tech imaging. with respect to quality, each and every organization aqc has made significant improvements across a broad set of quality and health outcome measures. to accomplish these results, aqc organizations are innovating in ways that are truly sowing the seeds of sustainability. they are investing in new infrastructure in information systems, deploying new stephon models, and implementing a process to page and engagement. these early findings offer on

findings that provider accountability for medical spending, quality, and the outcome is a powerful vehicle for realizing that goal of high- performance health care systems with a sustainable rate of spending growth. on behalf of the president and ceo and our leadership team, we look forward to working with you to address these important issues. thank you for the opportunity. >> thank you. >> mr. chairman, thank you for the opportunity to share earnings for our 25-year experience in partnering with positions on a variety of models that reward efficiency and effectiveness across the continuing product line. my name is peter edwards, president of provider development. relevant to the discussion today, humana is one of the largest private plan contractors

with 2.2 million members. we own 300 medical centers, run over 250 worksites, and contract with 320,000 physicians. 1.8 million of our medicare members will get care from positions in the network arrangement that includes one of our various payment models and we expect 80% of our network primary care physicians will be in rewards programs. my detailed statement is on record in here are a few highlights. we believe that delivery system transformation is predicated on creating physician payment models that recognize the variability and physician practices and engage physicians based on factors like practice resources, geography, and patient panels. beginning in florida in the 1980's introduced basic payment models. then we move the global this arrangement across our medicare benefits and had a combined riz, arraignmengement.

we introduced rewards programs in 2010 were the primary payment models have been fee-for- service. our program has four variations. opportunities to increase payment on a graduated basis as program complexity increases. payment begins with fee-for- service with an annual bonus and rises to quarterly and then fees plus a bonus and finally, shared savings. we provide real-time data it and detailed reports to physicians. in some cases, where primary care access is limited, we have added nurse practitioners to assist practices. as we have developed our reward program, we engage directly with

the leading primary care physicians society and we continue to solicit their suggestions and recommendations. during the first nine months of 2011, our rewards program resulted in improved health outcomes, including over 50% increase in the number of participating physician practices meeting patient care measures. some of the lessons we have learned include, costs from 5% higher without incentives. any proposal to modify medicare payment policy should be sufficiently flexible to allow for practice variation. a single uniform well- established performance measurement strategy is critical across all public and private programs. lastly, real time data is a critical component of any payment policy initiative. as we continue to develop innovative payment models, and our focus is on those that reduce fragmentation, improved communication, reduce

unnecessary cost scum and ensure the patient receives the right care in the right setting for the right level of care practitioner. thank you. >> thank you. >> good morning. thank you for inviting me to testify. i am the chief medical officer for aetna. since 2005, we have acquired a variety of capabilities to provide a collaboration model. we recognize -- [unintelligible] our shared goal is moving forward. [unintelligible] they are not limited to medicare or edna members.

aetna members. they use low technology cost solutions. hour provided calibrations provide the model for health- care delivery and payment that ties provider reimbursement to approve population health and reductions in the total cost of care. our medicare advantage model provides health information technology in nurse case managers imbedded within parts of provider groups. by collaborating with aetna, another company averaged fewer admissions in 2011 compared to stay wide on managed risk adjusted medicare population. new research and occur in advantage is published frequently. we have a large team of physicians, pharmacists, and registered nurses that acquired

research to develop and maintain our decisions. we alert physicians to areas or omissions, resulting in better quality and reduced costs. in a clinical trial, active health management technology found to lower charges by 60%. regarding fragmentation of delivery, people with chronic conditions such as diabetes and high blood pressure often receive care for many different about -- from many different providers. it is important that physicians are able to effectively coordinate care and information. technology exchanges patient health information. this accomplishes this regardless of which medical record is being used. michigan health helps the referral process, which is a significant point for physicians involving filling out forms as well as phone calls between

providers. within 120 days, they rolled out the perreault application to 100 practices, including 21 specialties. these practices are not able to replace the multiple phone calls and fast exchanges -- are now able to replace the multiple phone calls and fax exchanges. we show the goal to transform the delivery system and believe medicare can benefit for our cares to -- from our care solution. aenta has achieved collaborations. we are making it easier to pull meaningful health-care information out of -- we believe these models can be applied more broadly to improve population health and create a sustainable care delivery system. thank you. >> thank you very much. >> thank you.

i am the ceo of care first blue cross blue shield. we covered northern virginia, d.c., and all of virginia. we are the major carrier for the federal employee program. several years ago, we started our own patience entered medical home program. we approached it by asking primary care physicians in this area who are in active practice, about 4000 of them, to form small medical care panels. team specifically of 8-10 primaries. this includes solo practitioners. these are self-chosen teams.

there are about 300 panels now. there are millions of members being served by these panels. what we do is a when did capitation -- blended capitation fee-for-service program. this model is distinct in the sense that it offers the benefits of global capitation, establish global expected cost of care for each panel's patients. up paof 3000 members could be expected to run of $12 million per year in health-care costs. what we do is we project what that cost will be and then ask them to better that. if we can, we share the savings. we pay them during the course of the year on a fee-for-service basis because we can get the data better.

if they have bettered the expected cost of care, we share the savings with them. this can often provide major incentives to these positions. we also have extensive quality measures during the course of the year to see to it there is not a gain by under serving a population of patients. we have one year a full operating experience under this. through which nearly $3 billion worth of claims followed. here is what we found -- about 60% of the panel's, of the 300 and, actually beat the target. they beat it by 4%. that is a big number. of the panels that did not, they exceeded its by 4%. there was an 8% spread. y at happened is that the o

have become more interested in what they can do better and want to find out what they can do more. it has established a great deal of interest in the physician community. over 80% of the primaries in this area are in the program. in essence, that is the way we have approached it. we are looking to get medicare into the program through a waiver from cms to bring fee-for-service providers into the same structure. >> thank you. >> the german bachus, wrecking member -- ranking members, i appreciate my ability to share my testimony. thank you for holding this round table. hill physician's medical group has operated for 20 years.

we now serve 300,000 people through our network of 3500 physicians. most of whom are independent and self employed. we are paid prospectively through capitation and compensate our positions -- physicians for their service for our own compensation plan. i have submitted written comments about our experience. i appreciate you including my comments in the record. i will offer these brief opening thoughts. for 30 years, i have had boots in the ground imbedded with physicians helping to organize and develop tools and systems to build the value of a delivery system. there is remarkable consensus in what you have heard today and in your first round table. we get what we pay for. we pay for volume in fee-for- service. it would be difficult to entirely abandon its the we occur -- abandon it, but we

would like to enable pro-active approach is to care management and more intelligent resource allocation a crucross a continum of care. we have compensated physicians. hill physicians has defined desired outcomes, measured and reported on individual physician important, and achieved the outcome. medicine is delivered today in the increasingly sophisticated in fireman's. and affordability crisis has been anticipated. we did not anticipate the larger cause, which is the explosion in medical technology. there were few tools in the medical bed. today, he could not carry them in a wheelbarrow.

he would not be capable of using them on his own. the reimbursement model used today was built when he was in his prime. medicine is delivered to date in a sophisticated -- we have worked for over 25 years to build the largest organization of physicians supported with information systems and care management programs, designed to support positions to optimize value for patients. no payments strategy alone is enough to achieve the objectives we share. hill physicians has been successful because of our consisted organizational in pavement -- engagement. the organizational framework for these collective efforts has been a central for our success and i will encourage you to consider strategies considering systems development. i hope we can help you. thank you for inviting me. >> thank you. this is a bit different.

it is not a hearing. it is a round table. it is like around a kitchen table. that is why we are at this table. feel free to jump in if you want to. i will ask the first question. i am very intrigued about what you're doing, mr. burrell. i'm wondering the degree to saves and youstem i

said a target at the outset. how do you set that target? then, what consequence does that have for sgr because there is a target in each case. rselves.by you he said u.s. for a waiver for the medicare payment -- you said you asked for a waiver for your medicare payment system. can you tell us the degree to which you think sgr can be modified to follow some of your practice's or what have you learned that could help us decide what to do about it? >> this is very similar to the way premiums are established.

you have a particular panel, let us say 10 doctors. the question is, how many patients to those primaries have? who are they? then, the first question we ask is, what are the experiences of those particular patients? it reflects everything about the local aspects of health care. when i said it would be typically the case that 3000 members would be in a panel of hours, they would be expected to have about $12 million every year in health-care spending jurors. -- health care expenditures. that is the base. we use 2010, and unmanaged base. we look at the illness burden of the population that is in that

panel. we take that into account. then we apply an overall medical trend factor. that reflects the overall trends in health care in this area. we apply it to the base. and we then come out with the expected cost of care. what we are expecting is that as panels perform and attempt to beat that number, 60% of the panel's are represented, in this area, it is between 7% and 7.5%. what we do is we track that trend over time. we do one for -- we do one full year of prospective trend and the next year, a is 50/50 perspective than what has actually happened.

as the cost curve bends, we think it moderates the cost curve and what happens is the panels have harder targets to beat. by the time that occurs, they are more experienced in what it takes to beat them. so much of the cost is driven by chronic disease that we believe that the essential thing they must focus on is how to manage the chronic disease patients. that means they have the ability to identify them and said for them.plaset a car plan we assign a nurse for each case. >> to what degree could this be applied to medicare? >> same approach. for our under 65 population, you could say that you take medicare members in this area who are in

those very thin practices. -- very same practices. level,ish a medicare fee an a credit system, expected cost of care. debits are the fees themselves. what we would say is, manage the medicare patience in the same way he managed care first. look for the chronic disease, which medicare is a chronic disease capitol. >> what mr. burrell is doing at care first has credibility. one of the main features is that there is help given to the primary care provider through nurses to manage the more complicated and costly patients. that gives confidence that this is not an effort to deny care to

people to reach the target but to manage the cost of high interventions in a more cost- effective way. you mentioned you have oversight to make sure quality is maintained. there is a fear the bonuses are based upon dollar amounts and we are denying people needed care rather than providing quality. how do you assure that the necessary care is given? >> we have five different categories of quality measures that each physician is measured on and the panel as a whole. we have one we call engagement. this is the degree to which the position is actually engaged in the care of a chronic disease patient. are they to visit? do they take the call backs? do they deal with a nurse?

are they engaged? you cannot get an outcome incentive award in our design unless you have overall quality scores that indicate that you are providing quality service is and you are engaged with the patients who needed the most. less than 10% of all of the patients consume 65% of the expenditures. these people need differential attention. we asked the primary to do that because they are disqualified -- because they are not, they are disqualified for an award. it is meant to be multi-year award. we look for consistency of performance over time, not a cricket. -- quick hit. the reward goes up with consistency.

if a lady has multiple chronic disease,ake care of her. the only way you can win is actually to stabilize her, improver outcomes her outcomes. >> i suggest there are two elements of quality. one is a retrospective analysis based on measures articulated in the national quality forum during an important issue to raise is the fact that many of these practices do not have an intrinsic capacity to manage patients as well as it would like to. they do not have complete information. if patients have multiple doctors, the information is not coordinated. we have played a role in actually not being remote relative to these practices. we have become an integral part of the delivery of care. we can use our health information exchange capabilities to create an aggregate record of presentation to the practitioners.

that has been a huge help. the second issue relates to physician support. the good news about a day as you complete date on the patient. the bad news is and it is hard to analyze the data on the patient and related to what has been published in literature or what represents different levels of care. the ability to distill information using clinical decision support into actionable activities that can be pursued by the physician ends up being an important issue. the third point i would mention is the role of the patient. for all of the best intentions of doctors, patients are not adhering to therapy. we have done a lot to motivate and provide incentives for patients. consider the role of the patient as we attacked these issues. >> your question is very important. as we move to models that create accountability for medical

spending, how do we assure quality does not get sacrificed? the approach we have taken to that which is proving to be very successful is to pare those incentives for total medical expense spending with a very broad set of quality and outcome measures. targets have represented a continuum from good to great care. for every measure, and there are 64 in our portfolio, there is a range of performance targets from good to great. with great being a number that tells us the best that can be achieved for a population of patients by an organization. these organizations are embracing those measures with the data we provide to them and the substantial incentives on the table to do well with these measures. over their five-year contract time, they are moving aggressively to improve care for patients. because the measures include not

just clinical process but also measures of health outcomes and patient care experiences, these practices have to engage their patients in a new way. because you cannot accept accountability for patient health up comes without thinking about what happens to that patient when they are outside, living their life, working on issues with their chronic disease and managing health. these practices are innovating new ways to actually understand individual patients. and what we have seen, even in my first two years, is they are moving to the highest levels of e.rformance that ar they're important advances in health outcomes. >> i would like to add to those.

our reward program -- it is based on star measure, achieve 6 --to you have to achieve six out of nine. when they hit six out of the nine, they receive a reward for that. each of the programs will then later on the other -- then later on other factors. the payments for all of those moved up as you move along the continuum of the report program. it is important because it works in all areas. we have found that this reward program -- we have two practices

in south dakota. they will receive $102,000. we have four in montana with over $144,000. eight in utah for over $492,000. these are receiving were awards for quality outcomes for their patients. >> i want to bring up an issue that might be different. mr. edwards, a you mention humana using different approaches for account for variation. i want to ask about delivery of health care in rural america because that is where iowa fits. what does humana do in rural areas? what is successful? >> we have recently partnered with a group that have opened 13

clinic-based primary care centers that provide coverage to senior in low-income and underserved neighborhoods and rural areas. the we -- we will add 40 centers. we have created a program where mallural areas with spal patients panels, we put a team together with a nurse to go into the office and help them understand the disease management programs and the things that can be done to help serve the rural population. >> you just bought up nurse practitioners. would there be supervision requirements in the case of nurse practitioner and i am interested in what type of

response you have received from the physician community regarding the idea of using nurse practitioners. >> we have had no issues. they are -- absent actionable date to manage patients. the nurse practitioner comes in with data and shows them how to .mprove the patients' health they have the ability to take a doctor with them if they need to. we have no issue with that. >> a couple of issues with regard to rural care. as we think about reforming the payment mechanism, it believes the position to have -- the physician to have the support of a nurse practitioner. it is more cost-efficient. perhaps more lucrative for the

primary care physician. the other challenge is electronic galt -- electronic medical records. one of the challenges in the small practices and rula communities is the it spends associated with implementing an electronic medical record. in michigan, for example, we have introduced the capability to build an electronic medical record for free that meets meaningful use criteria and can participate in the exchange of data around certain areas. we are seeing the same level of sophistication regard to availability of data, analysis of data, and the creation of activities pursued by a doctor or nurse practitioners. that creates an environment that stimulates -- simulates the major medical centers. their real possibilities

leveraging technology -- there are real possibilities leveraging technology and payment reform. >> we have a long way to go in health i.t.? on a scale of one to 10, how well are we doing? they said about two. >> the notion of electronic medical records is appealing but the reality is, they know about you. they have a paper record. the electronic medical record may be advances their ability to access information but it does not help that much. the real issue is, like your doctors do not communicate with one another. what frustrates me as a practitioner was not so much what i am doing but what others are doing in terms of adding drugs or doing tests i did not have access to. one of the things we have not focused on with regard to health technology is the need for

health information exchange and so i can be provided with information about you generated by others. the other notion which has gotten a short trip is the notion clinical positions -- how do you convert information about you and to specific activities that will correct problems relative to our level of compliance as a team relative to the medical literature? >> is there some way to develop incentives? >> one is incentives for using electronic medical technology. i argue that a greater incentive would be the ability to assume risk in manage a community so that if i write a prescription for you, i have the capacity to know whether or not you have filled it. or to the extent you have gone to another doctor who did a drug test or lab test that represents a contract -- contradictory

piece of information. >> if i get a prescription and -- >> download the capability i described that can be prescribed so that information is available. secondly, when you fill a prescription at the pharmacy, rough your manager, we can access the data to know that you have filled it. there two components. i ordered the drug. the second is the degree to which to comply. patience do not comply. one of the things we have introduced is an experiment for patients after a heart attack and we give away drugs for free. it helped a bit. fewer than 50% took their drugs. we can access the data. >> i am sorry. i talked to denver health and she was telling me about that

problem. are you taking the medicine? " yes, we are. they were not. they checked with the pharmacies. they found out they were not taking the medicine. they said that to the patient. make sure you take them. there was coordination. >> that is what i am suggesting. i am suggesting that our technology can be introduced before free to address the issues we are discussing. >> how do you handle privacy? >> one issue is that under hippa, some of this information applies. most directly to address privacy issues, that relates getting permission from the member. there are issues of security which are just as daunting.

>> prescriptions by other doctors, -- >> we can ascertain that patients are shopping. we in fact can accumulate from a variety of electronic records or pharmacies that a particular patient is accessing excessive amounts of drugs. that is the sort of information we can make it back to the position as it relates to the specific patient to warn them about the propensity to narcotics. >> we all want to repeal sgr. the main problem we face is and what do we do then? it seems to me that your organizations go well beyond where medicare service is today. what should we do to focus on in

the near-term to approve payment within the fee-for-service system? should we focus on quality measures or incentives? what can we do? >> i will take the first shot at it. one of the fundamental problems of the sgr is that it deals with individual actors. individual clinicians. the targets are set based on the whole population across the country and whose behavior is they have no influence over. the individual actor has no incentive around efficiency. no incentive around quality. no real ability to control anything. what you have heard across all five of these testimonies is organizations that are dealing with payment in a way that relates not to individuals, but

to organizations. two organizations that have been willing to accept accountability for the quality and outcomes of patient care. one of the most important things that you can look to fix or replace sgr is to do a model that does not set targets based on the population of other clinicians. physiciansthato have identify the organizations they work with and how they accept accountability. of course, and that every physician or every physician group is ready for that kind of a pilot -- accountability. we saw 32 pioneer sunup. -- sign up.

by sending a signal that that is where we are going, and taking the step of having clinicians identify who is the other set of conditions they are going to share accountability with and starting with what he have done outside of our aqc -- for our fees schedule, we have had 0% payment increases. the only way to earn additional revenue is through your performance. beginning a path and having every physician in the country understanding this is where you are going, the finding who it is, and starting accountability and moving toward accountability for quality and total expense -- >> it is an important point that i would emphasize. as long as we are dealing with that position community at the grand juror level -- granular

level, we cannot get to where we can get to. we need to develop policies to foster the organization of physicians coming together into groups large and small with all the metrics we have talked about on performance so that they have a reason to go there. the other thing i want to say is a consistent theme is the emphasis on primary care. that is the gateway to the systems. we have health care delivery systems. we had a robust primary care system. the unfortunate underlying truth that we have not spoken to is if you want to manage chronic care population, you need a robust premiere here humidity and it is going away. in california, the primary care community is withering hospitals are being built -- while

hospitals are being built. we have to address that issue. >> i would like to reinforce that. we organize small performance teams. over half of which were in solo practice or practices of less than three. not sophisticated practices. by giving them a total expected cost of care to beat and some structure, they actually pay attention to the quality and who are the chronic patients? we have a sign nurses to follow them into the community. a lot of times, the primary does not have evidence. we supported them by providing

home assessments of what is happening to these patients at home. medications are critical. a lot are on 10 or more. not only do they not comply, they have too many. they have drugs that interact or make them unstable. we try to get the primaries in small teams to understand who among their panel of patients are at high risk, who have chronic diseases, and are you paying attention to them out of the office? we try to help with nursing support in the community and the home. if mary smith breaks down, the doctor is informed immediately. and then we provide strong financial rewards. we will not increase their fees. we increase the rewards to them if they get a better outcome.

>> are doctors being educated on people using medicare supplements? it is my understanding that if you are on crestor, it would be wise to take a dietary supplements to make up for the deficits. this is an area that is not well defined. people do not know that. they may be putting themselves -- i didn't mean to pick on them. they could be putting themselves in some kind of jeopardy if they take the dietary supplement. the drug part of the

equation is dramatically increasing. a lot of primaries do not know which drugs their patients are on. we create a drug profile of the patients. sometimes you are on two generics, or a drug laws prescribe by a specialist and they did not know you're on all these drugs. we provide a total profile of the patients. then they start to act. "i will try to revise that." they prevent the cycle of break down. that is where some much of the cost in the system is. i know it is true in this region. >> i don't mean to be

disagreeable. there yo go u go. >> just be careful. >> thank you. >> i have changed the remark in my mind. i think people are supporting alternatives their peace -- es.rapi vitamin d and calcium to prevent osteoporosis. a normal diet is probably more than adequate. we need to be careful about what we suggest and prescribe. we need to insure -- i want to

suggest the real issue is quality and total cost. perhaps we need to understand that is the issue here. we can back into issues like sgr. considering sgr in isolation will not get as to the greater issue and providing the right incentives for newt health care delivery system -- for a new health care delivery system. >> make sure you very program to allow for variations. they are not all the same. make sure you have different programs. not having to change too much out of the gate. a couple of quick hits for you.

>> i want to come back to the point that was discussed earlier with electronic medical records. that is not the most important issue to focus on. mr. burrell, you're talking about patients that have medications that perhaps are conflicted with what they need. that information is out there in the universe somewhere which could be captured if we had some kind of system. i think privacy is an important issue. so many of these things could be eliminated if we had a system where people's medical information was available irrespective of whether it access the health-care system. i was that the airmen were we asked the panel about where we were on a scale from 1 to 10.

everybody said in the two to three range. we have not come up with a solution to the standards. everybody talks about this issue in anecdotal form about what it does to add cost to the health- care system and so much of this could be fixed. i don't know how we achieve that. i know it has been discussed a lot in the past. i am unsatisfied with any of the enters i have received. that is one issue. the question, doctor safran talked about the program for

alternative contracts. the new england journal of medicine published an article that reviewed yearon one of that. i guess i'm wondering if you agree with the assessment. what can we be doing to put downward pressure on utilization. >> very important issue. i do agree with those findings. what most organizations reached for as the most achievable savings is cities that they can get from moving care to less expensive care settings. they are doing that in small ways, partly because they have accountability for patient experience. they are doing things like

moving care related to lab tests or the patient is happy to go with the commission -- clinician tells thetm. m. the harder job is to change utilization. that requires changing how physicians think and behave. what we are seen in years three and four are that this changes have started to take hold. the infrastructure that they are putting in place to prevent avoidable and missions -- avoidable admissions to catch the patient as they come through and see if this patient needs urgent care or emergency care?

let's take care of them over here. we will take care of their need and they will not wind up in a bed. sometimes you get the emergency room visit and an in-patient, too. they're making significant changes in utilization in years two and four yielding deeper savings than in year one. changing utilization is that much tougher tasks. it does involved changing out physicians think and act. >> i want to go back to the data question. .e've come a long way >> we just purchased a company

that has a rules engine that we're able to run members to the engine and will deliver back to us actionable gaps in care. the first time we ran it, the room% of the gaps were converted into actions. this is a brand new company that we just purchased. we can run full data through it overnight. >> the data you are referring to has been available for a long time.

we of claims and information from laboratories -- we have claims and information from laboratories. what did the tests show, what to the exam show? we have a company that does it through force. i would refer you to the 850 hospitals that are linked to the system. there is one in virginia that is using this capability. there is another in arizona, using it to support a medicare pioneer. the ability to couple traditional data with interoperable data without access provides information that i think you were referring to.

you need capabilities to convert that information because the it is quite a bit. think of a patient on thin drugs, there could be hundreds of different lab results. i could not keep up with the literature. i didn't know what other physicians were doing. there was an interrogation capability and to -- >> thank you, mr. chairman. my apologies for being late. many hearings. i know this is been a good panel.

i want to start with a question. when you come before the congress and talk to us about issues, and always almost comes back to information, which means data, and you need access to it. under federal law, you need access to the data. we want to change that. we have a bipartisan bill to open up the medicare database so it would be possible to look at global information and compare that to others. dr. reisman and mr. cardoza, you are sort of the point persons on

that question. would this be helpful to you, dr. reisman? how would you assess the need for effort to open up the medicare database so that you could get access to the kind of information and use it to improve quality and hold down costs? >> retrospective analysis of aggregate data to identify trends and to understand best, and we think that is enormously important. ofre working to take evanish the data capabilities -- we're working to take advantage of the data capabilities. the other element is the notion

of availability into real-time data at the point of care in regards to taking care of the patient sitting in front of them. analyze the data and make sure what i'm doing for you is consistent with the best clinical evidence and is not convert indicated relative to other doctors. there is the aggregate and the real time. the availablilty of information would be enormously important. >> i would second that. there is consensus that did it matters and sharing it matters. youasn't long ago that cannot have that conversation. physicians are possessive of

their medical records. they are coming to understand that medicine is complicated now. team.es 1a those days are past. they understand the importance of sharing data. by law, patients have access to their records. we are at the advent of this but i think this will move fairly quickly. >> let's bring the other three witnesses. you can elaborate on the question of medicare database, we can do that in writing or as you respond to this. you come from the private sector

and you watch the federal government. the the federal government sometimes looks like it is moving very slow. slow to change and slowed to adopt and slow to evolve. even as we talk today, traditional medicare is a demonstration project kind of stage. will it be your recommendations for speeding all for out-- what would be your recommendations for speeding all this up and to accelerate these changes? we take care of the three witnesses and they can take a crack at that one and your council on how to speed up changes and reforms. dr. safran. >> over the last couple of

years, we have seen is impressive speed with respect to the uptick to the accountable care organizations. i would leverage that. the key is going to be for medicare to be able to move away from my model of payment that deals with individual actors and holds them accountable for the behaviors of every other doctor across the country. to a model where i have had a group of peers that i have accepted accountability with and we're working together. the fact that you have stood up 32 pioneers in such a short period of time, i think sets out the beginning of a continuum that reminds me of the way that

we waited in to the aqc model that i talked about today. we hoped that we might have 10% or 15% of our network accepting that. we had 25% by the end of year one contractor that one and we have close to 80% across the state contract and that way. there are lessons to be learned by the federal government. it was voluntary to begin. we were not forcing anybody in. you can earn up well under this model by making care better and by contributing to the affordability over the long term, then come on into this contract. one, organizations started to

see that the initial pioneers in our models were succeeding at managing. they saw the system was starting to look pretty unattractive. it was looking like low or no payment increases and no opportunities to advance. they understood the kind of support they were getting from loss as a payer to help them as they transition from may volume-based system to weigh the and the space system -- >> make that last point. i think that is the ball game. that is what we started almost

three decades ago in our part of the world whether tt group help in seattle or provenance or other kinds of plans. what can the federal government do to accelerate a transition beyond fee-for-service? >> it goes back to the earlier question about data. from washington, d.c., or baltimore, it will be hard to partner with the provider organizations that have encouraged to sign up for these new models in the ways we've seen that have been critical to success in the markets. imagine those who signed up are able to partner with partner wipayers. if those private payers have all the data to work with. if we could be doing the same analytic, this is an

enormous assistance to them. giving them that same guidance on the medicare side, i think you start to see more rapid uptick across the country. folks think, i would not know the first thing about transitioning to a system that will not ask me to have accountability for overall spending and quality. >> when a witness says that they support the effort to expand access to medicare data and they want to promote the transition beyond fee-for-service, i using think i should quit while i'm ahead. >> you are doing just great.

i assume some physicians are wondering whether the billing practices will be questioned. maybe there is some medical liability issues there. i'm wondering if you could help us figure out how to bridge that gap. i think it makes sense for that data to be available. journey.it's a we have been due in the fourth25 we have been doing this for 25 years. in areas where there is no transparency and all, there is

going to be some trepidation. somebody else will be looking. but you have to go there. how do we get there? put the money where you want the system to go and it will go there. paver reform has to enable delivery system reform -- payment reform. the faster we will get their. >> these suggest modified patent reform -- do you suggest? >> yes. be?hat would debit >> just when above my pay grade -- you just went above my pay grade. get connected to organizations.

the physicians on their own cannot do this. this is not what they signed up for. the expectations are very different. they understand it is the right way to go. they lack the skills and were worth all to do it. enabling structures for them to do what they would like to do it if they could. at the granular level, they have no chance. >> if we had access to these data and the purpose was to say you're a good guy or a bad guy, and we talk about managing real populations and said there is population were the number of

coronary angiograms is half as many as you'd do. the incidents is three times higher, suggesting you're done angiograms on people who don't need them. we went to the committee and said we're changing the payment structure -- we went to the community and said we're changing the payment structure and we can assure you that by being more thoughtful about your use of angiography, you can responsibly assume risks without compromising the care of your population. we did think about the palin solutions and combine some of the issues we have been talking -- >> if we can make that data

available to people, we had two large cardiology groups. we went to those cardiologists and we showed them their data compared to the next county. if we had set that out to them and not engage them, there would of thought we were doing a good job. now their practices are exactly what the other counties is. >> is a working in texas -- is it working in texas? >> i do not know. the incentives are not there. >> it was several years ago. >> my understanding is there's some movement since they have been exposed.

>> i agree with the points. peer pressure within the panel and then peer pressure across the panel. you can have two physicians in a panel of 10 -- others are based i how the entire panel does. >> doctors hate being an out liar. >> any modifications in the policy, you have to make sure it is flexible. >> what role for medical schools here? >> i think there's a considerable role. these issues are not being addressed. there's a need to further acknowledge the contribution

that other types of practitioners make. conversation around primary- care, but we're not doing enough to introduce these issues to the curriculum in medical school. >> we are not treating physicians today to enter into a health care delivery system. we are treading them to be medical rescue workers. we are giving them lots of tool. s. medical schools are not doing what is needed today. i'm not going to demonize them. i think they can move in this direction if we challenge them. >> it is my understanding a lot

of the medicare reimbursement schedules is contracted out. it is weighted to specialists and primary care physicians. i do not know if that description is accurate. your thoughts on how we can deal with this difference in reimbursement. i did not want to take anything away from the specialists. high-glamour stuff and as for the money is. i am trying to figure out how we get a little more focused on primary care physicians here. >> i think the models you have heard us discussed today, each of them is primary-care centered. the only requirement we have of

an atc organization is in must have primary care at the center. beyond that, if they want a hospital as a partner in the contract, they may but they do not have to. that coupled with the fact that the quality incentives are so large it primary-care base has changed the dynamic of power and resources within these organizations. these organizations to understand they cannot succeed and that improving quality and outcomes if they are not investing in primary care at the core. tore seeing them looking hire more primary care cli nicians, investing in the infrastructure in primary care

practices, rewarding those practices for the success the organization is having and in improving quality. it has changed the dynamic for a specialists in a very important way. "how could we be helpful in this new model and at managing total medical expenses?" aren't there any good quality measures for us? that is a welcomed question. the available measures are at this point very much primary care focused and being able to have health care is very important. >> i agree with dr. safran. the pcp is the quarterback of the team. the most efficient model is for

the specialist is capitated. >> i think we need to get focused on this team-based, patient-focused attention. you're the surgeon and you might ignore the role of the primary care physician. but now i'm at risk if that patient is readmitted with an affection and all the things we have been talking about. sadly that primary care physician is my best for and-- suddenly that primary care physician is my best friend. we in fact restructure those relationships and restructure

the reimbursements to the primary care physician. >> the earlier panel mention the former cms directors and the subject of sgr. why not -- i tasked them to come back to us with recommendations on how to reform sgr. those recommendations are due tomorrow. too bad we're not altogether. what should we be looking for when they give the recommendations? water some of the key points that you think are most important in order to help us advance the ball -- what are some of the key points?

what makes sense in how you compensate physicians, looking for to collaborative patient- centered reforms? which to be looking at when we get those recommendations -- what should we be looking at? >> if we continue to pay for fees, there will just keep providing services. i would look at that for one thing. >> it has to be global measure and the structure of accountability principally through the primary care physicians. it is the overall cost of care. you need accountability and incentives. >> how do you measure quality?

>> largely on outcome. reductions in the evidence of the fragmentation of the health- care system. having fewer e.r. visits, fewer drug interactions. >> i think you backed out of things that are most fearful. the bad thing about being a diabetic is not the sugar. the outcome is not, "did you test this or test that?" people having strokes and winding up on dialysis. >> that depends on some kind of follow-up records. >> to see how things have turned dowout.

i would hope that the answer would be more expensive than an immediate reaction to sgr in isolation. i would hope there would be companion solutions that would be suggested. recommendations and an assessment about whether many practices have the infrastructure and the technological capabilities given the financial wherewithal to manage this approach. >> thank you. >> we have to transfer or get a transition from piecework system that they are in today, to one that rewards their ability to coordinate care and performance. that is one of the biggest things we need to do. >> i would look for them to give

you a model that moves from a focus on individuals to a model that focuses on organizations. a model that moves from a focus on individual services and the fees for those services to a global view of total medical expense and quality and outcomes for care by those organizations. a model that involves data and ongoing support as they venture into this new world of moving from volume to value. a model that places substantial financial incentives on quality and outcome to access the backstop against any incentive to spend on care. i would look for them to help with the further development of better and richer outcome

measures. making sure the important chronic diseases are under good control and avoiding complications for hospital care. those are good outcome measures but they are not good enough. we need further outcomes of good outcome measures. >> that is great, if they are watching. [laughter] i will ask for an extension. modify. >> thank you, mr. chairman. i thought the point about primary care was extension. we have mr. burrell here. bringing providers and patients in together around prevention. to me, that is really the ball game.

most goes to chronic diseases. we pick up the damage of heart and stroke and diabetes. you try to bring your providers and patients together and reward the patients. i think there's a particular good. we get together with the cleveland clinic and proposed financial rewards for senior citizens under medicare to lower their blood pressure, their cholesterol, stop smoking. in the context of the chairman's question about primary care, tell us a little bit about what you're doing to bring together your providers and the patients to start giving prevention and behavioral change were the

patients can be part of year practice. >> a discovery of the risks you have, that has a big effect on behavior. we ask them to share that with their primary doctor. it has an effect on the primary's thinking sometimes. it moves from financial incentives to outcome. we see the risks that you have. it is one thing to see. it is another thing to act. if your the other-- only one who knows that as a member, it doesn't do much good. it is seen by the panel.

we identify the patients at risk by the panel and we target the interventions together with those primaries for patients at high risk. it is an incentive on part of the patients and on the primary. if they can get a better outcome, they have a financial reward. the member does and the physician does. it is working together that causes the best results. >> i agree. at harvard, we published a piece in the new england journal of medicine where we gave patients who experience heart attacks their drugs for free.

they had already experienced the outcome. despite getting the drugs for free, less than 50% were compliant. the billy to convey information about risks -- the ability to convey information about risk. we have a long way to go. >> there is no question there are a variety of factors involved here. the work of dr. reisman at the cleveland clinic and the work that they have put together. it does seem to be working. i think they do try to spend time talking with patients and talking with families and incorporating the judgments that you are talking about.

they are very clear in their views that the financial awards -- these are enormous sums of money. the idea of a few hundred dollars has been successful and chairman baucus has given us a chance to kicke these ideas around. >> patient responsibility. as a responsibility -- patient responsibility is a big issue. how do we encourage it. we talked about the psyche of people. how do we encourage more

responsibility? >> part of it might be some social awareness, taking evanish of a new psychology and behavioral economics. the notion that i tell you what to do and say you can do it for free is not enough. >> i would agree with that. i think it starts with incentives but it cannot end with incentives. we find the breakdowns occur at home. you do not comply parley because you're depressed and parlay the way you live your life -- he did not comply partly because you're depressed and partly the way you live your life. often by a nurse following it up.

connect with the paris has an effect on compliance -- connect with the patient has an effect on compliance. it is the combination of all the above -- the physician paying attention. it is so important to getting compliance. >> you can do what in a straight fee-for-service plan. it is expensive to create the structure. a loss to have the global money up front -- unless you have the global money up front -- >> medicare does not cover it. >> based on the outcomes of care. adherence has been the great the last don't tell -- don't ask,

don't tell in health care. as mr. burrell just said, the financial barriers are just one piece of it. starting to address, does the patient understand? of their motivation issues -- are there motivation issues? addressing them has to be part of what health care means. >> the group that serves the low-income and the underserved neighborhood. pick up the patient and bring them in so they didn't mr. their appointment.

>> there are nine people working over here called the supreme court. how was their decision going to affect all of us? what do you do? been asked that question a lot. it will not affect direction. we cannot stay where we are. i think the affordable care act -- i am not an expert in it. i assume that it is flawed. it gets us to the starting gate. we cannot stand on this platform. it is on fire. >> changes under way are unstoppable regardless of what the court decides.

>> we been working on this 2 2005, at least. >> we are looking for more sustainable programs. >> absolutely. we cannot stop. >> it is been a good session here. this has given us a lot of good ideas. we keep moving forward. thanks a lot. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

>> will be live in about 40 minutes at the faith and freedom coalition here in washington. no speeches by senator portman

and senator rubio -- keynote speakers. the speakers include jim demint and ralph reed. that is live at 12:30 here on c- span. president obama is giving a major speech on the economy. he will be speaking at a committee college in cleveland. senateo of today's foreign relations look at the law of the sea treat. they are hearing from a number of officials and that hearing continues on c-span3. donald rumsfeld will be welcomed along with john negroponte. we will have that program this afternoon here on c-span.

part of our conversation this morning and financial regulators in washington. host: day four of looking at financial agencies. we began on monday with a look at the securities and exchange commission. host: today, a look at the federal deposit insurance corporation because our guest is the former chairman of the fdic, sheila bair. welcome. guest: thank you. happy to be here. host: there is something new you're doing, systemic risk council. what is that? guest: another nonprofit entity that is dedicated to integrity

and financial services. we have a great cast of wise men and women. paul volcker who are concerned about financial reform. it is getting bogged down. not a lot has been accomplished. voice and explain what needs to be done and perhaps provide a counter to some of the special interests. why hast: one reason not moved faster? guest: i think there are two problems. there's been a calculated effort to drag this out. they start losing interest and losing faith. the more you drag it out, they hope the rules get watered down. congress created an oversight

panel that was designed to be a coordinating body for getting these rules done and making sure they are communicated to the public. we're not been given much leadership. you have a negotiated process. the industry knows that. you end up with a lot of complicated rules. a lot of exceptions that are difficult for the public to understand. host: wh voice do you hope to have? guest: we are going to prioritize. we are having a press event. there are six issues that we need to focus on. there will be at high level pronouncement and we will follow that with commentary and identify additional priorities later on. our focus will be systemic risk. the system is still fresh.

i never want to see something happen again like what happened in 2008. that's what we're trying to do, prevent another 2008 crisis. host: jamie dimon was testifying on capitol hill yesterday. if the rules were fully in place, would that have happened? guest: that is a good question. a couple of things. regulators need these the tools they are ready have. i have a question about whether this was safe and sound. beyond that, i think it violates the intent of the volcker rule. it would address this kind of activity. they need to simplify. they to provide more clarify that only hedges should be an exception to the volcker rule. host: sheila bair it will be with us until 10:00 a.m.

you could ask questions. here's your chance to do so. you can call us. here are the numbers. 202-737-0001 for republicans. 202-737-0002 for democrats. 202-628-0205 for independents. you can send us an e-mail or twitter. a lot above yesterday's exchanges. one of the questions was about the regulatory regime. they were asking mr. dimon and we want to get your response. [video clip] >> the financial says -- system is safer today. >> i'm talking --- we have larger capital. i'm talking about the regulatory regime that congress put in

place. has it made our system safer? >> i do not know. host: your response to his response. guest: a lot of these rules have not been completed yet. i have disagreed with him. no, i think banks to have more capital now. -- i think banks do have more capital now. the rules are not in place to make the system more sounder. host: sarasota, florida. on our independent line for sheila bair. go ahead. caller: good morning. thank you for being available. i have a comment and question regarding the bank closures that the fdic has been overseeing. i think over 400 have been foreclosed. a lot of them for the right reasons.

there are these lost share agreements. my question has to do with the lost share agreements. congress ordered a study into those because of the abuse that takes place oftentimes to those lost share agreements where performing loss are forced into a nonperforming status because it is to the bank's advantage because they will make more money. -- more money than the face the idea of the loan. mr. anything we can do -- is there anything we can do? guest: i think there been some misunderstandings about lost share. the lost share acquire they are regulated entities. i do not know it would be in their economic interest to convert a performing loan into

a non-performing loan. they are going to take 20% of the loss. there is no loss for anyone. there's been some misunderstanding for lost share. it was used as part of the s&l cleanup. if we try to sell the loans out right, we take deep discounts because the buyer does not know what the loss will. -- what the loss will be. these were loans originated by another bank. good study show it saved us about $40 billion, at least during the five years that i was there. you need good controls in auditing. maybe there have been abuses. we have -- auditing procedures -- we had rigid auditing

host: our democrat's line from florida. you are on. caller: yes. host: caller, you're on. caller: there was a contract on my house without telling me. i went to the fbi. i told about the fraud. they said i had to go to civil court. i went to the police were the corrected broker was. they said, sorry, you have to go to civil court. i went to the irs and tell them about the fraud and they said you have to go to civil court. nobody is doing their job. and i'm paying my taxes.

everybody is saying to go to civil court. guest: you feel a broker give you a fraudulent loan? host: the caller is no longer with us. guest: the fdic has the authority to investigate bank fraud. we do that a lot. our inspector general has an excellent team. they brought a lot fraud cases against mortgage brokers. we do not have authority to get compensation for people that had been victimized. if it is a criminal prosecution,sometimes a celebrant can include compensation for victims. you probably need to have civil recourse against the broker. i know it is frustrating, but the fdic is not set up to adjudicate claims between

private parties. i am very sorry that something happened to you. there was a lot of fraud in this market. there are some good mortgage brokers out there but some have done some terrible things. host: carolyn from carolina. caller: sheila bair, thank you for representing our fed. what affected the government printing all this money - - didn't that degrade the value of our dollar? is it controlled deflationary? guest: that is a good question. there is a debate that maybe we've gone too far with monetary policy. there was justification for policies when we have the crisis.

whether we have gone too far now is an open question. i feeling is that the fed should stand down. this far outweighs any structure and benefit we might have. through easy monetary policies. so, i would agree with you. it is a difficult decision to make and the fed has been spending a lot of time on this. our problems right now are structural. they are not monetary policy. you can put money into the system but you cannot deal with what is done with it. unfortunately, the money is not going into lending or supporting the economy. it is going into arbitrage and into high-risk investments. one of the problems with jpmorgan chase is that there were trying to seek returns in other ways because these lower interest rates have made it difficult to make more money.

i appreciate your bringing that up. host: what to be done with a bank that is classified as too big to fail? guest: i think dodd-frank is the fdic the tools to end too big to fail. it will be going into the fdic resolution if they get into trouble. bondholders should note. the fdic has done tremendous work explaining how the resolution trust will work. that is the way you end too-big- to-fail. you convinced the market they will not get bailed out again. host: a living will when it

comes to a big bank. guest: the fed and the fdic draw up a living will. they need to show it can be broken up and result in an orderly way. i think this is a tremendous tool. we had information about insured banks. activity was happening outside of insured banks. into security affiliate's for insurance companies like a.i.g. and investment banks. all these institutions are subject to this process. they have to show the fed and the fdic how they can be resolved. structural changes can be ordered. this can be a tremendous tool. should beink it underestimated. host: a better way to handle a failing bank in the resolution

process. guest: thank you for bringing that up. jamie dimon was talking about the fdic process. he supported having a robust resolution process. he supported bondholders taking losses. he was talking about the fdic process as a bankruptcy process. he wasn't talking about bankruptcy itself. bankruptcy does not work for large financial institutions. the primary one is the way derivatives are treated. you saw the horrible disruption after lehman brothers. where we did try to use bankruptcy. these thousands of derivatives counterparties are basically able to cancel other contracts, dump their collateral on the markets. and that is what caused the

crisis that followed lehman. i think that was a primary driver. bankruptcy does not work. i saw that. on the opposite page, there was another op-ed on the opposite page. it was about gm and chrysler violating priority -- haircutting other claimants and secured creditors. so bankruptcy can be abused. bankruptcy is inefficient right now. the lehman brothers bankruptcy still drags on. administrative costs are about $2 billion. and claimants still have not been paid. but the fdic process really is a bankruptcy. there's a lot that needs to be fixed with bankruptcy. host: our guest is the former chair of the fdic. rob from tucson, hello.

caller: good morning. i am rob. if you would bear with me. i am a genius and if you would bear with big you could probably settle this whole world prices -- whole world crisis very soon. listen to be carefully. guest: ok. caller: they say there are 400 families in the usa that got fabulously wealthy, but the people are generally not very smart. so they got very, very wealthy. cattle feed, oil, the whole bit. alls say we confiscate their wealth, about $10 billion a family. that would be about $4 trillion. that would be a lot of money.

but immediately, our federal government, which is very powerful and should be very -- our government should be powerful to represent the people. the fifth point on the preamble to the constitution says to stimulate and to help the general welfare. host: we will leave it there. guest: this is a free country with property rights. the government cannot confiscate at well. -- at will. there are policies that should be tackled. one is the lower tax rate on capital gains. and the people have spoken about this. this is one reason why the wealthy pay lower income tax rate than you or i do. i would like to get rid of the lower tax rate. it is not a question about

punishing investors. we have a tax that punishes work. they should be taxed at the same rate. the rationale is that it creates jobs. there is no credible evidence that it creates jobs. we get rid of it in 1986. there is a problem with wealth distribution but you cannot confiscate people's wealth. but we sure to mean -- but we certainly should tackle some of these problems. host: a call from maryland. caller: good morning. i was looking at the coverage of mr. dimon. to me, he has an arrogant attitude. he continued to apologize. "i'm sorry for it.

i take responsibility." blah, blah, blah. it amazes me how thoughtful they were. -- there were with him when this happened. wasting taxpayer dollars. they had the slender trials and -- the solyndra trials and they were so mean. i do not know why people cannot see it. it is an amount of money that republicans versus democrats are getting from wall street. this election to me cannot be more clearer. guest: you are right. i think there has been on the democratic and republican side, this is been a big player in making contributions to former members.

not all of that is nefarious, but it creates an environment where people question objectivity. another problem is some of the technical aspects of financial services. financial services have gotten too complex. this trading strategy that jpmorgan chase was doing was so complex that even the management did not know what they were doing. there were surprised by the losses. it tends to intimidate members of congress sometimes. it has a chilling affect on them being assertive. i agree he got off easy and he did a good job. he was talking about the importance of having strong capital standards. which is right. they do have relatively strong capital, jpmorgan chase. it can be stronger. they can deal with these losses. some party agreement that will

increase capital agreements. -- capital requirements for very large banks. there were undertaking this strategy because they thought it would reduce their capital requirement. -- reduce their regulatory capital requirements. so it kind of backfired in there. perhaps there needs to be greater focus on that. but you're right. but it's not just in washington. i think it is in the academic community. too much influence. we propped everybody up from the bailouts. host: this is from twitter. how many times did you go to congress to talk to relevant committees? guest: i testified quite a lot and i had private meetings with members of congress.

i was glad of that. the regulators need to be the counter. banks are there to make money. we have a capital system. we light profit-taking. but we need to make sure that it does not hurt innocent bystanders. when banks go up there and lobby, they are articulate positions that will help them make money. congress needs to understand that. regulators will try to speak to the public's interest and that is the job. i have gone up 40 or 50 times when i testified before congressional hearings and as many private meetings. who approves of financial instruments? there really is no agency that

approves financial instruments. there's -- we have regulations over trading and regulations over conduct. there is no pre-approval process for a financial instrument before it can go to market. some have said we should have a. that is a controversial idea. we do have a vulcanized regulatory system which impedes regulation. i don't like single regulators. we do have a lot of regulators right now. market regulation and they don't always coordinate as they should. that will beat the focus of our new system, to make sure there's more consistency and information sharing. host: fort lauderdale. caller: it is great to be talking to an adult. only in american can someone like me be asking sheila bair a question. does anybody monitor the

mailings of the institutional banking people, the offers they -- of both the institutional shadow and banking people, the offers they make and how they are being made? i can remember running up to the financial collapse, i was getting things in my mailbox that were insane. i was wondering how they know i did not apply to everyone of these at the same time. i would be knocked out financially. guest: that is a huge problem. part of that will be addressed by the new consumer bureau. they did have authority to write rules and they did tighten up on that but too late. ben bernanke has acknowledged that he wished they had moved earlier.

if it makes you feel any better, i was getting the same kind of ads. i was with the fdic, my fax machine would get a fax from my mortgage broker teasing these rates. every month i would taken into my office and asked my staff who is funding these people and they never could. because, every month, when the new facts came in, they had changed their phone number. the only thing that changed every month was the phone number. they just moved around. the rules have tightened. host: we will have it representative tomorrow. a story in "usa today." guest: right. i think -- my priorities for

the consumer bureau is to focus on the non-bank sector. the mortgage brokers that are not related to anyone right now. that is a difficult task. that requires building a new infrastructure of examiners and getting into these shadow institutions. there's a lot of them and sometimes they run around. that is a difficult challenge. i know they are struggling with mortgage standards and i know that is difficult. one of the problems we have with consumer protection running up to the crisis is that the rules were just too complex. you saw a lot of regional banks getting onto community finance. it was so hard to figure out how to comply with them. they did not have the money to hire all the lawyers. consumers cannot understand what the rates were.

because the rules are so complex. making better disclosures, too. they are not as user-friendly as they should be. i hope those will be priorities. it is a brand new agency and they've had a lot of challenges. they have had a lot of challenges building the .nfrastructure appeare the controversy about installing a new director -- godspeed to them. they have a big job on their hands. i would like to see that and i think you can do that. it would require legislation to completely break them apart. i do not think there is political support in congress to do that. but to the fed and the fdic, getting back to the discussion from our earlier, they do have the authority to require structural changes.

they can force the trading activity outside of insured banks. if you are taking insured deposits, he should make loans. and payment process, traditional processes of commercial banks. the securities and derivatives markets -- i hope the fed and the fdic will use their powers to accomplish that. host: who tell these guys there were no rules? rob on the independent line. caller: what happened to the old antitrust laws that were there to try to continue competition by not allowing businesses to get as large as these big banks have gotten? so that we wouldn't be in the situation now. why can we bring antitrust laws

we bring antitrust laws back into the situation so we can have more control and break these banks up? guest: that is a good question. i am a bank regulator. that is a legitimate question without concentrated the industry has become. you have four or five mega- banks in this country and they do compete with each other. but the problem is that they are so give it that it creates competitive disadvantages for very small institutions. if they get into trouble, what do you do with them to make sure they don't hurt the broader economy? i think that is a good question. in the near future, as i said, bank regulators have a lot of latitude to put -- better to control. host: donna from maryland.

caller: my problem might seem small but it is rather large. i dealt with the fdic, the federal reserve, always up to senator barbara mikulski -- all the way up to senator barbara mikulski. are originally, -- cordially i thought i was screwing up my bank accounts. it continued i kept calling. maybe it was identity theft. i kept getting double charged. my husband and i had separate accounts. i falling figured out it was on -- i finally figured out it was only on the one account that was receiving social security direct deposit.

it was only being done by the move in the social security direct deposit into bank's mega fund, which i believe was illegal. but it happened at four different banks. you can imagine my, you know, craziness. i went to another bank. i thought it would be ok. it was a television vendor. -- i finally figured it out. it was one vendor, one television vendor. guest: these are regulated banks. you should go to the fdic website. you can ask for an investigation. if it is a bank they regulate, they will investigate for you. if not, they will refer it to the appropriate regulator. i'm sorry you had a problem. bank regulators should be alerted.

no, i think we do need the federal reserve system. there is a question about whether there should be less discretion. there are questions about whether the fed had too much of a mandate. i did nothing they have performed as well in terms of -- i do not think they have performed as well in terms of the rule-writing. the fed itself, we need the fed. we need a lender of last resort to make sure the banking system remains stable. you put your money in a bank, you want to make sure it is shared by the fdic and that the -- you want to make sure it is insured by the fdic and that the bank has enough cash. the bank can always turn to them.

host: would you agree if they do something like the qe3? guest: the risk for high inflation is significant. in the short term, there are the zero interest rates that have netted a difficult to take risks. i think pension-fund, banks are starting to do some stupid things, trying to get better terms because the interest rates are so low. we saw this leading up to the sub prime crisis. interest rates were very low. people were looking for returns. the started turning to subprime loans. it was a factor in the subprime crisis. there are definite risks with this policy. i hope they stand down and leave

it alone. host: dan from annapolis, maryland. caller: i have a question about an unpopular subject. i have been trying to understand and relate to the mortgages and the reinvestment act. when i go back and read stuff of the code of regulations, what i see is a tremendous amount of power that essentially said there are quotas of all of these loans, low-income loans. "we can stop be from expanding." they really set quotas. you put pressure on banks to make loans to people who did not qualify. it looks like to me that that is exactly what occurred. i would say that banks had a lot of loans on their books that they could not sail into the market and they were forced to do this bundling to get rid

of these loans. if you could address the role. i've not heard anyone show what occurred and forced banks into that. guest: thank you for asking that because i think there is misunderstanding in the subprime crisis. most of the bad subprime loans were made by mortgage brokers who were selling them on to wall street securitization vehicles. banks were not involved in the origination at all. cra applies to the loans that banks are making themselves. i did not think cra was a driver in making these bad loans. i think greed and making money or the drivers. -- i think greed and making money was the driver.

i do think regulators need to own up to the fact that there were instances where loans were given cra credit when they should not have been. greed was the driver for this crisis. host: tallahassee, florida. caller: good morning. in reference to these regulations for these banks, he gambled with his own money, not taxpayer money. the federal government gambles with our money all the time. do the same rules apply? do the rules that applied to jpmorgan and everybody else applied to the federal government? that would be my first question. three to one, the financial institutions -- three to one, zero to independents.

-- they give 31 said democrat, maybe one to republicans and zero two independents. i would like to see if the same regulations apply to everyone else when they are gambling with our money? guest: that is a good question. there was some commentary yesterday about how the government loses $2 billion a day. you're comparing apples and oranges. banks do the same thing. they use a lot of leverage. also, the druids bets, -- the derivatives bets, this is made with the bosses that were insured by the federal government. there was no government exposure. jpmorgan chase had plenty of capital, but it was insured money that was used in making these derivative bets.

host: johnny from michigan. caller: hi. i would like to ask ms. sheila -- guest: yes. caller:who controls -- who values the united states currency? guest: that is done by markets. markets set prices and exchange rates. it can be influenced by how much currency is being pumped in by the central bank. the market mechanisms determine currency rates but it is influenced by how much is being prompted by the central bank. host: a question by emma. guest: bank monopolies. there is a long-term record by the fdic, your money is always protected.

main street depositors should always make sure they can ensure their limits. your money is safe no matter where you have it. host: one more call. john from long island, new york. caller: i wonder if you could answer a question about citadel broadcasting. and how the shareholders were dismissed and the management stayed and the bank's status. is that regulated by either of -- and the bank's state. is that regulated by either of the these agencies? guest: not that i'm aware of. the lack of accountability has been disturbing. i am glad that shareholders are becoming more active. i of done a couple of columns in "fortune." shareholder value for the mega bank is much worse than for the

smaller mutual banks. much lower than 48 jpmorgan chase or boa or citi. shareholders should look at that. get active here. i think shareholders can be assisted. more value can be achieved. host: there's a survey. 221 rule-making deadlines. 73 have been met with finalized rules. we have been doing this for several years. guest: some of the important rules have not been finalized.

capital is one. i think getting back to our decision and things that drove the crisis, they need to be fixed. >> this is the faith and freedom conference. they are about to get underway. this afternoon, we will hear from senators rob portman and mark a rubio, who were said to be among the list of vice- presidential candidates for gov. mitt romney. also speaking this afternoon is senator jim demint. it is being delayed just a bit due to votes on the senate floor. there is a procedural vote underway. marco rubio initially opposed

the ambassador nomination. but he then changed his mind. that vote is under way. again, we expect this event to start before too long. we will have them live when they start this week, the house is not in. there will be back next tuesday. there are a number of issues that need to be resolved before the end of june. will -- congress is facing a june 30 deadline. what is going on? >> there is a countdown to a couple of different things in the middle of the summer that lawmakers are trying to figure out how to pay for. one of them is the federal highway authority, which has been under a number of extensions for several years. it will expire on june 30.

lawmakers will have to come up with at least a short-term extension to keep the money flowing into the high rate trust fund. another issue coming up in the middle of the summer is that there are subsidized student loans interest rates that are set to double if congress doesn't act. that is something that was put in place about five years ago as part of the higher education financing act. but lawmakers are saying that, with this economy, they don't want to see those interest rates doubled. they are trying to come up with their way to pay for a new highway bill that would allow federal authority for the highway trust fund to continue for at least a year, maybe a little bit longer, and to keep the interest rates from going up. they are proposing a couple of different pension solutions that could wind up competing for one another in terms of how they pay for it. there are a couple of different things that harry reid has put out in terms of accounting for

how certain pensions are accounted for from the employers some point and the pension guaranty corp. appeared some think that these offsets would work just fine, but would not cover both bills. >> how have lawmakers in the house, mainly house speaker john bennett, reacted to the latest proposal that would freeze -- house speaker john boehner, reacted to the latest proposal that would freeze the rates on student loans. >> the house has actually passed the bill to freeze the student loan interest rates for one- year using a federal health prevention fund which was part of obama's health plan. since they passed that, they

feel they don't need to pass anything until the senate passes something. so they are not even paying attention to it. >> the conference committee on renewing the surface transportation programs? >> the conferees have been exchanging paper back and forth for several weeks. there have been working very hard. the problem is that they have not even touched some of the top one controversial issues that have been driving the transportation debate for months. that would be the keystone pipeline and how you would pay for the roughly $9 billion or $12 billion that you might need to bridge the gap between what would be collected from gas taxes and what you would need to keep finding the highways at the same level. those two issues have yet to be resolved. they are supposed to be resolved by the house and senate leaders,

not the conferees. while the talks are going and they seem to be friendly, it is hard to know how they will actually result the highway issue. >> what about the office would have been talking about? >> based on the comments by john boehner and harry reid, i would place my bets on the student loan issue in part because it is much simpler than highway legislation. and they can extend the highway program without too much difficulty. president obama and the presumptive republican nominee mitt romney have both said they both want to keep the student rates low. so the student loan issue would win out. harry reid in particular has tried to say that he doesn't want to have to pick. he wants to pay for both of

them. but there is no sign that the republicans will follow through. >> thank you. >> back live now in washington with the faith and freedom conference about to get underway. we will hear this afternoon from senators marco rubio, mark borman, and jim demint. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> we are overwhelmed by the encouraging to turnout we have had. my name is gary marx. i am the head director of the faith and freedom coalition. as many as you know, faith and freedom coalition is headquartered in atlanta, georgia. so i bring greetings from the land of atlanta where there is a baptist church in every corner and the streets are paved with chick-fil-a. we are glad to be in washington, d.c. also.

there are some things you might not know about washington, d.c.. mark twain said "there is something good and motherly about washington, a grand old benevolent nationalists of for the helpless." i think that we see that sometimes in washington, d.c. another southerner says, this is andrew johnson who was our 17th president, he said, " washington, d.c. is 12 square miles bordered by reality." did you know that more wine is consumed in washington, d.c. than any other state? i am not sure what that says about what is going on in the nation's capital. and finally, in washington, d.c., there is one lawyer for every 19 residents. there are also 74 lobbyists for every united states senator. i can assure you that today represented in this room, we

have citizen lobbyists who will be flooding on capitol hill for faith and for freedom. [applause] that is what this weekend is all about, bringing citizen lobbyists to washington to get trained and equipped to make a difference for our values in this very, very critical election year. i want to go ahead and bring it to the stage. we have a special invitation from our ohio faith in free and coalition leader, kate blackwell. [applause] >> thank you, gary. that mark twain was a witty fellow. after a town to visit to cincinnati, my home town, he was

on a slow train ride out of the city with a young reporter from the "move will carrier." and the reporter asked him what is and perish in -- with his impression of cincinnati was after so many visits. he said, son, if i heard the world was ending tomorrow, i would get to cincinnati as fast as i could because things happen there 10 years after they happen in the rest of the world." [laughter] i get that conservatism very easily in a geopolitical sense. politically, my dad was so conservative that he prohibited premarital sex because he thought it might lead to slow dancing. [laughter] i want to rescue to about your heads and focus your minds and your hearts.

i will give you a preamble to a very simple prayer that was frequently sprayed by pope john paul ii. today, as we're strolling to create and maintain a country in which the individual, not the state, the sovereign -- we know that american exception was and is rooted in a set of core values, reflected in our declaration of independence, and the core principles enshrined in our constitution. these values and principles are being threatened today, threatened by a centralized bureaucracy, and a big federal government and big government elites. these elites are actively working against the very things that have made our country the

wealthiest, the most powerful, and the most generous nation and all of human history. they would like to transform our national philosophy founded upon the primacy of the individual and the supremacy of god to one founded upon the supremacy of the collective of the good and the supremacy of the federal government. our prayer, heavenly father, today, comes from your words. found in some 11, verse 3 and hebrew 12, verse 1. the question in psalms is simple. if the foundation is to be destroyed, what will the righteous do? today, we ask that question in

more secular terms. if the foundation of freedom and individual liberty be threatened, what will the lovers of freedom do? and in hebrew 12: 1, we're told that there is a cloud of witnesses that watched the way we run the race set out before us. and so, with that simple prayer, as we are about to protect with the nourishment of our bodies, we pray beeper from the bible that pope john paul ii often prayed. it was a simple one-line prayer in which she said and we retold, "be unafraid. be afraid to take a stand for freedom. been afraid to let our voices be

heard and the wonderful course for liberty as we take this food that led us get ready for a great meeting in the next two days. amen. >> thank you so much. i know that some of you may be wondering -- where are the senators that will be joining us? i can assure you they are on their way. they had the people's business and they are en route. we will let you enjoy your meals and we will begin the program in just a bit. before i leave the stage, i want to remind all of you you are our system lobbyists. our system lobby day is this afternoon when we ask everyone of you to take a timeout and go to capitol hill and meet with both of your u.s. senators in their offices. we have lobbied the packets to

hand to you as you leave the room this afternoon. one packet for each couple. we have a number of items in their to alarm you and make this very easy. -- in there to arm you and make this very easy. we have a leader -- we have a letter you can leave behind you and make sure that they can give a response back to you. is also the opportunity to swing by your house members. the house is not in session right now. you can meet with both of your senators and your house members. we have the lobby day package. we have stickers and maps. we can show you exactly how to get on the metro, how to get on a cab, how to get where you're going on capitol hill. finally, this is perhaps the most exciting part of lobbied day. have you finished meeting with

your senators, we have an amazing capitol hill reception set up for you at 5:30 p.m. it will be in h-137. that is in the u.s. capitol building itself on the house side immediately of the statuary hall. it is a great room, h-137. please come join us for that perception. we will be joined by rand paul from kentucky and many other members of the u.s. senate. we look for to seeing you there at 5:30 p.m. after you have lobby day. thank you. enjoy your meal. we will be back with an amazing program. [applause]

>> attendees will take a break right now as they await senators to arrive. when the votes are finished, we expect the senators to come back to the conference and give the keynote addresses. while the vote in the senate is under way and while the conference is on a lunch break, your phone calls from this morning's washington journal.

host: he was treated for the most part like a friend among friends. also, an apology and a defense of his bank in the front page of "in new york times." the ceo apologizes for billions in trading losses. we will come back and get to your calls and comments. >> we have let a lot of people down and we're very sorry for it. but we tell you how it went down. these are not excuses. these are reasons. we believe that a series of events led to difficulties in the portfolio. i highlight the following.

it was poorly conceived. in hindsight, the traders did not have the requisite understanding of the new risks they took. it should have been specific to the portfolio, only allowing lower limits of risk and each specific to is being taken. it should've done more scrutiny from senior management and i include myself in that. we have already taken important actions to guard against any recurrence. we have appointed entirely new leadership. while this does not reduce the losses already incurred, it does reduce the probability and magnitude of potential future losses.

host: ": contrite." -- "cool and contrite." he has proven himself to be unable front man but his testimony may not add up banking regulations following the company's risky trading losses. the hearings focused primarily on the embarrassing loss, but they veered into talk about regulations.

caller: good morning. how unfortunate that an apology comes after a $2 billion loss and after what occurred in the financial center in 2008. he is a very good speaker for his industry, but he really did not answer the questions of going forward -- he said his management team is going to do things differently. when we are on the present this, as we are throughout the world in financial centers, did you really help the people who lost all that money? the answer is no. we need firm financial reform to make sure this does not happen again. it has happened again since 2008 in 2012. very unfortunate. thank you. host: let's go to our twitter page, from cindy --

and from our facebook page -- our phone lines are open as well, divided between democrats, republicans, and independents. let me share a couple of editorials, beginning with the washington post --

and from "usa today" there's this editorial --

back to your calls and comments. doug is on the line from illinois on the republican line. caller: good morning. i saw quite a bit of the interview. i thought it was interesting. two things i walk away with. number one, he suggested that we've got to get our act together in terms of simpson- bowles. second, businesses are using models which have money concentrated from the past and present to predict the future. we have to get a handle on these mathematicians and the questions they're using. the guy is really incredible. he threw great warning signals to control where the money is

going and how to protect us from where the money could incorrectly go versus where it should be correctly going. host: thanks for the call. from the business section of the new york post, this headline -- c-span will be covering that. and this headline from the new york daily news -- and there's this sidebar story at the bottom of the page --

at one point president obama called him his favorite banker, but it's not clear who gave him the cuff links. >> you can see "washington journal" every morning here on c-span. back now to the faith and coalition conference happening in washington with keynote remarks from ohio's senator robb portman. >> we're proud to call him one of our own. [applause] >> thank you, gary. it is my pleasure to introduce not only a native son of ohio,

but a very, very dear, dear friend of mine. i will give you highlights of his bio any moment. but i first wanted to say that it is is up redness, his clarity of vision, the fire of his spirit that have made us good friends for decades. moral agency is what moves history. moral agency as personified by a william wilberforce, billy , and the list goes on. history does not move by