[captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] whether it is in my role as regulator in wisconsin. and also, you know, again knowing that i know what to do i recognize the value that carriers an plans and agents and the insurance industry in

general provides one, the economy, two local communs where they may be located. it may be the largest employer in a particular city or county. the amount of community outreach. the amounts of donations and sponsorships. carriers are not just big brick buildings filled up full of cash. they are filled up full or employees. they are full of very giving folks that add to the fabric of a particular state or their economy or even the national economy. so i bring -- i kind of carry all of that stuff around with me. when i'm making decisions and when i'm out meeting with carriers or agents or consumers and reminding, you know again, whatever the group is, how

valuable the insurance industry is to a particular economy or state or local area. that isn't always the case with some regulators. >> with all the reforms that have been adopted and that are being implemented i think there is a concern within the industry of regulatory fatigue in the sense that the industry believes, and i think rightly so, that it has to come to the departments now more often than usual. is that a concern the industry should have? what is the regulatory reaction to the volume and to the contacts as we work through these various issues? is there a sense of regulatory fatigue in terms of overload? is the industry handling from

your experience reform? in a respectful and efficient way? >> i think from what we have seen i think the carriers, the companies, the plans are meeting their goals. and i think we have been -- we have been as regulators very satisfied with our part of the rollout of the healthcare law. i think just as a regulator it is good to remember that we don't just regulate health insurance. we have that other insurance out there. all kinds of other issues going on. we're right now in the middle of accreditation. which is always a fun week for

the department. but it just -- it is good to have us audited once in a while because we put you folks through it all the tile. it is -- time. it is good to get a taste of our own medicine. i think -- it will be interesting to see how the next six, sister, 18 months -- 12, 18 months rolls out. how the companies have responded. from our perspective, we have had enough resources and enough time to get -- i hope meet the demands of the carriers as they file the new plans and the questions that they have coming in. we want to make sure we're meeting your needs as well. so i think so far so good. >> i'm told we have time for one question. do we have a question in the

audience? >> i think we got fatigue in the audience. i think i have talked enough. >> well, please join me in thanking commissioner nickel for being with us today. [applause] >> now health and policy officials from the district of columbia iowa, and the national association of medicaid directors on the healthcare law implementation. this is just over an hour.

>> good morning. i'm liz goodman with well care health plans. i would like to introduce you to our next session. medicaid expansion and reform. approaches for modernizing medicaid to expand coverage. our first speaker will be matt. matt was named executive director of the national association of medicaid directors in 2011. the newly formed association represents all 56 of the nation's state and territorial medicaid directors. he does a quiz to see if the people can name the extra six and provides them with a strong and unified voice in national discussions as well as a locus for technical assistance and practices. he spent 12 years at the national governor's association where he worked on the governor's healthcare and human services reform agendas and

spend five years prior to that as a health policy analyst working for the state medicaid directors. our second speaker will be claudia schlossberg. claudia is director of the healthcare policy reform administration for district of columbia healthcare and finance. she is responsible for overseeing regulations and policy management, the division of eligibility of policy and the division of research and rate-setting analysis. claudia has over 25 years in experience in health policy and regulatory affairs. including her experience serving as director of programs, policy and training for the office of civil rights within the federal department of health and human services. our final speaker on this panel is michael. he is the policy advisor for

governor terry branstad and the lieutenant governor of the state of iowa before joining the governor's staff, he worked as an attorney in private practice in his hometown of davenport, iowa where he represents individuals, businesses before practicing as an attorney, he was a consultant for deloitte in chicago. he earned his b.b.a. in accounting from the university of iowa and law degree from drake university school of law. matt? >> all right, thank you. good morning everybody. how are we doing? you guys still awake? good. good. are you happy that the government is no longer shut down? questionable? so we have about an hour this morning and we have a panel full of really good people. i think we're going to try to keep this fairly low key conversational and informal.

not a whole lot of standing here and talking at you. i think we're going to do a couple minutes each and give you some high level overviews and then get into more of a dialogue. i'm going to give the national collective experience and then claudia and michael will give you more of a detailed perspective from a blue state. we can call d.c. a state. yes? no taxation without representation but they are still a state. and then iowa, purplish? purplish. in the big picture, so we're now mid october. and we're closing in on -- we just passed one very important date in the implementation schedule and we're coming up on another one. in the big picture, a lot of people talking about and caring deeply about the medicaid expansion and what is going to happen. at this point, it really looks

like we are only going to have about half of the states, give or take one or two here in the margins who are going to be all systems go with the expansion come january 1. and that obviously leaves another half who are either saying no or who are saying maybe. or what else you got in there for us? and i think that is the important thing. i get a lot of people sort of come to me and say oh, well, why isn't everyone doing this? there is so much free money that is on the table. it is a no-brainer. why don't you care about people? and i think that fundamentally fails to fully appreciate what's happening in so many statehouses across the country. in many cases, this is not a question of do we want people to have insurance or not. it is well, how do we best go about doing that? and is an expansion of the existing medicaid program in its

current form the best way to do it and clearly many have said yes, but a lot of other states and i think you'll hear clearly more from iowa, who say maybe we can do things a little bit differently. maybe we can make some tweaks and make it look more like the private sector. make it look more like a program with more personal responsibility. is there a way to do that and still get to this goal of getting people coverage. i think there is going to be an interesting dynamic that plays out over the next year, as that other half of states starts to see how does this actually roll out? what has been the experience of states who have done the expansion? how many people have showed up? what do they look like? are they healthy? are they sick? are they newly eligible? is this a woodwork effect? as in how much federal match are we getting for these folks? i think there is also still

going to be some feeling out of what is actually doable. we have clearly seen arkansas, that has been approved to do something a little different. iowa is going to talk about what they are up to and other states are figuring this out. i think this is going to play out. at the end of the day, do i they most if, not all states, will end up doing expansion? i do, eventually. don't ask me what eventually means, though. the other big issue that i think is important to touch on now that we have been dealing it for a couple of weeks now is apart from the big questions, the big picture issues that have gotten all the attention, the expansion, do it or not or what, state run or federally run, the key thing to keep in mind is from a medicate perspective, from a state perspective, whatever you

decided on those -- granted very important questions, you can say no to the expansion. you can say no to a state exchange. there is still a normal amount of work that you have to do to overhaul, modernize and reform your program. every state has been frantic at work for the past couple of years trying to take legacy eligibility systems from the 1980's and try to convert them into a modern system that is going to handle connectivity with these exchanges. connectivity to the federal data hub. to close the loop with this system that will in theory provide seamless communication between multiple federal agencies, h.h.s., labor, i.r.s., treasury, homeland security and medicaid and then at some point during the road probably tanf and snap and other things as well.

with all of these things going on at once, with 50-plus different states doing this overhaul, with the feds building all of this all at once, part of our message has been people really shouldn't expect this was going to go smoothly on day one. and anybody, quite frankly who was expecting that day one, the day one rollout of healthcare.gov, to be working as intended, i think was a little naive. we have been trying to say this for months. the complexity of what's being built here is unprecedented in public policy. and the timeframe to do it, and the band width amongst the vendor, the i.t. vendor community, it just isn't there. i'm not saying -- but i'm not

saying it can't be done. i'm just saying that day one, we knew it was going to be bumpy. we have been predicting this for a long time. and the message is like well medicare part d. that did not roll out smoothly on day one. day one was a mess. and if you judge the success of that program on day one, it is a failure. but three, four months in, states and feds and plans worked to fix everything that was broken and now it is hard to imagine a life without it. and in many ways, healthcare.gov and the exchanges and conversion to magi, this is medicare part d on steroids. so bear with us. we've got state people who are working as hard as you can possibly imagine. to get this done. and it will get done, and it might not get done right away, but it will get done soon.

that is all the big picture stuff. i think it is also really important to know that underneath all of this stuff that is going on and getting attention right now, there is an enormous amount of activity at the state level on fundamental healthcare reform. not insurance coverage not systems, but fundamental health reform. states across the country, big, small, urban, rural, red, blue purplish, are actively trying to figure out how do we make the healthcare experience in medicaid better? how do we take a fragmented dysfunctional u.s. healthcare system with acute care buckets and mental health buckets and pharmaceutical buckets and long-term care buckets that don't talk. how do we blend them, merge

them, braid them to provide a better experience, to provide higher quality, higher value and ultimately lower cost? and states are very, very active in a lot of different ways. some of it is in delivery system reform. moving to managed care. and some of it is in just pure payment reform. shared savings or other types of approaches that try to drive the system to pay for value as opposed to paying for volume. and that is the stuff that is really exciting. because this really does have the potential to make enormous changes for very costly, very sick, very frail populations that will benefit not just them, not just their families, but for the payers who are responsible for them at the end of the day. that is the overview. a lot of exciting stuff going on.

i'll stop and hand it over to claudia to talk about what's going on in d.c. and then we'll keep going. >> thanks, matt. one of the things that is happening in d.c. today is we're actually able to pay our providers because congress has passed the budget. we were kind of caught up in,000 budget mess in a very special way. i'm really pleased to be here. i'm really excited. as matt has said, a lot of folks are working very, very hard. so hard that i don't get out of the office much so i appreciate being able to come to arlington. i'm also very pleased to be here because i'm extremely proud of the work that we have been doing and where we are in the district of columbia in terms of our medicaid expansion. i'm going to talk about the district a little bit as a case study and i do have some slides. i apologize. i know. we want to keep this formal. it is a good story. i think oftentimes a graph or

chart is able to illustrate sometimes in a way that words sometimes don't. first of all, just a couple of things about the district's medicaid program. it is a $2.7 billion program of the revenues that the city receives including all of our individual tax revenue, medicaid revenues represent about 19% of our budget. so it is a very important program for a host of reasons. one out of every three residents in the district of columbia gets their health coverage through medicaid. how did we get there and where we are today is 6% of district residents and there are almost 700,000 of us are uninsured. that is all. so we are in many ways where most states want to be after they have implemented healthcare reform. it is based on u.s. census data release it reendly -- released

recently in 2010. we look at who the uninsured are. we kind of in the district -- we're in many ways city with two very distinct populations. we have very high rates of employer-sponsored coverage. we have the federal government which provides excellent healthcare coverage. then we have a shrinking middle class, as i think is true in many parts of the country and then we have a significant population of people who are relatively poor or very poor. and when we looked at the census data, i hope you can see this on the slides. these are the folks who have insurance in d.c. so you can see where between 80 and almost 98% in terms of income levels. at the highest levels, 400% of income and above, that is the point at which you're no longer available for subsidies. we're other 95% insured. as you go down the runnings in terms of income eligibility,

we're still doing pretty well. there is a group at 138%-139% of poverty where you see about 80% insured. a lot of states are doing broad outreach strategies to try to get people connected to the health exchanges. we have some targeted work to do to find those folks who are not yet connected to our health insurance programs. one of the reasons why the district's un-insurance rate is 6%, i think we're second only to massachusetts, is that when you look at our income eligibility levels for medicaid, they are relatively high. we cover most adults. actually all adults up to 200% of the federal poverty limit. we cover pregnant women and children up to 300%. this chart basically is a comparison of our surrounding jurisdictions. you can see virginia in green with respect to families and children.

they are about 24% and maryland is a little over 100% and the district at 200%. you can see all the way across the chart. i don't have to read out the numbers that there are significant disparities in terms of the levels of coverage. if you go all the way to the right side of the chart and you see that big purple bar. i don't know if you can see it in the back, it says childless adults. the district covers and has covered childless adults up to 200% of the federal poverty limit since the end of 2010. i'm going to talk a little bit more about that. we have been an early expansion state. we took that option after the healthcare reform law was passed to expand coverage to childless adults. to the limit. in fact, we went above 138. we have an 1115 waiver that allows us to cover childless

adults up to 2/3 of the poverty limit. many states won't do that until early january. those who have taken the option. the next slide shows the non-magi population. aged blind disabled, medically needy. and then we have something very unique. again, to the right side of the chart and i think we may be unique there may be counties in california that may do this. we cover people who are not eligible for medicaid. children and adults up to 200% of the federal poverty limit and that is solely with local dollars. i don't believe there is another program in the country. it is a medicaid-like benefit. it doesn't have quite all the coverage levels, but it is darn near close. so our early efforts to cover

childless adults started way before healthcare reform. to cover individuals who are h.i.v. infected. this coverage was extended to individuals who are h.i.v. positive with incomes 100% below the federal poverty limit. the key to maintaining control of the costs there was cost neutrality. the other piece of -- let me go back. how do i go back? oh. we then also took the early option to cover childless adults up to 133%. i mentioned that. effective july, 2010. we also then received another 1115 waiver which is funded thu an allocation to cover adults up to 200% of the federal poverty limit.

we have received another 1115 waiver which is funded through a dish allocation to cover adults up to 200% of the federal poverty limit. we have expanded, unlike most state who is have opted for the medicaid expansion, who are expecting to see a large influx of people into their medicaid program, we do expect to see more people enrolled because we're doing a lot of outreach, but the large influx authority happens. we have some experience with this expansion in population. it is about 44,000-45,000 adults to the medicaid roles. it is adults to the medicaid roles. actually when we counted up to 200%, it is over 50,000 individuals. so one of the things that we can tell you, because we have experience, and again, this may be a little unique because the district of columbia is a very urban area. we're not like many states. we are an urban center. so what we found particularly with this expansion population is fairly high rates of h.i.v. infection, hep c and other disease states that are quite expensive. what we found when we were

expanded, the delivery system is through our managed care plans. through capitation. these folks were a little more expensive than we anticipated. you can see in the slide when you look at our legacy population, within that legacy population, this was f.y. 2011 data, there were 664 individuals with h.i.v. but when you looked at that adult group, up to 133, that new adult group, the numbers jump up to 968 or 3.1% compared to 1.8%. that additional population, that 133% to 200%, it was 5.8% of the population. the numbers in red just show the prevalence rates for the males only because they are again the disparity when you look at the legacy population, which is primarily your women, children the people normally covered in

the medicaid program, 1.1% of males in the legacy population but that new group, particularly that 133% to 200%, the prevalence of h.i.v. was 8.9%. that is pretty significant. that drove pharmacy costs off the charts. again, you can see that the legacy m.c.o. rate for pharmacy was about $24 per person. the 774 and 77 5, those are our program codes for the expansion group, but you can see those costs really significantly jumped. $78 per member, per month. so i have another -- so how did we deal with that? one of the things we did is carved healthy h.i.v. drugs from the m.c.o. rate so that we could take advantage -- we have a department of health

pharmaceutical warehouse and pharmacy that uses d.o.d. pricing and we were able to do that and got waiver to do that. we also created a new rate cell for that expensive population so our rates could remain sound. we're looking at some payment reforms and health delivery reforms such as care coordination models. that is very important as we go forward. so when we look at the district and i think this may be -- did i -- yeah. ok. so i don't know if you can see this. you probably can't read the numbers. the blue area represents -- this is again a comparison between d.c. at the top, maryland in the middle and virginia at the bottom. this is just a snapshot of states with kind of different approaches to the medicaid expansion and what happens with healthcare reform? the blue represents medicaid coverage levels. you can see the district because

we're way out there, up to 200% of the poverty limit. we're going to be covering a lot of folks and then where we end, the subsidies and the exchange continue on. that's the purple area. it is not really important to know about the numbers, but if you jump down to the bottom where you see those red bars what happens in a state like virginia, that is not expanding, you end up with an enormous coverage gap. i can't read those numbers. i'm too far away. as we noted in the earlier slide, virginia's coverage for parents and caretakers is fairly low. that doesn't change. the subsidies pick up at 138% of poverty, and then that red in the middle represents the people who don't get anything. so you have a significant population of people who are significantly, probably vulnerable. low income. who are not going to have access to healthcare coverage.

again, the district has closed that gap. maryland has closed that gap. that is what the medicaid expansion helps you to do. so we're very glad that we were able to do that. as we move forward, one of the things i should say is that because of the federal money that is available for the expansion population, beginning in january, if all goes right, we get our spas in and they are approved, that the districts -- district's expenses for that adult population, those newly eligible individuals will be 100% reimbursed under the federal government. this for us was a no-brainer. get everybody covered and the federal government will pay for it. at least for a while. so as we move forward, we are very much at the forefront of implementing healthcare

reform. we have taken advantage of every opportunity to pull down federal dollars to help us basically retire a 25-year-old eligibility -- legacy eligibility system that has caused no end in headaches and problems and lawsuits and everything else. we have gotten a waiver from the federal government to implement magi determinations early. so we have permission to start that october 1 when we launched healthcare reform so that we could align it in the exchange beginning on day one. we have waiver to defer renewals during that safe harbor period between january and march 31. so we will not have to do any renewals for those three months and we can begin doing passive renewals april 1. we have secured a tremendous amount of federal funding through our eligibility funding

through establishment grants and the planning document. what is interesting about what d.c. is doing. there is a lot of mechanics involved in coordination between medicaid and the exchange eligibility. we have had our share of challenges. i'm not going to sugarcoat it, but the law requires that if you apply -- an application for medicaid is an application for exchange subsidies. if you apply and are found ineligible for medicaid, then you have to transfer that case over to the exchange so they can complete the exchange eligibility. we have eliminated that step. what we have done is used the money that we have gotten from the feds to replace our aging eligibility system with a single system with a shared platform. instead of medicaid owning it or

the exchange owning it, it is actually owned by the district and we are all customers of that system. we will not have to do any case transferring. you apply. it is a single door entry. it is stream lined. you'll get your eligibility determination and through all of our interagency agreements, we are coordinating the work that has to flow around that, but the case itself doesn't have to transfer. we have been working with c.m.s. so we can claim that 100% for newly eligibles. i know that has been a struggle for states. we have been able to work something out with c.m.s. that we think is going to minimize the burden in terms of how we go about doing that. and we did launch d.c. health link, which is the name of our exchange. our eligibility portal. on 10/1/2013. one of the most wonderful things about this new system is all the data that we can pull

out of it and how quickly we can get it, which is not something we can do with our legacy system. i get a report every evening about the activity on the d.c. health link. i can tell you since day one, we have had nearly 12,000 people who have gone into the system. we're talking about 6% uninsured. there is not a lot of people. maybe under 50,000 people in district that we have to reach. already we have just under 12,000 people who have created accounts. we have employers who have signed up. we have had employees sign up. we have over 1,500 applications in the queue. we have gotten people through the system that have shopped for plans and chosen plans and they have paid their premiums. we had a meeting the other day so sort of regroup and we said it hasn't always been pretty and it hasn't always been easy, but we have struggled through it and we feel really, really proud of what we have been able to accomplish, and more to come because we're now going to integrate all the non-magi

groups into our system. plus all of our human services programs. we're going to have a single port of entry, not only for magi medicaid and the exchange and non-magi and tanf, food stamps and every other benefit program the district offers its residents. with that, i will sit down and will be happy to answer any questions. >> well, good morning. i want to thank, first of all, liz, for the very kind introduction and ahip for inviting me to speak and share the iowa story. i would also like to thank matt and claudia for being on the panel. looking at the speakers and the panel that i was going to be with on stage, i felt pretty overwhelmed from a healthcare perspective. because, as liz mentioned, i come from a little bit of a different

background. i was trained as an account and trained as lawyer and now i'm in politics. to my father, in iowa, that just means i'm licensed to lie, cheat and steal. to the government, that means i look at problems in a really annoying way. what we looked at, i sat down with the governor when he took office in 2011. said governor, what do you think about healthcare reform? where are you at? politics aside, he said michael, what i think is missing, what the discussion hasn't been about is about getting people healthier. really focusing on the metrics. what is the goal of medicaid in iowa, our state-based medicaid what is the goal of what we're trying to accomplish when folks get on health insurance? is it just provide access so they can go to a doctor? in iowa, we've had over 90% coverage in that sphere. no, that is not it. at least it shouldn't be.

our duty is it should be about getting people healthier. about taking those steps to pick low income iowans up and getting them back on their feet in a health manner so they can go forward. that means for me, this focus couldn't just be on the system and the focus couldn't just be the population, but the focus had to be on the system and the population. let me tell you a story about a gentleman in iowa named bob fagan. about 30 years ago he buried his father. his dad has type 2 diabetes and then he lost bob fagan is a city manager in state of iowa. he is somebody ho has had health insurance for many years but his health coverage has treated him in a way where it was just paying for reimbursement. not looking at the whole person, doctor by doctor, problem by problem. bob fagan went to his doctor to get a health risk

assessment. the city he was working for in northwest iowa was requiring it as part of their premium package. he goes and he has a test done and his doc says your blood level is a little off. so we're going to do some more tests. well, his kidneys were functioning at 1/3 of their capacity. he is on medication for type 2 diabetes. he is on medication for heart problems. he is on medication for cholesterol. his kid niss, what killed his -- kidneys, what killed his father, were functioning at 1/3 of their capacity. the very next day, he went home and he started walking. around the same time, we were instituting the healthiest state initiative. we were -- we started looking at the problem, well, how do we make iowa healthier? we said you know what? government is not the answer. i worked for the governor, terry branstad. a long serving governor who

never ever is going to go for a ban on big gulps. not happening. iowa is the purplest of states but that is not going to happen. how do we engage iowans in their communities, neighborhoods, businesses? we worked with our largest health insurer, our largest grocer. our public universities and we started saying what are ways that we can approach the health of our populations? we did it through two ways. one would be blue zones and the other would be the healthiest state initiative and healthy state walks. let me tell you why that is important, though. iowa, when we came in. like i said, i look at problems in an annoying way. we knew healthcare reform was on the horizon. governor branstad, what we had to do is kind of like bob fagan, get an idea for what we faced as a state. so we said ok. we need to look at the people. people are taxpayers.

taxpayers fund everything we do. so first, where are we going as a state? well, we're one of eight states in the nation who have failed to grow by 100% of our 1,900 census. eight. we're the only state in the nation who has failed to grow by even 50% of our 1,900 census. the only one in the nation. 36.5% since 1,900. we have grown consistently except for two parts of our history. world war ii and the farm crisis of the 1980's. however, we're looking at how we grow also. by 2040, right now in iowa there is one county, one, that has more people over 65 than under 18. one. let's magnify that by the fact that 57% of our 5 and under population live in just 13 of our 99 counties. now i can tell you later about why a state the size of iowa has

99 counties, but there is not really a good reason. [laughter] the next fact is we have to say governor, how are we spending our money? right? so in iowa, we have a legislative session every year. starts in january and ends right around planting season. believe it or not. hopefully and what we did is we said ok. where are we spending our general fund? 96% of our general fund in the state of iowa is spent on three areas. three areas, all entitlements by one definition or another. state salaries and benefits. education and funding and medicaid. 96%. i kind of again looking at the world in an odd way said said we spend six months a year arguing about 4% of our budget? there has got to be more productive ways to do what we do. in the past decade we have expanded medicaid in iowa by 65%

as a population. however, our costs have gone up 129%. chronic disease has increased by 66%. every single health metric whether it was depression and treatment or infections has gone the wrong way during that same medicaid expansion period. we have over 90% coverage, but in iowa, anecdotally, or as they found in the 'new england journal of medicine," pure access was not the answer. i had a governor who was convinced of the fact that we needed to attack the system and the population. we started on the population immediately with the healthiest state initiative going from 19th to 9th. we hope now the hard part is going from 9th to first. we want to do it by 2016. we're doing it by engaging communities, engaging businesses, instituting-evidence-based practices. letting communities take the

lead, not the state. the other side of that is we do need to make sure our healthcare system is working in a way that is effective towards the goals and results and performance that we all desire as taxpayers, let alone as people who are administrators of this plan entrusted to lead the state. when it came time to have this debate about medicaid or medicaid expansion or healthcare reform in iowa, we wanted to do it our own way. so i call that a common sense approach. what we did is that is kind of how we looked at health care reform. we have a partnership exchange in iowa. not totally federal. not totally state. if you have ever been to a website in iowa you know we shouldn't be building them. what we did is we said federal government, apparently, you're better than us at that, which results might say otherwise. we focused on regulating our plans, informing our consumers and maintaining control over our eligibility of the medicaid

population. you also need to understand that since 2005, iowa has had a very base level of coverage for our citizens. it is called iowa care. it was an 1115 waiver, which is medicaid talk for not traditional medicaid. it was a plan that covered adults from 0% to 200% of the poverty level at kind of a basic level of coverage. if you had more detailed or more problematic conditions, you had to go to one of two hospitals in the state. so a very narrow network. it worked to provide healthcare coverage. healthcare coverage has been in iowa. this idea and the question really in iowa was starting january 1 of 2014, were we going to take away coverage at least on some basic level from adults in iowa from 0% to 200% of the poverty level. i think that is a key point for debate, in iowa at least. we came up with originally the healthy iowa plan.

it became the iowa health and wellness plan. there were five core principles that drove the development of that plan. the first was a pretty simple principle that we see in private sector plans everywhere. that is investment. what we had seen is that co-pays were not effective. they were not equitable. they were not predictable and frankly they were not working. we said why don't we look at a premium contribution from iowans above 50% of the poverty level that lets them know there is value for the services they are getting. there is an investment in their healthcare. the next goes hand in hand with that. that is a personal responsibility principle. you have to pay for a portion. a modest amount, no more than $10 at 50% of the poverty level per month. if you do the right thing, not only will we waive your premium, we'll give you a bonus. it is not a new idea. it is not a new concept. private health insurance plans

have been taking people and their problem is trying to get people who are on heart meds to getting off heart meds. my problem is running this isn't to getting people off heart meds, it is getting them to get off heart meds instead of having heart attacks. we want to get our population in to see their doctor. get a physical. get a risk assessment. if you do that, it is worth the investment to have that premium contribution the first year. it is called the healthy behaviors program. next was quality. and it goes hand in hand with the fourth principle, access. governor branstad refused to expand access. wouldn't work. we were calling for the population to have more personal responsibility in investment. but we also need to look at providers. access would be quality access. starting in the first year, we were going to pay providers. having worked with our number one ininsurer. we didn't want to reinvent the wheel.

the state is not good at defining that. you know who is good at it? private health insurance plans. they already have agreements with the systems. they know what that field looks like. why do i need to relitigate it with our major hospital systems? so we're going to measure quality. and have this whole population be at risk within five years. finally, the governor and the legislature wanted increased private insurance. so our plan, as most people know is bifurcated to a 0 to 200 population iowans who have served not on a medicaid health plan, but on the plan that i get, the governor gets, but with a little bit of mental health added to that. the tr other side of that is from 101-138, the iowans get to choose it not only increases folks on private health insurance, but also makes

policy sense. iowa has seen the second greatest rise in incomes of any state in the nation. we're only second to north dakota. we have agriculture money. north dakota has agricultural money and oil money. oil money trumps. so what we have zone said ok. we have incomes rising in our state. what we want people to do is as those incomes go up, i want continuity of care for them and their families. to me, that just makes good sense. it is fair to the iowa families. and less people on state programs is good for the taxpayers because then we can be better stewards for the folks who are served by it. we're better with the state funds that are entrusted to pay for it. rooted in all of these ideas, that core concept that i touched on at the very beginning, which was governor branstad wanted to focus on healthcare reform. focused on making people healthier. engaging iowans to invest in their own healthcare. that is also rooted in the same

concept that as we have seen healthcare costs rise, it reminds me of the economic principle if something cannot go on forever, it won't. healthcare costs have grown at a rate that very simply cannot continue. what i kind of look at and as we see this steep curve of healthcare costs increasing and obesity on the rise and all of these contributing factors, i realize this is not a curve that can continue forever. it is a problem that be states, whether private sector or public sector are really starting to tackle. this is something that to me as i look through history, these are problems that we have tackled over the last century. i'm not a huge fan of quoting people but there is that margaret intermediary quote, never doubt what a group of people can do to change the world. something along those lines. over the past century, what we have seen is the average life spans of humans increase by two. the average per capita income

increase three-fold. child mortality drop 10-fold. the cost of transportation, 100 times less expensive than it was a century ago. communications, for everyone on their phones, 1,000 times less expensive than they were a century ago. never doubt what a group of thoughtful committed citizens can do coming together. we can change the world because we have tackled the big problems and i'm here to tell you in iowa, we're up to the challenge. maybe that is just midwestern optimism, but it is something that we're working on. i would like to again thank ahip for inviting me here and i really look forward to your questions. >> speaking on behalf of the audience, what a great series of three presentation. st. thank you so much. i'm going to ask a question and i hope that you all will participate and ask questions on

your own. matt, on october 8 you and your group offered a series of recommendations to congress with respect to changes to the behavioral health system as it affects medicaid and i was hoping that you might give us a snapshot of what those recommendations are. >> behavioral health. this really kindor got its start, obviously it is an issue that has been important to medicaid for a very long time. we actually looked at the numbers. about 30% of medicaid spending is mental health related. that is kind of staggering when you think about it. but the motivation for us sort of coming together we have put out basically a pretty extensive list of recommendations. it kind of all comes out of the congressional conversations, quite frankly on gun control

after sandy hook. when it became clear that congress wasn't going to be able to come together on gun control they started to look to mental health. they felt the need to do something. and unfortunately, what they kind of seem to be coalescing towards is the sense of well, mental health is a really challenging issue. we don't really understand it very well. let's just make medicaid do more of something, because that tends to be an easy answer. and the idea that was getting some traction is let's create a new entitlement within medicaid. let's create a new provider group that has never existed before. mandate its creation. mandate it as an entitled service. something they were calling federal -- federally qualified community bare i don't recall health centers.

something along those lines. not only sort of saying medicaid must create and pay for these, but to dictate in federal statute what that payment would be using the basis of what exists now federally qualified health centers which are essentially the only entity in the medicaid program that has the reimbursement rates dictated by federal statute. we just sort of said wait wait, wait. this is the completely wrong way to go about this problem. medicaid does more in mental health than anybody else. second of all, this, what you're trying to fix is not the problem. and what you're doing is actually going to make things worse if you actually move forward with this. so that kind of got us thinking, ok but we need to be able to say not just no, no, no, but no, but here is something else you could do. so we spent a lot of time with

our members thinking through what are the problems? what do we need? and we ended up with a pretty lengthy list that kind of boils down to the fact that -- an i'll draw a parallel to long-term care in general in that the issues around behavioral he will mental health in this country, are very, very deeply rooted are very, very complex and very, very expensive and people don't want to talk about them like adults. people, policy makers are afraid to have real conversations about how we pay for these things. and so we just kind of do it piecemeal and medicaid ends up picking up the slack for all of it. and that has got to stop. there has got to be a more cohesive federal national, doesn't necessarily need to be federally funded, but a national conversation around what with

are we about mental health. not just sweep it under the rug of medicaid. how are the exchange plans going to deal with this? how are we dealing with it elsewhere. at the same time there is an enormous amount of exciting activity going on at the state level which has made it difficult by confusing contradictory federal policies. we need to find ways to break down some of those barriers and enable some of those promises state practices to really take hold. iowa has really been at the forefront of a lot of behavioral health and acute care integration and a number of other states are seeing this as well. it has got to be a complex you know solution that sloves housing. is it -- involves house house. this is not just a healthcare issue. one of the things we have struggled for for so long is

that there is a pretty clear clear problem with medicaid in that medicaid can't pay for what we call i.n.d.'s. institutes for mental disease. medicaid won't pay for them. that forces states to pay for them with 100% state dollars. that doesn't really -- that was done 40 years ago and maybe it made sense then. it doesn't make sense anymore. and that if you really want to get at concrete ways that you can improve what medicaid does do let's take a look at some of those things. it is up on our website. it is like 20-something pages of recommendations. so you know, be careful with it. we think -- we think it is the first step in a broader conversation that i think quite frankly, a lot of people, if not everyone in this room, can have a lot to benefit from and to share in terms of support.

so we would like to figure out how are there ways that we can talk about this together to try to figure out what the solutions are. >> claude claudia and michael, do you want to speak to this issue on mental health? and the affordable care act? >> sure. well to, matt's point, in the state of iowa, we spend on average $225,000 per person per year to institutionalize. i was talking with liz before the session and as an accountant looking at our state. it costs us $85 per person per year the medicate. $33,000 per year to incarcerate. $225,000 per year to institutionalize. it creates some pretty funky

incentives for where you want folks reside who might have mental illness. what we have done is the fact of the matter is medicaid exists in the political realm. and so i have politics means that is going to be tough to close down an institution, let's say in toledo, iowa, that employees 114 iowans in a town that frankly isn't that big. what we have instead done is look to managed care. we don't have a lot of managed care in our traditional medicaid population. we have one tanf plan. that is it. but we do have magellan managed care in our i.d. population and they can present creative solutions that don't take us having to work with the legislature and what i like to call when i'm talking to business folks, i have a board of directors of 150 100

representatives and 50 senators elected from across the state. half of them hate us and every one of them think they have a better idea than us. so you have to approach problems crivel and what we sfound that magellan that is freedom and flex to believe the do that and they are very good at incorporate greating that care and helping provide solutions for the state. that is what matt was referring to. it is something that has been long standing. we have been able to get it right. that is how we approached it. >> so in the district, we no longer have large, long-term psychiatric hospitals. the hospital was downsize. i was the monitor for the district's mental health system for a period of time so i was very much involved with the downsizing and ultimate closure

of the long-term hospital for people with psychiatric illness. and the distribute has over several decades developed a fairly robust system of community-based mental health we still have significant problems. when we look at our medicaid populations, they are the drivers of a lot of our costs. part of my job is to oversee the business. we have looked at this from numerous ways. we have found things from our hospital payments. it is always mental health and substance abuse that seem to be the highest cost items. we have looked at this carefully. we have found our frequent fliers. we have identified them. we know who they are. these are people who have serious mental illness or

substance abuse issues. now we no longer have a long- term psychiatric hospital. they are using our hospitals pretty much for housing. anecdotally we can confirm this. a lot of people are being admitted to psych bands that have acute mental illness. there is no or else to -- a lot of people are being admitted to psych beds that have acute mental illness. there is no where else to put them. housing prices are so high. i cannot really address the parity issue in the exchange. i am going to be interested in how new folks coming into private insurance, particularly in the 200%-400% level and how

average insurance is able to help. what we have seen in our nco plans and the legacy group is that behavioral health is a significant issue. we have not done a great job in addressing it. there are a number of reforms underway. the american psychiatric illustration is allowing us to pay medicaid and that has allowed for better care coordination. we are hoping to see better outcomes from that. we have a health homes planning grant and are moving forward to implement that program. it will be focused on individuals with serious chronic mental illness and substance abuse. we see this population, even with a fairly good care that is out there in the community, these are people who require high touch.

they require a higher level of service and a higher level of care coordination that we have been able to ovide at this point. we have also recently -- it happened october 1 -- we have integrated our mental health and substance abuse operation and they will be working as one. we will see what happens. >> one of the questions most people want to know, some of the exceptions you are asking for. you might want to speak to what those exceptions are. >> they are back to work. we were talking with secretary stability is -- secretary kathleen sibelius. our plan is different. it is not only having and a ploy benefit plan instead of medicaid. it is bifurcating the population

and limiting wraparound because of the plan chosen. it is rethinking how we are going to pay providers. we want to pay providers based on equality of outcomes and something called the value index score. that has to start right away. within five years, we will go at risk for the entire population. looking at the fqhc's and how they will be part of the changing land it in iowa. what has gotten the most rest and insight from -- most press would be premium contributions for iowans below the poverty level. that has not been instituted in states before.

i think i said in my remarks the premium for folks below the poverty level, we saw them as more predictable and more equitable and something that was even more affordable. it was a simple demonstration case of one dollar and two dollar premiums it can easily show you that $10 per month premiums that you know you have to pay -- there can be incentives that you don't have to pay it. it is paid to the state and you don't have to go to a doctor. you can say, i do not have that three dollars. will that dr. turn iowa -- will that dr. turn iowans away? the answer is no. a working iowans may not have

the feasibility of making that payment. it is hard to forget how many. i am close to see the trees are not the forest anymore we have already enrolled hundreds of iowans. we are going to roll over thousands into our plan. we have our own eligibility site like the district. we have had hundreds of iowans set up. our plan passes wrought bipartisanship -- bipartisan support. let us try it our way what the governor -- he harkens back to the 1990s during welfare reform.

they met with the health and human services secretary it turns out they worked. they were adopted on a wider basis states have -- on a wider basis. states have figure out how they fit each state. we are very optimistic. >> i am being told our time is up. i apologize for those of you have questions. i am going to ask each of you to vacate the room so we can set up for lunch. we appreciate your time and your attention. [applause] [captioning performed by

national captioning institute] [captions copyright national cable satellite corp. 2013] ayou can see it live starting at age: 45 eastern on c-span 2. -- numeral 8:45 eastern on c- span and world two. -- c-span 2.

>> the oldest clock in the united states capitol. it was commissioned in the year 1815. it was from a philadelphia clockmaker. >> one of the many reasons the c-span video archives are so amazing. >> the video library is amazing. you can see c-span programming any time. go to c-span.org. click on what you want to watch and press play. you can find a person. just type in their name, hit search and go to people. you can also share what you are watching and make a clip. use the set buttons. add a title and description and

click share and send it i e-mail -- by e-mail. the c-span video library. searchable easy, and free. created by the cable tv industry and funded your local cable company. >> as federal employees return to work, president obama spoke of the bipartisan agreement to reopen the government and raise the debt ceiling. the bill funds the government through january 15 and raises the debt limit through february 7. these remarks are 20 minutes. >> good morning, everybody. please have a seat.well, last night, i signed legislation to reopen our government and pay america's bills. because democrats and responsible republicans came

together, the first government shutdown in 17 years is now over. the first default in more than 200 years will not happen. these twin threats to our economy have now been lifted. and i want to thank those democrats and republicans for getting together and ultimately getting this job done. now, there's been a lot of discussion lately of the politics of this shutdown. but let's be clear: there are no winners here. these last few weeks have inflicted completely unnecessary damage on our economy. we don't know yet the full scope of the damage, but every analyst out there believes it slowed our growth. we know that families have gone without paychecks or services they depend on. we know that potential homebuyers have gotten fewer mortgages, and small business loans have been put on hold. we know that consumers have cut back on spending, and that half of all ceos say that the

shutdown and the threat of shutdown set back their plans to hire over the next six months. we know that just the threat of default -- of america not paying all the bills that we owe on time -- increased our borrowing costs, which adds to our deficit. and, of course, we know that the american people?s frustration with what goes on in this town has never been higher. that's not a surprise that the american people are completely fed up with washington. at a moment when our economic recovery demands more jobs, more momentum, we've got yet another self-inflicted crisis that set our economy back. and for what? there was no economic rationale for all of this. over the past four years, our

economy has been growing, our businesses have been creating jobs, and our deficits have been cut in half. we hear some members who pushed for the shutdown say they were doing it to save the american economy -- but nothing has done more to undermine our economy these past three years than the kind of tactics that create these manufactured crises. and you don't have to take my word for it. the agency that put america's credit rating on watch the other day explicitly cited all of this, saying that our economy

remains more dynamic and resilient than other advanced economies, and that the only thing putting us at risk is -- and i'm quoting here -- "repeated brinksmanship." that's what the credit rating agency said. that wasn't a political statement; that was an analysis of what's hurting our economy by people whose job it is to analyze these things. that also happens to be the view of our diplomats who?ve been hearing from their counterparts internationally. some of the same folks who pushed for the shutdown and threatened default claim their actions were needed to get america back on the right track, to make sure we're strong.

but probably nothing has done more damage to america's credibility in the world, our standing with other countries, than the spectacle that we've seen these past several weeks. it's encouraged our enemies. it's emboldened our competitors. and it's depressed our friends who look to us for steady leadership.now, the good news is we'll bounce back from this. we always do. america is the bedrock of the global economy for a reason. we are the indispensable nation that the rest of the world looks to as the safest and most reliable place to invest -- something that's made it easier for generations of americans to invest in their own futures. we have earned that responsibility over more than two centuries because of the dynamism of our economy and our entrepreneurs, the productivity of our workers, but also because we keep our word and we meet our obligations. that's what full faith and credit means -- you can count on us. and today, i want our people and our businesses and the rest of the world to know that the full faith and credit of the united

states remains unquestioned.but to all my friends in congress, understand that how business is done in this town has to change. because we've all got a lot of work to do on behalf of the american people -- and that includes the hard work of regaining their trust. our system of self-government doesn't function without it. and now that the government is reopened, and this threat to our economy is removed, all of us need to stop focusing on the lobbyists and the bloggers and the talking heads on radio and the professional activists who profit from conflict, and focus on what the majority of americans sent us here to do and that's grow this economy; create good jobs; strengthen the middle class; educate our kids; lay the foundation for broad- based prosperity and get our fiscal house in order for the long haul. that's why we're here. that should be our focus.

now, that won't be easy. we all know that we have divided government right now. there's a lot of noise out there, and the pressure from the extremes affect how a lot of members of congress see the day- to-day work that's supposed to be done here. and let's face it, the american people don't see every issue the same way. but that doesn't mean we can't make progress. and when we disagree, we don?t have to suggest that the other side doesn?t love this country or believe in free enterprise, or all the other rhetoric that seems to get worse every single year. if we disagree on something, we can move on and focus on the things we agree on, and get some stuff done.let me be specific about three places where i

believe we can make progress right now. first, in the coming days and weeks, we should sit down and pursue a balanced approach to a responsible budget, a budget that grows our economy faster and shrinks our long-term deficits further. at the beginning of this year, that's what both democrats and republicans committed to doing. the senate passed a budget; house passed a budget; they were supposed to come together and negotiate. and had one side not decided to pursue a strategy of brinksmanship, each side could have gotten together and figured out, how do we shape a budget that provides certainty to businesses and people who rely on government, provides certainty to investors in our

economy, and we'd be growing faster right now.now, the good news is the legislation i signed yesterday now requires congress to do exactly that -- what it could have been doing all along. and we shouldn't approach this process of creating a budget as an ideological exercise -- just cutting for the sake of cutting. the issue is not growth versus fiscal responsibility -- we need both. we need a budget that deals with the issues that most americans are focused on: creating more good jobs that pay better wages. and remember, the deficit is getting smaller, not bigger. it's going down faster than it has in the last 50 years. the challenges we have right now are not short-term deficits; it's the long-term obligations that we have around things like medicare and social security.

we want to make sure those are there for future generations. so the key now is a budget that cuts out the things that we don't need, closes corporate tax don't help create jobs, and frees up resources for the things that do help us grow -- like education and infrastructure and research. and these things historically have not been partisan. and this shouldn't be as difficult as it?s been in past years because we already spend less than we did a few years ago. our deficits are half of what they were a few years ago. the debt problems we have now are long term, and we can address them without shortchanging our kids, or shortchanging our grandkids, or weakening the security that current generations have earned

from their hard work.so that's number one. number two, we should finish fixing the job of -- let me say that again. number two, we should finish the job of fixing our broken immigration system. there's already a broad coalition across america that?s behind this effort of comprehensive immigration reform from business leaders to faith leaders to law enforcement. in fact, the senate has already passed a bill with strong bipartisan support that would make the biggest commitment to border security in our history; would modernize our legal immigration system; make sure everyone plays by the same rules, makes sure that folks who came here illegally have to pay a fine, pay back taxes, meet their responsibilities. that bill has already passed the senate.

and economists estimate that if that bill becomes law, our economy would be 5 percent larger two decades from now. that's $1.4 trillion in new economic growth. the majority of americans think this is the right thing to do. and it's sitting there waiting for the house to pass it. now, if the house has ideas on how to improve the senate bill let's hear them. let's start the negotiations. but let's not leave this problem to keep festering for another year, or two years, or three years. this can and should get done by the end of this year. number three, we should pass a farm bill, one that american farmers and ranchers can depend on; one that protects vulnerable children and adults in times of need; one that gives rural communities opportunities to grow and the long-term certainty that they deserve.

again, the senate has already passed a solid bipartisan bill. it's got support from democrats and republicans. it's sitting in the house waiting for passage. if house republicans have ideas that they think would improve the farm bill, let's see them. let's negotiate. what are we waiting for? let's get this done.so, passing a budget; immigration reform; farm bill. those are three specific things that would make a huge difference in our economy right now. and we could get them done by the end of the year if our focus is on what's good for the american people. and that's just the big stuff.

there are all kinds of other things that we could be doing that don't get as much attention. i understand we will not suddenly agree on everything now that the cloud of crisis has passed. democrats and republicans are far apart on a lot of issues. and i recognize there are folks on the other side who think that my policies are misguided -- that's putting it mildly. that's okay. that's democracy. that's how it works. we can debate those differences vigorously, passionately, in good faith, through the normal democratic process. and sometimes, we'll be just too far apart to forge an agreement. but that should not hold back our efforts in areas where we do

we shouldn't fail to act on areas that we do agree or could agree just because we don't think it's good politics; just because the extremes in our party don't like the word "compromise." i will look for willing partners wherever i can to get important work done. and there's no good reason why we can't govern responsibly despite our differences, without lurching from manufactured crisis to manufactured crisis. in fact, one of the things that i hope all of us have learned these past few weeks is that it turns out smart, effective government is important. it matters. i think the american people

during this shutdown had a chance to get some idea of all the things, large and small, that government does that make a difference in people's lives.we hear all the time about how government is the problem. well, it turns out we rely on it in a whole lot of ways. not only does it keep us strong through our military and our law enforcement, it plays a vital role in caring for our seniors and our veterans, educating our kids, making sure our workers are trained for the jobs that are being created, arming our businesses with the best science and technology so they can compete with companies from other countries. it plays a key role in keeping our food and our toys and our workplaces safe. it helps folks rebuild after a storm. it conserves our natural resources. it finances startups. it helps to sell our products overseas.

it provides security to our diplomats abroad. so let's work together to make government work better, instead of treating it like an enemy or purposely making it work worse. that's not what the founders of this nation envisioned when they gave us the gift of self- government. you don't like a particular policy or a particular president, then argue for your position. go out there and win an election. push to change it. but don't break it. don't break what our predecessors spent over two centuries building. that's not being faithful to what this country is about.and

that brings me to one last point. i've got a simple message for all the dedicated and patriotic federal workers who've either worked without pay or been forced off the job without pay these past few weeks, including most of my own staff: thank you. thanks for your service. welcome back. what you do is important. it matters.you defend our country overseas. you deliver benefits to our troops who've earned them when they come home. you guard our borders. you protect our civil rights. you help businesses grow and gain footholds in overseas markets. you protect the air we breathe and the water our children drink. and you push the boundaries of science and space, and you guide hundreds of thousands of people each day through the glories of this country.

thank you. what you do is important. and don't let anybody else tell you different. especially the young people who come to this city to serve -- believe that it matters. well, you know what, you're right. it does.and those of us who have the privilege to serve this country have an obligation to do our job as best we can. we come from different parties but we are americans first. and that's why disagreement cannot mean dysfunction. it can't degenerate into hatred. the american people's hopes and dreams are what matters, not ours. our obligations are to them. our regard for them compels us all, democrats and republicans to cooperate, and compromise and act in the best interests of

our nation - one nation, under god, indivisible with liberty and justice for all.thanks very much. >> most people think of film as stories you see and theater. the truth is, cinema is a much broader category. the movies you see in theaters are only a small part of the total national and world production of film. when you begin to broaden out and look at these poorly- remembered films like you can see on the internet, you are

able to get a much broader sense of what our country's history is. 200,000 educational films were produced in the united states. they range from works of art consciously produced as films with some sort of special production value and creativity to tremendously benal films on how to brush your teeth or how to ask for a date. the value of educational films today is that they are tremendous documentation of how they wanted young americans to turn out. they show us what we were supposed to be. >> now that the soup is served, that he sees that the crackers are passed. should he have helped himself or not? >> where films from the 1920s to

the 1960s sunday at 7 p.m. eastern on c-span 3 american history tv. defense department comptroller estimates the shutdown cost $600 million in lost be attended -- productivity. he and defense secretary chuck hagel talk about the end of the shutdown in the fiscal uncertainty faced by the defense department. from the pentagon, this is 25 minutes. >> good afternoon. i wanted to make some brief comments this afternoon regarding the reopening of government. i'm going to take -- after i make a statement, a couple of

questions, and then i'm going to ask bob hale, our comptroller, to take some questions regarding the specifics of the reopening. this morning, i announced that the department of defense is resuming operations now that congress has restored funding for dod and the rest of the federal government. while all of us across the department welcome the fact that the shutdown is now behind us, i know that its impact will continue to be felt by all of our people. all of them, in different ways had their lives affected and disrupted during this period of tremendous uncertainty. in particular, i am deeply aware of the harm that this shutdown inflicted on so many of our civilian personnel. all of our leaders, civilian and military alike, deeply regret

what this shutdown has done to our people, and we'll work to repair the damage beginning today. echoing what president obama said earlier today, i want all of our civilian personnel to know that the work they do is critically important to this department and this country. it matters to this department, and it matters for the country. the military simply cannot succeed without our civilian employees, and the president and i appreciate their professionalism and their patience throughout this very trying period. now that this latest budget crisis has become history, and we have come to an end, we have an opportunity to return to refocusing on our critical work. but it's important to note that congress did not remove the shadow of uncertainty that has been cast over this department and our government much of this year. like much of the rest of the government, dod is now operating on a short-term continuing resolution which limits our

ability to start new programs, and the damaging cuts of sequestration remain the law of the land. in the months ahead, congress will have an opportunity to remove this shadow of uncertainty as they work to craft a balanced long-term spending bill. if this fiscal uncertainty continues, it will have an impact on our economy, our national security, and america's standing in the world. and if the sequester level continues, there will also be consequences. earlier this year, in our strategy choices and management review, dod explained how the continuation of these abrupt cuts put us at risk of fielding a force that is unprepared due to a lack of training, maintenance, and the latest equipment. dod has a responsibility to give america's elected leaders and the american people a clear-eyed assessment of what our military can and cannot do after years of

sequester-level cuts. in the months ahead, we will continue to provide our best and most honest assessment as congress works to establish the nation's long-term spending priorities. that is my statement, and i'd be happy to respond to a couple questions. thank you. lita? >> mr. secretary, you mentioned consequences. as you look down the road -- i think mr. hale addressed this at one of his briefings -- there already are some reviews of how many civilians and how much force reduction overall there will have to be, reductions in force. can you talk a little bit about, as you look ahead, what are you warning congress and the country about in terms of the number of forces that you're going to have to cut in order to meet these lower budget levels, the number of civilians you may have to lay off?

and what does that do to u.s. readiness and morale of your workforce? >> well, i'll leave the specific numbers to bob hale, but let me respond in a general way to your questions. let's start with the impact on morale. i don't think anyone questions that the uncertainty that shutting down the government and closing down people's jobs has brought a great amount of not only disruption to our government, to our country, but to their lives, to the civilian personnel whose lives have been disrupted by this particular shutdown. then you add further to that the uncertainty of no authorizations, no

appropriations, and living in a world of continuing resolutions, of continuing sequestration, the uncertainty of planning, not just in an agency or a department, or certainly all the elements of the department of defense, but in personal lives. i mean, people have to have some confidence that they have a job that they can rely on. i know there are no guarantees in life, but we can't continue to do this to our people, having them live under this cloud of uncertainty. so morale is a huge part of this. we won't be able to recruit good people. good people will leave the government. they're not going to put up with this. good people have many options. so that's one part of it. i have said many times, the chiefs have said, general dempsey has said over the last few months that as we have had to close down training

facilities, and our training we've had to stand down wings and not allow many of our wings to fly, the steaming of our ships. we've had to pull back the longer-term investments that are required to keep the technological edge that this country has always had. i mean, these are all dimensions of sequestrations, of uncertainty, of not knowing or not being able to plan what's coming. sure, that adds to impact on our readiness, and, sure, that eventually will present capability issues for us. so these are not new issues. i've talked about them, general dempsey, all of our leaders, all of our chiefs have talked about them. that's part of the point the president has made, i have made continually through this process over the last few months.

i noted again in a statement that we've got to have some certainty here of being able to go forward. we've got a qdr that you all are familiar with, that we're going through that review. we've got a budget resolution that we are preparing within this institution and within the white house budget that we will present a budget to congress, as we do each year. to try to plan for a budget with this kind of uncertainty alone how are we going to fulfill our strategic commitments? what impact is this having overseas with our allies? i've been to, as many of you know -- some of you have been with me on these trips -- to the asia pacific area three times since i've been secretary of defense. secretary kerry was there recently. the president pulled his trip down last week because of the shutdown. our allies are asking questions, can we rely on our partnership with america?

will america fulfill its commitments and its promises? these are huge issues for all of us, and they do impact our national security and our relationships and our standing in the world. so these are the broad general areas of consequences of not being able to plan and prepare because of that uncertainty that we're living under. the specific numbers, lita, i'll leave for bob hale. thom? >> thank you, sir. on the sequester moving ahead, you know, you spent a lot of time in the senate, you know how the hill works. you have a good sense of the american people. so in your current position, mr. secretary, is it your sense that the sequester-level cuts, those are the new reality, and rather than uncertainty, isn't that what you should be planning against, given congress's will the will of the people?

>> as you know, thom, everyone in this room knows that the so- called sequester, which is a product of the budget control act of 2011, is the law of the land. and we have to plan and prepare, to your point, with the facts as they are and the realities as they are. if you recall, when i implemented and directed the strategic management review and choices, which i noted in my comments here, it was to prepare this institution for different scenarios of different numbers and certainly the numbers that we know are there that we have been living with this year reflected under sequestration are numbers that we've got to prepare for. we plan also for the continuing resolution numbers. and we plan also for our budget numbers. now, i don't know -- you started your question to me, thom, about my service in the senate -- i don't know if a compromise can be reached, if some kind of an agreement can be reached to deal with these issues. that's part of the uncertainty.

so we have to plan for every eventuality here. and you can't take an institution like this, as you all know, because you've been around here a long time, and turn these things around in a month, in a week. this is the national security of america we're talking about. and so it does take thought and it does take planning -- we're talking about people's lives -- as we bring down and draw down by law our force structure. we know that, and we're planning for that. and you've heard me say many times, you've heard general dempsey say many times that the abruptness and the steepness of those cuts give us no flexibility to glide it down in a responsible way to make sure that our resources match our mission, our -- our mission

matches our resources, and that we are able to fulfill the strategic interest of this country. >> one final question. >> mr. secretary, you spoke a minute ago about morale of the civilian workers at the department. are you at the point yet where you or general dempsey have concern about troop morale given all of this? what indicators might concern you? and how are you watching that, given what you said about they're not being allowed to train and to fly and all of that? are you now worried about the troops? >> we are always worried about the troops. the reason i noted the civilian personnel specifically is because the civilian personnel were the ones affected by the furloughs and the shutdown.

as you know, our uniformed military was protected in that. but the same uncertainty certainly, resides in the uniformed military community different dimension of it, of course, but questions i get all the time from our junior enlisted, from our officer corps, from our senior officer corps, future, i get -- what is the future for me as an e-5, starting a family, for example? and i got these questions two weeks ago when i had my monthly luncheon with junior enlisted members of our services. i get these questions all the time. mr. secretary, can you give me an honest answer -- in one case last week, two weeks ago, i had one service member say, my wife asked me to ask you, do i have a future? do we have a future? and these are young men and women who are very proud to be in the military, want to stay in

the military. they have a purpose to their lives serving in the military. but they also have to ask the question, when you're 25 or 30 years old, if you have a family, you want to start a family, can i support that family? i mean, what kind of a future am i giving my family if i'm not sure where all this is going? so, yes, it affects our uniformed military. yes, we are vitally concerned about the morale of our military. but the civilian workforce are the ones that have been obviously touched directly by the shutdown and, of course, the furloughs that we've seen this year. thank you. and bob hale will respond to more specific questions you've got. bob. >> well, good afternoon. let me just start by joining the secretary in thanking our

civilian workforce, all of our workers, but especially our civilians for their patience through this. and i'd add the senior commanders and managers have helped me a great deal as i work to help the department get through this. so when i read the omb message about 2:30 this morning saying government was reopened, i felt like i could stop beating my head against a wall, but i got to say it would have felt a lot better never to have started beating my head against a wall. so with that, i'll stop and -- if you have questions. >> i wonder if there is any estimate of what costs the department of defense incurred as a result of the shutdown, including the -- you know, the workers at the beginning who were not working and that money was wasted. is there any cost estimate? >> well, we know at a minimum there are about $600 million of lost productivity, if you will from at that point almost 400,000 civilians that we had on

furlough for four days. there were a number of other costs where i can't put a number on them. we built up interest payments because we were forced to pay vendors late. we had to cancel training classes, so we had to bring the people home on orders and then send them right back again. so there were a lot of costs of those sort. i can't quantify those, but it's at least the $600 million to start with in essentially lost productivity. >> can you just take a stab at the layoff and attrition -- >> the layoffs? >> the layoffs that are coming down the road and reductions in force? >> well, you know, he said he'd defer to bob hale. bob hale is going to defer to

the future, because we haven't decided. but, look, if we face budgets at the bca cap level, roughly $50 billion less in 2014, we're going to have to get smaller. i can't tell you exactly how much. yes, that will mean fewer civilians. we will try to avoid reductions in force. we'll keep them at an absolute minimum. we would look to do this, if we have to, through attrition, but, yeah, we're going to get smaller. i just can't tell you exactly how much. >> mr. hale, you've had an entire couple of hours to pull your numbers together. do you have any idea yet of the impact of this on programs and the -- whether, you know, some testing's been delayed, that sort of thing, and also just the friction costs to both you and to the companies? >> well, we were relatively fortunate in the government. we had a partial appropriation. the pay our military act was in appropriation, so we kept -- except for that first four days,

most of our civilians working, all of our military. i think that limited the disruption, but it was there. i'm sure we delayed testing, though i can't quantify it for you. my guess is that we will be able to catch up reasonably quickly for those kinds of delays, backlogs of vouchers we haven't paid. i'm a lot more worried about the morale effects on all of our people, but especially our civilians. and you've heard that story, but i think we all are concerned. i mean, it's not just this event. i mean, we've had three years of pay freezes, although i noted the cr did not prohibit the -- or either the military or civilian pay raise, so -- so far, it's still in place. we've had three years of pay freezes. we had the sequester furloughs now the shutdown furloughs. i mean, my own people are kind of looking at me and asking the question -- most of them are seniors, so they'll probably stick around, but you wonder what the folks out in the field are saying. "i'm not so sure i want to work for this government." so we need some stability, and

we need to keep telling them they're important, and then we need to show it, through things like pay raises and no more furloughs, et cetera. that's the bigger concern to me. >> do you know of any new starts that are being delayed because of the cr? >> oh, yes. i mean, the cr will delay -- well, now you're going to test my memory. i can see the sheet. i can't remember. so i'm going to have to get back to you. i don't want to name something that's wrong. there are no huge ones, but there are a number of smaller programs that under the continuing resolution we are not allowed to do new starts, rate increases, no military -- new military construction projects. perhaps one of the biggest problems is the fact that we essentially required under the cr to buy the same ships this year as last year, because congress appropriates by ship, and we have to repeat last year. it's a groundhog day approach to budgeting. so there are lots of disruptions. i can't remember the specifics. they're not in my head. i'm sorry. >> mr. hale, is the likelihood of sequestration informing your recruitment numbers now, either for civilian or for uniformed members? and wouldn't the responsible thing be to be slowing down in that recruitment so that you don't have to let people go who will only just -- >> right. we're going to start executing at the continuing resolution level or a little lower, because of the enormous uncertainty and the possibility that sequestration in january, if it occurs, could take us down to the bca cap level.

and, yes, i think that will cause us to begin to reduce or think in terms of reduced size and reduced recruiting. you're exactly right. i mean, we don't want to -- on one hand, we don't want to commit ourselves in this period too much in a period of enormous uncertainty in case we are able to do things we think that are important, but we do need to slow down. and we will slow down our execution, at least to the cr level, and probably a little bit south of that, just because there's so much uncertainty. we're only three weeks into the fiscal year, and we're still kind of plus or minus $50 billion in what we're going to spend this fiscal year. that's not a comfortable position, particularly for our comptroller. so it's a challenge. >> excuse me. so have there been orders issued to the components and the services to spend at the bca level? and, secondly, with the cr, is there the kind of flexibility in moving money around in accounts that you need to cope with sequestration. >> i mean, we haven't issued any

formal orders. we've discussed with the services to execute at the continuing resolution level and maybe somewhat south of it. and we'll have to work with them on specifics as time develops. what was your second question again? i got -- >> about flexibility. >> yeah, flexibility. no, i mean, we have very little flexibility under continuing resolution. it gives us money in budget accounts, like air force procurement and army active o&m. it just gives us a dollar figure and says that you can't do new starts, no rate increases, no new military construction projects, and you get then a little more than 25% of it to cover october 1 through january 15. beyond that, though, we've got to kind of be looking at the fact eventually we'll get some kind of appropriations, so we need to be careful on where we spend that money, and we can't move between those accounts at all. and generally we aren't allowed to reprogram when we're under

continuing resolution. so for a while, we kind of have to hold our breath and try to look to the future and be as conservative as you can. if that's a vague answer, it's because things are kind of vague. it's not a good way to run a railroad. >> going back to the secretary's comments regarding his doubts on congress reaching some sort of compromise, is there anything that can be said that hasn't been said already by the department to convince lawmakers that, you know, this cliff is coming? or is it just a matter of continuing to sort of beat the drum on the dangers of sequestration? >> you mean that can be said to sort of help the process along? i mean, we'll be helpful in any way we can. we'll work through the administration. the president has a plan.

he enunciated -- announced it with a budget, in terms of a plan to reduce the deficit and to provide for discretionary spending, which is the level we submitted the budget at. we certainly support that plan. we understand there's going to be negotiations, and we'll help them in any way we can. i don't think there's any one thing we can do, but we stand ready to assist through omb and the administration to help the negotiators any way we can. we want them to succeed. >> tuition assistance, g.i. bill, what happens with that going forward? what's the situation now? >> i mean, i assume -- we will i think, pay tuition assistance. g.i. bill is funded in another agency, but the tuition assistance we will pay, i think more or less at the levels that were programmed. i mean, we're not planning to cut it back substantially. now, we continue to look at it in the context of overall budget reductions. and there may be some trims, but we know it's an important program, and we won't stop it, and we will continue to fund it. there may have been some temporary interruptions during the shutdown, but we'll continue to support the program. we know it's important to our people. >> mr. hale, you've had a chance to look, i think, at all the services' initial 15 proposals and their alternate proposals

with sequestration. how much of, i guess, of an "oh, wow" factor is there in the alternate proposals, in your opinion, sir? >> well, i mean, there are far- reaching changes. it shouldn't be surprising when you take about $50 billion in fiscal 2015. and there were some funds that were taken out right at the end game by the president. the president proposed some cuts in discretionary spending, as well, in that budget package that we didn't fully accommodate, so pretty good- sized reductions. there are force cuts. i mean, i'm not going to give you specifics, because i don't feel i should, but i'm not surprised. and you saw the scmr, and it's often usually in those ranges, within the ranges of the scmr. i'm not surprised. but i think all of us are aware that it will be a somewhat different, smaller military if we have to go through with those cuts. but we are looking at them actively. and we will be as prepared as we can, within the limits of time that we have, to be ready for a

wide range of contingencies, because we know that's what we face. >> last question from thom shanker. >> thanks. in past years, it's been the business practice of this department, as you approach the end of the fiscal year, to hold some money back. you obviously don't want to overspend your budget accidentally. i'm just curious how many tens of millions or hundreds did you end the year with? and can you now apply that money in some way to mitigate the strain? >> well, there are several kinds of money we get. a number of the operating dollars, military personnel and operations and maintenance expire, those you can't spend them after september 30. it will tell you something about the real-time nature of our accounting systems that i don't know yet for sure what we obligated. but i think that we will have obligated the great majority of those funds. we usually try to. other funds that -- investment ones, we get two years for rtd&e, three years for procurement. and there i think you would see our obligation rates fairly low

right now for a couple reasons uncertainty, but also, frankly i mean, our contracting officers were concentrating heavily on the one-year money in those last days. and we had had to cut back on them because of sequestration. so my guess is, we've pretty well obligated, though i don't know for sure on the operating accounts. i think that's not true on the investment accounts. and there are some -- we'll try to pick up the pace as best we can. and let's hope there's no further disruption that occurs in january. >> thank you very much. >> thank you, sir. >> today, the group of america's health insurance plans continues its conference. you can see it live starting at 8:45 eastern on c-span 2.

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and adam green talks about the future of the progressive movement. at 8:30, a look at the future of the tea party. host: the next phase of the budget talks has begun. a full house-senate budget conference committee is due to meet. with that we want to hear from you on your budget priorities what would you like to see this conference committee achieve? if you like to see budget cuts entitlement reforms, more spending, and of sequester? you can see the numbers there on the screen.