Transcripts For CSPAN3 Politics Public Policy Today 20240622

Seriously considered. Senator mccain has already referenced them. One is i think we have to take a hard look at overhead. The army but not just the army but the military across the board, all of the services to include department of defense are very very Large Organization with a big bureaucracy with a significant overhead. A second is acquisition. As already previously mentioned, theres a considerable amount of cost and in many cases waste in the acquisition process. We need to get that under control. And the third and final piece that i think is worth taking a look at theres a wide variety of emerging technologies that could in the outyears could lend itself to automated processes and reducing either manpower or manpower costs, compensation cost over time. Thats three big areas that would want to lock at if confirmed. We have russia creating a looming threat in europe, we have the pacific and chinas expansion or i should say increased activity there. We have the ongoing war in the middle east against the fight against islamic extremism. General odierno said a 50 brigade army should be adequate to keep these in check. Do you think that managing or facing those threats is boss wbl a 33 brigade army . Senator, are you talking active brigades or are you talking the total Army Brigades . Right now total army we have 60 brigades today. We have 32 in the act of component today. The plan that was announced a week or two ago will take us down to 30 gra gads, active component and well lose two. But the bottom line is that was the active the 33. From a total army perspective, weve got adequate capacity numbers of brigade combat teams to handle the contingencies that are currently on the books if we do not drop below the 980 force. We have adequate capacity size. But that is with significant risk. That risk is incurred in terms of time, the time to the fight, the time to mobilize units and get them trained and certified to the fight and its significant risk and potential casualties. The second piece is not just capacity but capability. The readiness of the force, how capable it is to handle that type of fight, which is a different fight than what we would have than weve been dealing with for the last decade and a half. Weve got ways to go in terms of improving our readiness with the high end type of combat operations. General generally milley i want to close by saying i look forward to you being in this role. You were one of the first to reach out to me back before i was sworn in to offer information and to help me ramp up. You were very generous with your time when i spent several days down at ft. Brag and youve been up here several time. I think youre going to be a great addition as the chief of staff. Thanks again to your and your family. Thank you mr. Chairman. General, thank you. As everyone has expressed, we appreciate yacht you coming by our offices and a chance to visit one on one. And i certainly appreciated that. I want to talk about the cuts and sequestration and the issue that we have in front of us in the next 90 to 120 days here in congress. The understand that las vegas level cuts that the army announced earlier this month are based of course on a shrinking to 450,000 soldiers. As you know and have talked about this morning theres a significant risk that these cuts will will not be the last. If congress doesnt provide relief, the army will be forced to cut an additional 30,000 active duty soldier. This year the republicans are attempting to get around the statutory budget caps by using the overseas Contingency Operations or the war fund which doesnt have to be paid for it. It can be put on a credit card. Would you buy back force structure using this war fund . Senator we would prefer, if passable, the budget be in the base. But as the resip recipient of the money well take it if thats the only way to have modernization modernization. This is more difficult because it tramped on whether or not the oco is being used appropriately. Theres it was designed for an off the budget unpaid for on the credit card to be used in an emergency for the purposes of a contingency operation. Thats why its called the Contingency Operations. We know in your advanced policy question for that hearing you noted that our technological advantage over current and potential adversaries are at risk. We invested in the base budget in technology and research for decades to get us to the point that we are today where we are the most technologically superior force in the world. If we want the young men and women in the future to have the same advantages that the men and women have today with our technological superiority can krau make Long Term Research and Development Investments using a fund that was designed only to apply to a contingency . Id have to get back to you on the actual legal use of that fund relative to Long Term Research. I think the answer would be no. I think the oco funds are only for oversees operations but i would have to get back to you to see if that could be used. I dont think it could but ill check and get back with you. The frustrating part of this is the only difference between the commitment to put this 40 million in the budget, between my friends and colleagues and us on this side of the aisle is the willingness to acknowledge that were spending the money. Is the willingness to say this belongs in the base budget, lets put it in the base budget, lets not use an artifice gimmick, phoniness to pretend that somehow were not making an investment in the base needs of our military but rather in an overseas contingency operation. Its one im hopeful we can work out so we dont go down this path and create this precedent that is very dangerous for the long term stability of our military and your alls ability to do your jobs in terms of planning and coordinating and having what you need going forward. I just think its a very very irresponsible precedent. On Sexual Assault, i know several members have talked 0 you about it already. I know youre getting after the retaliation. Ill continue to monitor that. But i want to mention brefly at the end of my time the incredible training thats going on at ft. Leonard wood for the investigators of Sexual Assault. This is a special set of training that must occur. And i would like your commitment the forensic interment tall trauma crew is being trained throughout the military and the civilian world. The expertise thats been developed at the fort on this is unparalleled in terms of how you get after a Sexual Assault investigation, particularly interviewing a victim. I would like your commitment to familiarize yourself with that training and that youll continue to fight for the Adequate Funding so we can get the perpetrators behind bars so they are not besmerjing the amazing wonderful military that we have in this country. Ill take a deep look at that. As i understand it, its the best practice and leads the nation in its skills. It does. It does in fact. My thanks to you and youri16q family for your service. Thank you, mr. Chairman. Thank you for your 35 years of service and to your family. I know theyve sacrificed a lot. I have a number of questions, as you can imagine, about the armys decision to cut 40,000 troops recently. I know that you werent in the ultimate decisionmaking but youre going to be tasked with implementing this or maybe relooking at it so i would appreciate some of your thoughts and views. General dunford last week talked about the importance of the military and d. O. D. Focusing on and implementing the defense guidance from the congress and whether its you know i gave examples of if the cno was told we the congress 11 carriers we need or the chief of the air force, chief of staff of the air force, we need a10s, even though the service doesnt like it, they do it. So one of the things that im concerned about is in the current ndaa we have a lot of focus on the pacific rebounds. Theres Strong Language very direct live language. The United States forces should increased. Any withdrawal of the forces outside of the u. S. Would undermine the rebalance. It was put in there to provide credibility to strategy that this Congress Bipartisan supports. So ive been quite concerned that the armys decision pretty much ignores this. So i would, with all due suspect to senator ro no, i dont think the decisions were inevitable. I think what was Just Announced takes a huge chunk not only increasing forces, not only keeping them the same but dramatic increase. As a matter of fact of the 40,000, a huge proportion was from the asia pacific region. So the idea of fighting tonight maintaining the rebalance i think its all under mind. I think its dramatically under mind and i think our allies are going to seat it undermined. Do you think its been undermined by dramatically reducing forces despite this congresss defense guidance to the department of defense to not do that . I dont think its necessarily been undermined senator. From an army perspective, about 20 of the armys power is in the pacific, even with the reductions. But more to your point, though, i agree that the sense of the congress could absolutely inform decisionmaking on and we should take that seriously and i think we will. It doesnt look like you did in this case. As you know, i doesnt in this position. General, general, utmost respect for you, im talking about the armys decision. And now if confirmed youre going to have to defend. The department of defense, the army did not abide by the defense guidance of the congress period. If] they read that ndaa amendment. Ill take a hard look at the entire issue and i look forward to working with you on it. But i do think sthart, that the army has substantial capabilities committed to the pacific. But theyve been significantly increased in the last two weeks according to this decision. The only airborne combat brigade in the Asian Pacific has now been gutted. I would say that the Airborne Brigade was down down to a Battalion Task force with the specific intent and design that it could be reversed if funding becomes available over the next couple of years. That brigade doesnt go to a battalion i dont think until late 16 or 17. Its designed to go to a Battalion Task force with the intent of reversing it if funding is made available. Do you think or allies were supportive of this . The idea of fighting tonight in korea, that bct was the recervical vary for any contingency in korea that can get there in seven years, cold weather unit. You think that our capability has been decreased by this decision . The army, marines both have significant ground capabilities that are positioned throughout the continental United States, hew hie, alaska, ft. Lewis, washington and okinawa that can respond. We think its a capable response to mitigate the threat given the current situation. Mr. Chairman ill have more questions in the second round. Thank you. Thank you, mr. Chairman and mr. Ranking member for this hearing. Thank you so much, general milley for your service. Thanks to your family. Youve been extraordinary things and im so grateful that youre continuing to serve our country. I want to talk a little bit about combat integration. I want to applaud the army for taking steps by opening up 20,000 combat engineer and skill position to female officers in june. What reasons might there be for army to ask for an exception . The only reason at all, senator, theres been no decision yet, but everything revolves around standards and readiness. So the military occupational specialties that remain closed currently, infantry armor some observers in the Field Artillery and special operations, special forces. Theres a gender integration study ongoing right now, a similar study ongoing by the marines. Theyre cross walking their data. I expect to see that information if im confirmed probably in september, october were have to make a recommendation to the secretary of defense whether to seek a waiver. Ill take a hard look at the data and make that call at that time. Weve seen the success of the cultural support teams in afghanistan and how vital the women were to gather information about where the terrorists were and where thaw were being housed. I do hope youll focus every effort to make sure that all of our best and brightest are serving. Was concerned about the recent news regarding the eight women who failed the first phase of the Army Ranger School due to their ability to accomplish evaluated leadership tasks. These women were Army Officers with years of leadership experience. Why do you think the class these women were in such a historically high attrition rate and do you find it alarming that west point is graduating leaders who after five or six years of service are not able to accomplish these tasks . Senator, range school askis a very very hard course, male were female, no matter who you are with a high attrition rate. The women who failed, one of the ones they failed are the leadership skiles. A u because they are not in the infantry already they have had limited ability to train for those skills. Those skills would improve over time. We have three women in the mountain phase as of yesterday of Ranger School and were observing that to see how that goes. The broader issue of women in armor, et cetera theres a very detail study going on. I want to take a hard look at that and make sure that the standards are being met in the readiness force. As to whether women can fight or not. Theres no doubt in my mind that women can engage in Ground Combat with the enemies of our nation because theyve done it and been doing it for ten years. I also want to associate myself with the remarks from senator ernest and mccaskill about Sexual Assault in the military and how important it is for this committee that we solve that problem. I want to note one thing. Retaliation is not a new issue. Weve been measuring retaliation over the last several years because of our dod surveys. One of the Biggest Challenges we have is this years ser u survey 62 were retl yated against. Its the same statistic as two years ago. We have a real challenge here with retaliation. And to be clear the retaliation is fairly diverse. 62 53 is social retaliation, peer to peer. 35 is administration action, 32 is professional retaliation and 11 is punishment for an infraction. If you look at all of those factors, arguably more than half of the retaliation is through the chain of command. Please do study that. There is an issue of perception by female members of the military of discrimination. They said in 60 of Sexual Harassment cases and sexual8f1 discrimination cases it came from the immediate commander. So youre talking about unit commanders who are perhaps creating a toxic climate. So that command climate needs to be looked at aggressively to make sure that the female soldiers know they can succeed and that their immediate supervisor doesnt have it out for them. Ill make that a focus area senator. Thank you. Thank you mr. Chairman. And thank you general milley, for your service to our country and for your willingness to be considered for this position. I real he enjoyed our visit last week when we met and enjoyed getting to know you a little bit better. I want to first join my colleagues in condemning the deplorable attacks against our Service Members in chattanooga last week. I pray for the Friends Family members and the colleagues of the five Service Members who lost their lives. And i pray for a quick recovery for those who were injured. The attacks in chattanooga last week were the latest in a string of deadly assaults on military personnel in facilities in the United States, including ft. Hood and the navy yard as well as a number of attacks that were planned but that quite fortunately were disrupted before they could be carried out. In the coming months i hope our military leaders in congress can Work Together and work in an efficient effective manner to figure out how we can better protect our men and women in uniform from these types of attacks in the future. One of the concerns that ive heard repeated he from Service Members in utah and elsewhere is that they feel inquad kwatly informed by military leadership about some of the persistent threats against themselves, their families and the facilities where they happen to work. They see threats on the news or through social media but they dont feel like theyve been given enough information about whats being done to protect them or proper guidance on how to protect themselves at or away from their workplace. General, whats your assessment of how such information is being disseminated through the army and if confirmed what you might do to approve the effectiveness of the information and guidance thats coming from Army Leadership on these threats to our homeland and to our Service Members in particular . Senator unfortunately in todays world theres no area in this battle against the terrorists of isis or any other terrorist organization. The area of the United States is vulnerable and we have to do a better job of making sure that vulnerability assessments and information awareness is out there with our soldiers and their families. Theres no doubt in my mind we have to increase that throughout the force, throughout the total army and undeed throughout the entire military. Theres things like what to look for, signs, indicators and warnings of reconnaissance and surveillance by enemy and the terrorist on a particular compound or particular person. Unfortunately though a lot of these types of attacks are very ambiguous. This one in chattanooga may or may not have had indicators ahead of time. May or may not have been a lone wolf. We dont know yet. So both access and passive information with all of oush families and soldiers, armenirmen and marines. I appreciate your insight on that. I next wanted to follow up on some questions that senator wicker asked and some comments that we made. Among the most contentious issues over the past two years involved the armys restructuring initiative. I understand the army has been put in a difficult position by budget reductions and over the past several years has been exploring a number of option to maximize come pat power while at the same time trying to combat costs. Congress has similarly been taking a hard look at this which is why the commission of the structure of the army was established in the ndaa. If confirmed will you comment to thoroughly reviewing the armys Aviation Restructuring Initiative and working closely with congress once the Commission Report is delivered next year to help us figure out the best path forward on Army Structure issues . Absolutely will and i look forward to reviewing the Commission Report. And what do you think are the biggest threats that should you be confirmed youll have to prepare the army to address in the coming decade . I think the armys fundamental mission of engaging in Ground Combat winning in Ground Combat i think that Mission Remains sound and i anticipate that mission will remain so in the future. The three key tasks in the National Security documents that are out there is to assure allies, detur opponents and if necessary night and win on the ground. All of those are challenges in the years ahead as we go forward. Thank you very much. I see my time expired. Thank you, mr. Chairman. Thank you mr. Chairman. General, i wanted to talk you talked about Budget Constraints and looking at ways to reduce those. One that you didnt mention is making sure theres no overlap in terms of Core Competencies and missions. I assume you think of a core competency the air gad task force, ability to deploy at any moment. They are a core competency of the United States army, thats correct. One thing im concerned about when you look at army pacific path ways mission, my office has been asking the army for weeks now on what the costs of that are. We havent been able to get any answers on that. But to me you see that value in terms of our Nations Defense bct with regard to the army or putting soldiers on navy ships and doing maneuvers out in the pacific. Whats a higher value for the army . I theyre both a value to the army. And i do think that ashmy forces on shipping and moving them around the pacific has been done really for over a century. Thats how the army moves, by air and by ship. So you dont see that as redundant to the Marine Corps Mission in the asia pacific . No, not at all. The reason i say that is they compliment each other. But the marine corps competency is amphibious assault. What were really talking about is Strategic Movement of army forces over the ocean. Were not using any gray hull to do that. So if you had to choose in our budget times would the army want to focus on airborne Core Competencies or a mission that in some peoples view looks somewhat redundant do anothers services. Frankly the army has to do both. Im asking if you had to choose in this kind of austere budget, you have to choose. We have to be able to do both. We have to. We dont have a choice. We have to maintain both capabilities. And we have to be able to move forces, both air and sea, to reinforce. So wed appreciate some numbers on the pacific pathways in terms of cost. Sure absolutely. I want to turn to another issue, kind of a merging threat issue. You and many others who have testified have talked about russia as a principle threat, and certain therely thats the case in ukraine. I want to emphasize and talk a little more about the arctic. Youve probably seen in the last few weeks theres been articles got this in the airport today, russia has made military buildup in the arctic a strategic priority. Theres article after article about the russians moving huge force posture huge force structure, four new bcts, big operations that nobody is even aware of that are taking us by surprise all through the arctic. Youve probably seen this map that has new airfields, 11 new airfields, 40 arctic icebreakers, some nuclear the u. S. Has these forces here. Thats it. This recent decision were going to remove a key capability of these. And we have this as our strategy. This was the 2013 dod Arctic Strategy mentions Climate Change five times and in a footnote mentions russia. This is a joke of a strategy. And i think during our deliberations for the ndaa the congress recognized that this was a serious issue a serious new threat environment. So we had and amendment that came through the ndaa that focused on our interest in the arctic, the need for a much broader assessment for a much more serious look in terms of old plans, in terms of an military strategy. And that passed unanimously. But what i was wondering, when you look at so the secretary of defense has to put forward this strategy within the next year. And yet our most capable arctic forces before we do the analysis, before we do the planning, before we do the old plan were going to remove the most capable, indeed the most lethal arctic warriors that we have. And as you know, general, it takes a long time to become proficient in the arctic. Im wondering what your thought is on that and if confirmed, i think it makes sense to do the analysis first, the do the old plan first, to do the Strategy First before we move any force structures structures. Would you commit to work with this committee to hold off on moving arctic forces particularly given the dramatic threat increase until after the secretary of defense and others have put together an Arctic Strategy as defense guidance from this committee and this congress . Do you think that thats the most lodge a call way to do the planning . I appreciate that senator. And i agree with you. I think having an old plan force and figuring out our Task Organization second is the right sequence and i think that is in fact whats about to happen. I think as you already mentioned, the arctic old plan, the Arctic Strategy is going to get reviewed by the osd. There is no old plan. There is no strategy unless you want to call this a strategy. Theres a lot of work that needs to be done. Theres a lot of work that needs to be done and its under review as i understand it. And i think you asked general dunford to produce a plan and he committed to do it and i look forward to participating in that and well work with that over the next year. The forces in alaska dont get reduced, according to the decision i heard, dont get reduced until end of 16 and 17. Plan first, reduction of forces second if still required. And ill work with you on that. Good. Because to me, again i think it makes strategic sense put together the plan, see what the commanders need in terms of troops, see what the new threat level is and then make the plan on troop levels once youre informed by a real strategy. Not a 13page documents. Thank you. General, i would just like to say that senator sullivan raises this whole issue of the arctic and the recent russian moves in that region. We need to pay a lot more attention to it. We see our friends in norway in particular, but also sweden finland, those nations there that are experiencing things like russian overflights and Russian Submarine activities and other i believe that the russians have, what is it senator sullivan, 50some icebreakers . Close to 40. I think we have one. Is that correct . . Yes, sir. So weve got a very full agenda. But the arctic i think is another area that we have to be concerned, particularly given russian behavior. Even sweden, which is traditionally as we know a very neutral nation has become extremely concerned about russian activity in their territorial water. And as we see Climate Change as we see areas of the arctic opening up to being oceans areas of navigation, this is an area that i hope well spend some time on. And i thank senator sullivan for his attention and involvement in what is i view, a looming situation with russia. I thank you general. Va officials warn this week that it may have to close some of its hospitals in august if Congress Fails to address the current budget shortfall. Vets Affairs Secretary Bob Mcdonnell will testify before the House Veterans Affairs committee about the va budget. Live coverage starts at 10 00 a. M. Eastern time here on cspan 3. Later in the day a House Communications and Technology Subcommittee will look at broadband infrastructure in the u. S. Well hear from google fiber cities director michael singer. Live coverage begins at 12 30 eastern also here on cspan3. Its almost as if they were matter and antimatter. Freedom breeds inequality. Say that a third time. No, twice was enough. Hes always to the right and almost always in the wrong. I confess that anything complicated confuses him. Filmmakers Robert Gordon and Morgan Neville talk about their documentary best of enemies on the 1968 debates over war, politic, god and sex. Theres not someone in their ear, very unlike today. Today i believe theres someone saying you know, the numbers are dwindling. Talk about hot topic, hot salacious topic number two. Whereas there, i dont think that was the norm in tv at the time and i dont think these guys needed, as morgan said, these guys didnt need that. And howard k. Smith was the moderator who i think was really embarrassed by this. He was moderating but he disappears for sometimes five or more minutes at a time. I mean today you wouldnt have a moderator not jumping in every 30 seconds. So i think really everybody at abc just stood back and let the fire burn. Sunday night at 8 00 eastern and pacific on cspans q and a. Up next treasury secretary jack lew talks about the financial regulations. This event was organized by the group better markets. Hello. Were honored to have secretary lew here today on this historic occasion. Most of you know his background. He was confirmed by the United States senate as the 76th treasury secretary in february of 2013. In that kmas fi hes also chairman of the Financial Stability oversight council. Before becoming treasury secretary he served as president Obamas White House chief of staff and before that he was director of the office of management and budget in both the obama and clinton administrations. While there are many high profile activities in the financial irene that at and before treasury that i could mention, i wanted to mention one of the many things that hes fought for that has received no attention, which is kind of hard to do wh you have a high profiled job. Its cftc funding. One of the most important financial regulators one of the most important jobs in protecting the American People from the dangers of derifties. Its a little more than 200 million in a federal budget of trillions of dollars. And yet at the white house and treasury secretary secretary lew consistently fought cuts to the budget and fought for increased funding. And it hasnt received any attention but it tells you a lot about secretary lews concerns when hes on the front line fighting for an agency so small but important. Thats one example of the many things that the secretary has fought for over the years that dont get headlines but that are very important. Were very happy to have here him today. Heres secretary lew. [ applause ] good afternoon. Thank you very much, dennis the, for that kind introduction and organizing the event. Its a pleasure to be here with all of you today to mark the 5th anniversary of the dodd frank Consumer Protection act. Its particularly great to join with the architects. Their tireless efforts along with those of the president and members for both sides of the aisle led to the passage of the most far reaching financial reforms since the great depression. I want to thank them for their leadership, their vision and their unrelenting determination. [ applause ] today as we mark this anniversary, i want to reflect on the progress that weve made over the past five years. And id like to begin by putting wall street reform in the context of the crisis and in what i see as the key ingredients for a heal thy relationship between the economy and a Financial System. When president Obama Took Office our country was in the depth of the worst financial crisis of our life times. During its darkest moments, our economy was contracting at the fastest rate in 50 years. Companies were shedding more than 800,000 jobs a month, unemployment top 10 . The american Automobile Industry nearly collapsed. Millions of families lost their homes open savings. The rescission started with a financial crisis but the loss of confidence in the Financial System spiralled into a broad economic crisis, one that hurt families and businesses on main street as well as wall street. Though Financial Stability can at times seems leek an abstract concept, the crisis demonstrated that excess risks can have a real impact in the lives of all american. When people discuss wholesale and roll back wall street reform, its important to remember those that suffered through the worst of the rescission, the worst recession of our lifetimes. The boarded up store fronts, the lost Retirement Savings and all of those americans who lost their jobs. Make no mistake, an unstable Financial System harms us all. Stability is a critical agreement of a functioning Financial System. But we also need a Financial System that promotes sustainable long Term Economic growth maintains transparent deep Capital Markets and extends credit to homeowners and small businesses. To that end the wall street reform set out to transform the way the Financial System operates so that it is more stable, more transparent, more focused on serving customers. Five years later with nearly all of the major rules written, the economy is growing banks are lending and theres in doubt that wall street reform is working. First, our Financial System is safer, stronger and more resilient. Before this law was enacted, many Financial Institutions were undercapitalized underleveraged and focused on reaping short term profits. The incentives were to take too much risk and it turned out that a significant portion of the risk was born by customers, creditors and taxpayers. To realign the system wall street reform required banks to manage their businesses and retain the buffers so they can bear the cost of their failure. The burden was born by others, through private losses and public action. Going forward financial reform made clear that had to change. One of the most significant enhancements is the requirement that banks hold more capital in their businesses. The Additional Capital serves as a shock absorber. Too often we hear capital characterized incorrectly as money banks hold back and pile up on the sidelines, that more capital leads to less lending. But the opposite is true. A bank with insufficient capital is a bank that cannot lend. Over the last six years Bank Shareholders added another 600 billion of capital which is 600 billion more that will be available to absorb unexpected losses. During the crisis the largest most complex Financial Institutions often held the least capital and their distress threatened the stability of other firms. To address the danger posed by these institutions, wall street. While the regulation of all 7,000 banks was improved by wall street reform, only 31 of the largest firms, with more than 50 million in assets are subjected to the heightened requirements of capital, liquidity rules and living wills and test stresses. Theyre designed to show that they can suffer the storms. Risks to Financial Stability are not confined to traditional banks. In 2008 no Government Entity was accountable for looking across the broader Financial System and over the horizon to ask tough questions and monitor emerging threats. For example, there was inadequate regulation of interconnected nonbank Financial Firms such as aig and no accountability to identify and respond to the risky practices that ballooned across the Financial System. When several of these nonbank companies experienced financial distress in the leadup to the financial crisis they shook the stability of the Financial System and damaged the economy more broadly. To address the gaps in the regulatory gram work wall street reformed created the stability council. It brings together the federal and state regulators to identify and respond to threats to Financial Stability. Their approach has been data driven and deliberative and resulted in greater scrutiny of potential risks posed by institutions in a range of activities across the Financial System. Since its creation its made actionable regulations to enhance Financial Stability and designated eight Financial Market utilities and four Nonbank Financial Companies for additional oversight to help address the risks they could pose. Through their work and the agencies of the securities and exchange commission, reform addressed risks in the Money Market Fund industry. Some funds were susceptible to runs. The fcc is working to put in place additional reforms for these important fbl productinancial products. Wall street ended too big to fail as a matter of law. Regulators also have modern common sense tools to protect taxpayers in the event of a crisis or failure. Regulators can seize the Financial Institutions and wind them down in an orderly way. Since we know they do not respect the National Borders with, were observing a new International Standard for global banks at the g 20 this year. Weve supported changes to financial contracts that will help prevent fire sales and contain it at home and abroad in the event of future failures. But ensuring stability and preventing excessive risk taking is not enough. Functioning markets require transparency and the agree flow of information to ensure safety and fairness. Thats why wall street reform tackled the vast derifties market which in 2008 was valued at more than 600 trillion. Prior to reform derivatives were traded leaving Market Participants and policymakers unable to see and understand the market as a hole. The rum was a massive web of invisible connections. Losses led to panic across the market. Many Market Participants for highly leveraged and had to sell their positions exacerbating the shock. Today thanks to wall street reform derivatives are centrally cleared and traded on exchanges or transparent platforms. Transparency requirements are at work in other aspects of wall street reform as well. For example, the law now requires that Hedge Fund Advisers register with and report data to the securities and exchange commission. Furthermore the law seeks to improve Corporate Governance by increasing transprncy. And they created the office of research which informs the public by developing high quality standards and data. Theyre leading they but as the system changes, we must continue to look out for new risks and continue to monitor new dynamics and ensure that markets remain transparent and participants have access to clear and accurate information. Safer banks and more transparent markets are essential. But there are means to an end. A Financial System that supports a growing economy through responsible lending to businesses and consumers. Before wall street reform many Financial Institutions lost sight of this purpose. Reform encourages banks to take a long term view and to halt Business Strategies kbilt around extracting unfair and hidden fees from mortgage borrowers or making short term bets in the securities market. One of the corner storms of the wall street reform is the rule. The major components of which go into effect tomorrow. It prohibits risky trade while protecting the depth, liquidity open stability of the Capital Markets and safeguarding taxpayers. It allows banks to provide Core Services to their customers protecting market making, underwriting hedging and trading trading trading. Wall street reform sought to make sure that the banks are invested in the success of the loans they originate. Another corner stone of reform is a requirement that a lend are before extending a Mortgage Loan make that the borough we are has the ability to repay the loan. This approach was too rare in the years leading up to the financial crisis. For example, many lenders during the housing bubble loaded mortgages with points and fees to get their compensation up front before selling the loan to a third party. Excessive points and fees encouraged lenders to steer borrowers into expensive products even we be they qualified for lower cost options. These abusive lending prak tess and unclear underwriting standards resulting in risky mortgages that hurt consumers and threatened Financial Stability. Wall street reform eliminated these were predatory practices and extended protections to all home buyers while maintaining access to credit for borrowers under terms they can understand and afford. And to ensure that more qualified borrowers have access to safe and affordable mortgages we have been working with the fha and the fhfa as they seek to end friction in the Housing Market and prevent clarity to consumers. We must also strengthen our resolve on comprehensive reform of the Housing Finance system. Reform has brought greater fairness to credit markets by improving information. Consumers now benefit from new mortgage disclosure forms which are shorter and less complex and make borrowing for a home simpler and more understandable. Similar reforms have been adopted or are being developed for student loans, auto loans and payday loans. The effect of these reforms is that lenders must now focus on extending credit on fair terms and good faith. They must out compete other lenders by offering better terms not by finding a way to sell consumers product that they dont really need and cant really afford. The independent Consumer Financial Production Bureau the first regulator solely dedicated to defending americans is focused on formulating and commuting these rules of the road. The cfp p c has established consumer pro techs that are preventing the behavior that contributed to the financial crisis. The bureau is making the Financial Marketplace work better for all americans, its transforming mortgages so they are clear and safe for customers, putting a stop to discrimination in auto lending and its tackling abusive payday lending practices that trap some of the poorest americans in debt. In addition, because of the c if. Pb we have put debt collectors under supervision for the first time and are reigning in unskrup lus lenders who prey on the elderly. Before wall street reform victims of financial fraud rarely saw their money returned to them. Now with the accept of the cfpbs Enforcement Division money is flowing back to peoples pockets. That includes military families targeted by predatory lending schemes, krpss built by dishonest Marketing Tactics and homeowners hit by dee sip testify practices. All told if the last five years alone the bureau has secured more than 10 billion in relief for more than 17 Million Consumers harmed by illegal practices in the Financial Marketplace. One of the greatest strengths of the american Financial System is one generation after another of innovative finance ears. The goal of reform is not to quench the desire or ability to innovate but to make sure that the oversight of our financial testimony keeps up with the pace of transformation. The work of reform is ongoing, it is constant and we must be unjeeld yielding in our pursuit of it. The progress that weve made must be renewed with each administration, with each congress, with each generation if we are to avoid another financial crisis like the one we experienced in 2008. We cannot afford to take a break from this pursuit. In the past policymakers have been tempted, especially when the economy is doing well and when an emergency seems improbable to roll back regulations, weaken reforms and reduce oversight. Were seeing this kind of moflt now on wall street and on capitol hill. For example were hearing calls to water down new rules out of concern that they are adversely affecting liquidity in some markets. We all share an interest in properly functioning markets and we need to make certain that we do not return to the pre crisis way of doing things. As we learned in 2008 broker dealers with too little capital cannot provide liquidity when its needed the most. Worse still, the laneful process of broker dealer dee leveraging further krims the markets and streds contagion across the system. Its a mark of progress that we now have to remind ourselves of the lessons weve learned, but it would be a grave mistake to think that banks can selfregulate, that forces that produce excessive risk taking is a thing of the past and risk taking on wall street will not harm main street. Instead of slowing down our work we must sustain and build on the progress weve made. In the next five years we must build on these accomplishments, we must focus on improving the Financial System for the users of financial services, not just for its providers. We must continue our efforts to expand access to credit and bring private capital back into the Housing Market by completing comprehensive Housing Finance reform. We must Work Together with congress to strengthen reform and enhance the ability of Community Banks and other Financial Institutions to continue to serve main street. As regulators continue to implement new rules they must use the flexibility provided by wall street reform to make sure that smaller, less complex institutions are regulated differently from larger more complex firms. But cal bragt reforms for Smaller Banks is not the same as erasing important laws that place a higher level of review on the largest 30 or 40 largest banks in the country. We simply can not afford to take the risk to our Financial System of making changes to this law that would weaken consumer, investor or taxpayer protections or impede the ability of regulators to carry out their missions. We must fund our regulators so they can keep pace with changing markets. Wall street reform increased the scope of the cftcs responsibilities but they need a stable source of funding to conduct their work. Congress should bring their bunl in line with their regulatory pierce and allow the agency to Fund Operations using fees assessed on the primary beneficiaries of their oversight. We also need to protect the ability of the fsoc to ask the hard questions and identify potential risks to the Financial System wherever those risks reside. The fsoc is critical to understanding how new developments change the landscape of the Financial System. Today our Financial System is growing more through the assets of hedge funds, Pension Funds and mutual funds than it is through the assets of large complex Financial Institutions. This evolution of our Financial System means that we must consider a different kind of risk and be open to different kinds of policy responses. And we need to always be looking ahead and asking what are the risks of the future . To make sure our Financial System is safe, thats why we need to look ahead. And we must finalize important rules like the ones that raise standards on analysts who provide retirement and Investment Advice and the ones that fix compensation practices to align incentives between executives shareholders creditors, taxpayers and customers. Weve seen attempt to roll back key safeguards by slipping complex provisions into unrelated bills. This tactic of using riders on must pass legislation to chip away at rushl financial reforms is unacceptable. Let me be clear this administration will strongly oppose these efforts. Faced with bills that threaten to turn the clock back to 2008 and leave the American People vulnerable to another crippling crisis i will recommend the president veto them. In closing, i want to point out that in the aftermath of the 2008 crisis we saw proof of what weve always known. The American People are resilient and termed capable and creative fiercely independent and profoundly generous. Rather than being disheartened americans took the actions needed to eemerge from economic catastrophe. They paid down their debts, got an education and expanded their skills. They chose to save up for new homes, start new families and secure their retirement. They chose to create new businesses and new industries and they chose to rebuild our nation on a new foundation and lead the world once again. Around the world the ability of the u. S. Economy the American People and our political process to bounce back is once again admired and serves as an ideal to which others aspire. The purpose of wall street reform is to make for sure our Financial System is worthy of americas people. Thats why five years ago we worked so hard to make wall street reform the law of the land and thats why today tomorrow and far into the future we will work hard to keep this law strong, both in statute and in practice. Thank you very much. Pleasure to be here with you today. [ applause ] [ applause ] thank you very much secretary lew. Please remember to stay in your seats until the secretary has left. I thank you all for attending and for those on cspan for watching. Remember to visit our website, regularly to stay on top of financial reform. And making markets work better for everyone. Dont forget to both take if you are in the audience take your copy of the report, if you are watching on tv its at our website www. Bettermarkets. Com where all the other information is, too. Thank you very much. This concludes our program. And we are live this morning on capitol hill for remarks from veterans Affairs Secretary Robert Mcdonald. He will be testifying on Veterans Healthcare and his agencys budget. Va officials have warned this week that it will have to close some of its hospitals mention month if Congress Fails to address the 2. 5 billion shortfall for the current budget. The agency is also considering furloughs, hiring freezes and other measures to close the budget gap. This is live coverage on cspan 3. It looks like veteran Affairs Secretary Robert Mcdonald is in the room. So had this should get underway in just a moment. Good morning, everybody. Welcome to this hearing. I appreciate your attendance. Were, again gathered to discuss vas budget execution for this fiscal year and if you will remember, less than three weeks ago we gathered to hear deputy secretary sloan gibson testify regarding a budget shortfall at the department of Veterans Affairs. Im sure everyone may be asking why we are here again on the very same topic and i intend to explain in just a minute but as we all know the stakes have been raised considerably since the deputy secretarys testimony on june 25th. At that hearing deputy secretary gibson was asked the following we by ms. Brownley and i quote, if congress doesnt act on the fiscal year 2015 budget shortfall, what is going what is it going to look like in the va in july and august and on october 1st . End quote. The deputy secretary responded that we get into dire circumstances the longer we go but that quote, before we get to the end of august we are in a situation where we are going to have to start denying care to veterans in the community because we dont have the resources to be able to pay for it end quote. The deputy secretary also testified about antiquated Financial Systems contributing to the problem, costs associated with the new hepatitis c drug treatments and an unrealistic assumption of how fast va could set up and effectively utilize veterans Choice Program. Now, imagine my surprise when on july 13th i received a letter again from the deputy secretary that in the absence of providing the flexibility that va is seeking to plug the shortfall with choice fund money that va hospital operations would is shut down in the month of august and that nonva care authorizations would cease at the end of july. This is unprecedented. A true budgetgate, if you will of our time. First, never can i recall or other individuals that ive talked to can recall or any agency for that matter other than va completely exhausting its operational funds prior to the end of the fiscal year with the consequences for va being cessation of hospital operations. Second, never can i recall an issue of second enormous magnitude evading the direct attention of the president , and until just recently you and i speaking about it mr. Secretary. This is not a flying under the radar issue. And i feel that its exactly how the va and the president have treated it for an effort in an effort to avoid responsibility of whats going on. So that everybody understands where im coming from let me start by reviewing how weve arrived at this point. The first real hint of serious Financial Issues came as a result of a brefg for our staffs with the va on june 4th on a very separate topic. At the conclusion of the Briefing Committee staff noted that there appeared to be a two to 3 billion difference between vas projected 10. 1 billion obligation rate for care in the community, compared with the funds that va budgeted for care in the community. The va official that was briefing agreed with the discrepancy but stated cryptically that just because va was on pace to spend 10. 1 billion it didnt mean that the money to address the discrepancy was either found or was available. That assertion was repeated upon further questioning, leaving it to staff to read between the lines what was meant. At around the same time during a june 8th visit to the Cincinnati Va Medical Center i myself began to hear rumors of an impending financial issue consistent with the crypt tick warning that had been provided by va officials in a staff briefing on the 4th of june. As a result, on the 10th of june i called on either the secretary or the deputy secretary to testify on the state of vas budget. As a consequence of my calling this hearing staff received a prehearing briefing again at our request on june 18th. It was at this briefing that va for the first time publicly revealed a possible 2. 5 billion shortfall in funding. Not with standing this briefing there was no mention of a hospital shutdown. On the 23rd of june we received a letter from the secretary citing the looming shortfall of 2. 5 billion and also requesting of the Appropriations Committee a transfer of funds from the medical facilitys account to the medical services account. Again, there was still no mention of a Hospital Systemwide shutdown. And finally at the hearing on june 25th itself there was no mention of a Hospital System shutdown coming in august. Mr. Secretary, im disappointed about the slow painstaking revelation of this crisis by the department thats led by you. I understand their excuses as to why we are in it this position, however, somebody somewhere took their eye off the ball. Just as congress established a cap on spending for the denver project that va busted, Congress Also provided a budget for va for fiscal year 2015 which the president signed into law and it, too is now busted. In both instances va has Left Congress with very little time to react to a crisis created by vas own management decisions. While we will not penalize veterans for vas management, or transparency failures, the days when va can come to congress and just say cut us a check are gone. Asking for flexibility without supporting information is not enough. Similar to the way a large cooperation board of directors sets a budget and a Corporate Management implements that budget, the president , 535 members of your current board of directors set a budget and expect you and your staff to carry out the departments mission. That is, to manage the taxpayers resources in a fiscally responsible manner. Just as emerging circumstances in the private sector might cause a ceo to go back to the board armed with information supporting a request for Additional Resources or flexibility, we have the same expectation. Despite unsupported hints of a problem by the department, that supporting information was not provided until extraordinarily late. Weve already passed legislation to take va out of managing Major Construction programs. Perhaps we need it to bring in an outside entity to manage the departments finances. I hope not. I recognize Ranking Member brown for an Opening Statement. Thank you mr. Chairman. And thank you for calling this hearing today to discuss the vas current budget shortfall and the possibility that va may have to close hospitals or ration healthcare. Mr. Chairman i know everyone in this room agrees that this committee is committed to providing the resources that va needs to take care of our veterans. We all need trait answers to our questions, how much is needed and why . We are all supportive to make sure our veterans get the care that they need but yet again we are facing with an 11th hour va budget crisis. We must all Work Together. Va and congress in order to properly anticipate the resources needed for va. The va must do a better job of predicting requirements. It is important that va starts planning, anticipating what our veterans will need and where they will need it. We have been hearing that this shortfall is due to the increase of veterans coming to get medical care, resorting in more veterans being treated outside of va. I also think it takes care of the veterans with hepatitis c. Many of whom are Vietnam Veterans who we recently honored in a cleb operation in the capital should be one of our highest priorities, but i wonder if this shortfall is fundamentally due to lack of planning and forecasting or for a variety of programs which provide services to our veterans. So today lets figure out what we need to to to ensure that our veterans are getting the healthcare they have earned and begin to if i can what steps we need to take a fix that will prevent any more 11th hour budget crisis. In february the secretary began asking this this committee for more flexibility to move money between accounts that would enable him to run his administration more like a business and better care for the veterans. Let me repeat that. In february and, again, in had march the secretary came right there and asked us to give him the flexibility to run the va like a business so he could care for the veterans. We have over 60 additional accounts that the va has to decide whether or not to allow flexibility. And as we track the vso support in providing, allowing the secretary access to charge towards funds i want to present for the record the va physician productivity is up 8. 5 and it gives the account of every category that we are servicing veterans for fiscal 15 and the increase. I want to submit that to the record. In addition no objection. In addition to that, i want to submit for the record a letter from each of the Service Organizations indicating that they support the secretary having the flexibility to move this money around. When we did the choice act the purpose of the choice act was to provide services to the veterans. We didnt say what services . Just services to the veterans. And the secretary needs the flexibility enable to provide those services. With that, mr. Chairman, i wreeld back the balance of my time. And did you take the vas without objection . Yes. The letters . Without objection i will accept those letters. And i do appreciate you submitting those letters of support and remind my colleagues that all the veteran Service Organizations also support my accountability bill as well. So as we meet later on this week to talk about t i hope that we will keep that in mind. I would remind the members that this committee and the senate as well rejected on a bipartisan basis an attempt to go into the choice fund to fix the budget shortfall at the aurora hospital as well and i think we need to focus, rightly so as ms. Brown has pointed out this morning, forecasting and getting a better grasp on whats going on with the dollars that are appropriated to the department of Veterans Affairs and thats why weve asked the secretary to be here. And i know you had to change your schedule in order to come and i appreciate that. Without question once we spoke the secretary said, i will be there, along with dr. Schmidt. So, mr. Secretary, you are recognized four your Opening Statement. I know you also have some charts you brought with you. I dont know it if we are going to post them up here or if people have weve given them out, mr. Chairman. Okay. All right. Thank you, mr. Secretary. Youre recognized. Mr. Chairman, if i may, id like to start and i know you would agree with this by honoring our five Service Members who were senselessly killed in chattanooga. On behalf of all veterans and on behalf of our department i extend my deepest condolences to their families, their fellow Service Members and their friends who grieve their loss. We will never forget their service to our nation nor their supreme sacrifice on behalf of all of us and the freedom that we so cherish. Thanks to the chairman and the Ranking Member for joining your Senate Counterparts at our most recent four corners meeting at vas Central Office last thursday morning. And i appreciate this opportunity to it continue our dialogue publicly so veterans and all americans can understand these important issues. Representing veterans and Service Members this morning our Senior Leaders of some of our most important part years veterans and military Service Organizations and i want to thank them for being here as well. A year ago today at my Senate Confirmation hearing i was charged to ensure that va is refocused on providing veterans with the highest Quality Service that theyve earned. I welcome that opportunity. For the last year ive been working with a great and growing team of excellent people to fulfill that sacred duty. Over the last year since my swearing in nine of the 17 top leaders in va are all new. We have to get the right people on the bus and we have to get them in the right seats on the bus. Because of their hard work va has increased veterans access to care and completed 7 million more appointments this year than last year. 2. 5 million within va and 4. 5 million in the community. So 7 million total more than last year, 4. 5 million in the community, 2. 5 million inside va. Weve increased va care in the community authorizations, including choice by 44 since we started accelerating access to care a year ago. Thats 900,000 more authorizations than the previous year. While choice has been just a small proportion of that 4. 5 million, its on the rise and utilization has doubled in the last month. Today because of growing growth in access the department is struggling to meet veterans needs through the end of the fiscal year. We need your help. Youve already appropriated funds to meet these needs, but you havent given me the flexibility or the authority to use them. Without flexibility we will have no option at the end of july but to defer all remaining nonchoice care in the community authorizations until october. Provide staff furlough notices and notify vendors that we cannot pay them as we begin an orderly shutdown of hospitals and clinics across the country. These are unfortunate conclusions to an otherwise productive year of progress. In had fact, weve doubled the capacity that we thought was required to meet last years demand by focusing on four pillars staffing space, productivity and Va Community Care, or what we sometimes call choice care. We have more people serving veterans. Since april 2014 weve increased net staffing by over 12000, including over 1,000 new physicians and weve used choice act funding to fire over 3,700 Medical Center staff. We have more space for veterans. Weve activated over 1. 7 million square feet since last fiscal year and increased the number of primary care exam rooms so providers can care for more veterans each and every day. Were more productive identifying unused capacity optimizing kedling, heading off noshows and were also stopping late appointment cancellations and extending clinic hours at night and on the weekends. We are aggressively using Technology Like telehealth secure messaging and e consults to reach more veterans. Clinical output as you can see in this chart has increased 8. 5 where our healthcare budget has increased only 2. 8 . We are aggressively using care in the community. The Choice Program and our accelerating access to Care Initiative increased veterans options for care in the community. We provided va care in the community authorizations, including choice for 36 more people than we it did over the same period last year. A total of 1. 5 million individual va beneficiaries. In short, were putting the needs and expectations of veterans and beneficiaries first, empowering employees to deliver excellent Customer Service, improving or eliminating processes and shaping more productive and veteran sent rick internal operations. Thats my va. Our top priority to bring va into the 21st century. Our strategy is paying dividends for veterans. Weve increased va care in the community authorizations, including choice by 44 since we started accelerating access to care a year ago. Thats 900,000 more authorizations than the previous year. Between the end of june last year and may weve completed 56. 2 million appointments, a 4 increase over last year. And there were 1. 5 million encounters during extended hours, a 10 increase. Thats particularly important to our women veterans. Even with that increase we completed 97 of appointments within 30 days, 93 within 14 days 88 within 7 days and 22 same day appointments. For Specialty Care wait times are down to an average of five face. For primary care wait times are down to an average of four days. And we have an average of about three days for mental healthcare. So were making verifiable progress for veterans and with your support va can be the best Customer Service agency in federal government. But even as we increase access and transform important challenges remain and there will be more in the future as veterans testimony graphics evolve. Its now clear that the access crisis in 2014 was predominantly a matter of significant mismatch of supply versus demand exacerbated by greater numbers of veterans receiving services. That sort of imbalance predicts failure in had any business, public or private, especially when we promise receipt rans benefits without the flexibility to fulfill the obligations. So a fundamental problem problem is va working to a budget, not to the package of benefits and Services Veterans have earned and have been promised by congress. Budgets are static our requirements are fluid and changes in veterans needs and preferences for care far outpace the federal budget cycle. Here is an example. Last year on average we added 51,000 veterans to our healthcare rolls each month. This year this year the average monthly Monthly Average of new enrollees has been 131,000. 131,000. Thats 147 increase. And we welcome them all and im sure you do, too. But we cant miss that today enrolled veterans only rely on va for 34 of their care. Just 1 percentage point growth in reliance increases costs by approximately 1. 4 billion. Let me say that again. Today enrolled veterans only rely on va for 34 of their care. Just a 1 increase a 1 percentage point increase in reliance increases costs by 1. 4 billion. So were working hard to best serve more veterans but without flexibility we cant provide what they need the way youve directed it. Weve reached a decision point. Congress can either shape a different benefit profile for veterans or give va the flexibility and money for legislated entitlements. My Worst Nightmare is a veteran going without care because i have the money in the wrong pocket. I earlier compared the inn flexibility we faced to having one Checking Account for gasoline in your household and one Checking Account for groceries, the price of gasoline falls in half and you cant move money from the gasoline account to the food or grocery account. Well, the inn flexibility were talking about today is even worse than that, its even more puzzling. I cant move money from the food account to another food account. From a care in the community account to another care in the community account. All a together we have over 70 line items of budget that are inflexible, yet the veteran has choice. Freed up they would help us give veterans, the va that you envision and that they deserve. We need flexibility to move money from line item to line item just like you would a business. We need flexibility to move money from Va Community Care to choice and from choice to Va Community Care. Both are care in the community. We need flexibility to transfer both directions depending upon demand because we will not ever be able to predict the demand exactly. We owe it to veterans and ourselves to be more agile 15 years into the 21st century. It it was february which asked for flexibility to move resources. It was may when we again asked for flexibility to use some Choice Program funding to provide care in the community. Im asking again for the simple flexibility to serve veterans with the money you have already appropriated so we can resource the passity that weve grown. More flexibility will go far toward meeting veteran care and increasing access across the country. Pun for the denver replacement Medical Center will be depleted by earlier october and work on the project will cease unless we receive congressional authorization for the full cost of the project and fles i believe in fiscal year 16 to transfer 625 million of our existing resources to the Major Construction account. We have presented several plans to congress, the latest being on june 5th and we will have an update shortly. We anticipate the corps of engineers will award a contract to complete the facility in october and assume Construction Management on the project if we receive full authorization and that flexibility that we seek. To improve Community Care for veterans we need to streamline an ant waited business processes for purchasing care. For years a variety of authorities and programs have provided Community Care to veterans and i have Trouble Holding this up and talking at the same time, but you have had this at your table. Today we have seven different programs for providing Community Care. Each one has its own exclusions each one has its own payment options. Its incredibly confusing. We have traditional va care we have choice we have patientcentered Community Care we have two separate plans for Emergency Care in the community we have something called arch, we have Indian Health service and Tribal Health program and these dont include other programs for veterans beneficiaries. Its all very difficult to understand. Veterans dont get it providers dont get it, our employees dont get it, and i can tell you from our breakfast earlier last week members of congress dont understand it completely. We look forward to continuing to work with you on an integrated network of va and Community Care and a single integrated reimbursement system to get the providers we need on board. You see what happens is providers cherry pick the program to get the highest reimbursement rates. On may 1 we sent you our proposal, the purchased healthcare stream lining and modernization act, a bill to make critical improvements in provider agreements and give us the flexibility to provide timely local care to veterans. Our proposal modeled on the purchased Care Authority in the choice act includes protections for procurement integrity provider qualifications and reasonable cost. Flexibility with respect to choice is central to resolving the budget shortfall and ensuring veterans continue receiving timely care as we strive to meet the 30day access goal. On top of the 7. 5 billion of Va Community Care we already provide, congress added new entitlements for veterans in the choice act, but there are many programs that the choice act doesnt cover. Because choice authorizations and Community Care authorizations are in different buckets, we have a funding short paul, in spite of the fact that at both types of care are Community Care. At the current rate we expect care in the community in 2015 will cost an additional 2. 5 billion. New hepatitis c drugs for veterans will cost an additional 500 million. All we seek is flexibility. Flexibility through limited authority to use money for Community Care to the extent those exceed our fiscal year 2015 budget. To meet these growing requirements next year va needs the Adequate Funding the president s 2016 budget request provides, but the house proposed 1. 4 billion reduction means 688 million less for veterans medical care meaning as many as 70,000 veterans may not receive care. Further, it means no funding for four Major Construction projects and six cemetery projects and 17,000 veterans and family members may not receive va burial honors. The construction budget was cut 50 and thats at a time when over 50 of our buildings are over 50 years old. The increase this in requirements were seen anticipates greater challenges ahead. Services and benefits peak years after conflicts end. Remember during my budget testimony i talked about the fact that were now seeing the peak years of the vietnam crisis even though the vietnam war ended 50 years ago. The healthcare requirements and the demand for benefits increase as veterans age and exit the work force. So full funding of a 2016 budget request is a critical first step in meeting these challenges, but we have to look much further ahead for the sake of afghanistan and iraq veterans. In 1975 just 40 years ago the year i graduated from west point, only 2. 2 million American Veterans were 65 years old or older. Thats 7. 5 of the veteran population. By 2017 we expect 9. 8 million will be 65 years or older, thats 46 of the veteran population. What does that mean . Well consider this. Va provides the best hearing and Technology Hearing Aid Technology anywhere. Medicare doesnt cover hearing aids and most insurance plans have limited coverage at best. So choosing va for hearing aids saves veterans around 4,200. As va continues to improve access, more veterans are going to come to the va because they want to and because it makes financial sense. So its a foregone conclusion that the cost of fulfilling our commitments will grow for the foreseeable future. It bears repeating that the 2014 access crisis was in part a vietnam debt, not a debt of afghanistan and iraq where Service Members still serve. So we cant be short sighted we have to respond today with a longterm view that underlines a commitment to va transformation. Veterans who have preserved our freedom are watching us, as the military draw down continues Service Members are also watching us. And young men and women who might choose to serve are watching us. They rightly expect us to fulfill our possible gagss with the same degree of dis knit and fidelity with which they put their lives on the line for our nation. If we choose shutdown we fail all of them. Given the commitment we made at breakfast last week to keep working together, i know we will honor all of our obligations to veterans and their families of every generation. Thank you very much, mr. Chairman, and committee. We look forward to your questions. Thank you very much mr. Secretary. I would like to ask you talked about additional enrollees this year and i dont have the numbers right this front of me. Did you say that was a net number so it would include those that died or is this just new enrollees . So you had 100,000 new enrollees, how many folks tied and came off the system . I dont have the number mr. Chairman, of how many died, but i can tell you that with 7 million more appointments this year versus last, that a lot more are alive than are dead. And i understand that but you made a point of talking about how many new people enrolled into the system and i just want, for clarity purposes i think its important not just to focus only on that number. We will get you that number. That we get a net number. We will get you the number of the number of people who died and the number of enrollees. And i think the simple question i think that we need to talk about today and i know you wanted to focus on the appropriate appreciations process which is still ongoing, i will hope very soon that the senate will move and move a piece of legislation so we can get the va budget passed i think its critical that we get that done, but if we didnt have the Choice Program to fall back on today, that 10 billion, 9 billion, whatever the number is today, how would this problem be solved . Well mr. Chairman, we agree with you, as we said last week and as weve said from the very beginning, we very much favor the Choice Program. The Choice Program is the shock absorber that has allowed us to care for veterans at a time when when more veterans are entering the system and when that care is necessary. You know the Choice Program allocated 10 billion for care over three years. Were already spending 6 billion for Community Care from the current va budget. So the idea that has been propagated in the media that shower against the Choice Program or were gutting the Choice Program is absolutely positively wrong, proven by the data. 6 billion weve overspent 6 billion this year in in Community Care. Community care is absolutely essential. I think the issue is your hepatitis c drug 1. 5 billion or whatever the number is for hepatitis c is part of the issue, and i dont think any one of us thinks that we should not be providing that drug. In no budget submission that i can recall was it discussed about that although im hoping that somebody and ms. Brown actually talked about the forecasting that somebody was looking at the approval of that drug and that it was coming on and that if it did come on that it was going to cause a significant issue as it relates to the nonva care item, line item he, of 6 billion which is gone now its never been gone before, but all of a is sudden this year its disappeared. And my question was if we didnt have the pot of money that youre looking at now to solve this crisis, how would we solve the crisis . Mr. Chairman, what were saying is that based on the laws that the congress has passed there are certain benefits we have to give to veterans and the budget has to match that. Without the choice act the budget clearly would not match the laws that we provide to veterans. Remember, as i said, only just about over a third of veterans are using the system and with every new 1 percentage point of veterans who enter the system were talking about 1. 5 billion. I think an incremental 1. 5 billion. I think the point you make on the hepatitis c drug drug is an important one. I talked about the length of budget cycles in the federal government. We started the appropriate appreciation for 2015 because its an advanced appropriation sometime around 2015. These drugs were invented between 2013 and 2015. I couldnt have been anticipated. We had two more hepatitis c drugs come out. How do we Work Together to create the flexibility in the budget cycle oost so that we can deal with incremental demand of veterans and new special causes like new drugs . And thats what were proposing to Work Together with you on. According to your staff the Veterans Health administration has taken a number of steps to curtail the shortfall, including revised guidance on the use of nonva care, halting all nonkey sengs hires purchasing and travel and pulling salary dollars for Medical Center can accounts. One area that i see that hasnt been looked at and that is the issue of bonuses. What is sacred about the bonus 350 million bonus pot that would prevent you from accessing that money and if you need flexibility we will be glad to give you flexibility to use that, too. Would you not look at every crevice possible . Mr. Chairman, you probably recall the meeting you and i had in your office where we went through the relative ranking and the accountability steps that weve taken within va. One of those steps as you may recall, is nobody in in the Veterans Health administration, nobody, is receiving a bonus for 2014. And also the relative ranking that we did of their performance, no one in the Veterans Health administration received an outstanding rating and i would deny you, as i did that day, to compare our relative rating, our relative performance rating, versus the relative performance rating of any other department of government and the best companies in the private sector because we were following the principles of the best companies in the private sector. And i appreciate the meeting that we had, the information you provided and my time has expired but i want to get for clarity nobody within the veteran iad administration is getting a bonus . No executive. Yes, sir. Theres a very distinct difference between executive and the line employee. I just wanted to make that clear. Ms. Brown. Thank you mr. Chairman. First of all, let me just say that it was a beautiful services that we had here last week in the capital for the Vietnam Veterans and you know, that glitter is very nice i mean, they deserve it but they also deserve the services. Now, i participated in every choice meeting, every conference voted on it and the purpose of the choice was to provide Veterans Services to veterans their care. Can you expound more on the flexibility that you need . Because when i think about it i think about the gi bill. Veterans can go to any school that they want to, so the money follows the veterans. So can you expound on that flexibility that you need that youve come to congress both openly and in private and explain to us that you need the flexibility. Yes, maam. Thank you ms. Ranking member. As weve said there are about 23 million veterans in this country, only 9 million are signed up for our Healthcare System and probably only 6, 7 million use it on any given day. So theres an opportunity for every veteran to use our Health System and we would like that but in order for that to happen weve got to have the flexibility to be able to deal with an influx of veterans as we improve care. One of the things that youre probably aware of is if you get your knee replaced with medicare it will cost you roughly 5,000, if you are a veteran and you get your knee replaced using the va you save 5,000. So to the degree we improve our system and we improve access to our system more and more veterans will will enter the system. As we said earlier every percentage point of veterans who enter the system is going to add another 1. 5 billion of cost. With 70 plus line items of budget where we cant move money interest one line item to another it distorts what we do. It causes situations like were this today and the whole purpose of the choice act was to improve care for veterans. The whole purpose of the choice act was to get veterans care in the community. What were talking about is a shortfall in care in the community. So it really defies my logic to understand why we cant use choice care money for care in the Community Since thats the reason it was appropriated. The money has already been appropriated, its sitting there, wed like to use it to care for veterans. As more veterans come into the system we want to care for them, too. One of the complaints or challenges is that you talked about Knee Replacement. So if someone goes into one of the Choice Programs for knee and the doctor determined that both knees need to be replaced, you condition do it based on exactly how the choice is working right now because that other knee has had to carry i mean i know its getting technical can the medical person explain to me why . So i think if the veteran needs both knees replaced under the Choice Program they could get both knees replaced, it would require a second authorization for the second procedure that needs to be done. I think that the challenge for us is really you know the chairman asked, well what would we do if we werent in the situation where we have the choice funds. And the fact of the matter is we probably this year would have done what we always have done we would have managed to a budget, but we didnt do that this year. We managed to our requirement and that requirement was that no veteran would wait more than 30 days for care. And while we have worked very hard to make the Choice Program an option for that patient who needs that Knee Replacement the fact of the matter is today a lot of our care is going were buying it through mechanisms outside the Choice Program, but we are doing it so that no veteran waits more than 30 days for care. And then accessing the resources to be able to pay for that is, i think, our challenge today. My concern is those Community Programs that weve been working with for years, universities, other stakeholders. Whats happening to those programs . Because weve cut the uses of some of those programs because of the shortfall. We have curtailed the use of those programs for elective care today. Our interest is actually making Choice Programs the premiere program. To make that program the predominant way that we get care and we have worked very hard with both health net and triwest to get the 87,000 providers that we have used in the past some of those are our academic affiliates, to sign up to be providers under the Choice Program. And for our academic affiliates we offer them both indirect and direct medical education overhead expenses and the reimbursement that they have negotiated with cms. Thank you. Thank you, mr. Chairman. Mr. Lamborn, youre recognized. Thank you, mr. Chairman. Thank you for having this important hearing. Secretary mcdonald, youve come in here basically demanding 3 billion or healthcare in large part shuts down on august 20th. And im just amazed that were in this position. Do you do you and your Leadership Team at the va have any accountability or any responsibility at all for this happening, and if so, how much . Well, of course we do. And as secretary deputy secretary gibson laid out in the last hearing on the same subject, just a few weeks ago, there are many reasons that we are where we are. And i think we all share some of the responsibility, including members of congress. We have a new program called the Choice Program, its hard to predict new programs, we have seven different ways of providing care in the community and at the time the choice okay. Excuse me, is sir, you want to interrupt . Yes. Let me interrupt because my time is limited. Weve described what the layout of the land is you i was going to go through the reasons we are where we are and i was going to show you what accountability we have. Okay. Do you have any role in this . We all do. Is what im getting at. We all do. One of the first things you learn your first day at west point is to say no kmusexcuse, sir. One of the thing that baffles me is were dealing with a Computer System thats over 30 years old called the fms system, its written on cobal which was a language i wrote in 1973. Weve got to change the Management System of the financials of this enterprise called the va. The problem that we have is when we benchmark private industry our it budget is about 50 of what a Healthcare System i. T. Budget is so weve got to fix that. At the same time weve got to improve our management of the Financial Systems and were going to work hard to do that. At the same time it would help us if we had flexibility rather than over 70 line items of different budget that we cant move around. See, my issue is that every time one of these problems comes up on an almost weekly basis it seems like this year we want we hear pleas for more money or more flexibility to go forward but we never get to the bottom of what caused it in the first place. Thats what i and the rest of us are trying to get to the bottom of. I you want me to repeat my Opening Statement . I thought i was clear about what caused it. Last year you talked about Miss Management not giving veterans care, no you Miss Management is giving veterans too much care. No. No. No. Here is my here here is my real rob here. You say that on august 20th theres no other option for except for an emergency supplemental by congress youre going to start closing down operating rooms hospitals, clinics all over this country and theres and with a 60 billion healthcare budget out of 160 billion total budget theres no other way for you to see around this problem than to tell veterans they cant come into the operation room after august 20th. Sir, i didnt say that. I did not talk about a supplemental. What i talked about was using part of the 10 billion thats already been appropriated by congress for care in the community to pay for care by congress for care in the community to care for the community. Appropriated 10 billion and we are talking about using it to pay for care in the community. Mr. Chairman, i yield back. Mrs. Brown lee. I do think flexibility is part of the solution, not the pan sea, but part of the solution. I think clearly we need to be more nimble to serve our veterans and to serve them appropriately, and the way they deserve it. Closing hospitals is not a choice as far as i am concerned. I think we have an i. T. System that cant track spending and cant reconcile a budget in a timely way, and i would argue and i think youve eluded to this in your testimony, but i would argue that, yes there has been an increase in demand from our veterans, but i would also argue that the v. A. Is pushing more resources out the door than they have in the past. And thats a good thing. Because pushing more resources means that more veterans are being served and being served appropriately. I guess, you know, my question you mentioned about areas that we need to improve upon and you mentioned i. T. , were spending 50 of what private industry spends in their i. T. Systems, and better management, checks and balances. What are we going to do . I think before we need before we move forward in any way shape or form we need assurances these kinds of things are going to get fixed. We cant move towards flexibility and hope and pray the next time we will be better off. We need assurances that these are going to be fixed and we will know in a timely way where we are if we ask the question today, we know exactly where we are in terms of money that has been spent and what the balances are, so share with us the specifics and when you think these things are going to be fixed so that we dont approach another fiscal year with the same kind of calamity that we are facing today. Thank you, and i, again, want to reiterate we do own these problems and want to fix the problems and i didnt want to give any different kind of impression with the questions and it starts with getting the right people in place. As you know, we just got confirmed, mr. Laverne counsel who is the secretary for the office of information technology. She was the i. T. Leader for Johnson Johnson and dell, and i have been working to recruit her for many months almost since the day i was confirmed. We have to get the right leaders in place and i think we now have them. What we then need to do is benchmark other operations, which we are doing. In the case of the fms, the cobalt system i am talking about, we have to replace it and until we replace it we have to take brute force effort to make sure we are doing a better job of keeping track of the budgets and keeping you informed of them. One of the issues here was when you pass the choice act you demanded in the choice act that we account for here in the community in a different way than we were doing it previously. You asked us to centralize that and that change helped exacerbate this situation. Nevertheless, we tried through brute force to try and keep that accounting whole so that we could understand what was going on. But there is no question we have got to do a better job. Mr. Secretary for me at least, i presume we have the right resources to find the people for the right job, and thats part of the solution. I have to say i dont have a lot of confidence having served on this committee now for 2 1 2 years that the v. A. You have not asked us for additional money for an i. T. System, yet. I assume that will come. And i dont have the confidence that within a year we will have a new i. T. System that provides tools that we would need to be able to have a timely data and timely information in terms of where we are. Is there something that you are working on specifically obviously, this is a high priority for us. Before we design an i. T. System to deal with seven different ways of paying for care in the community, we ought to Work Together as we talked about at the breakfast to making one way to pay for it and making the i. T. System will be easier. Thank you, mr. Secretary for being here, and i guess my biggest problem, frankly, and i agree with having more flexibility in accounting, and nothing irks me more than seeing new windows put in a v. A. And we dont have other things so i agree with that. I am concerned about the fact that we didnt know about this whole situation until what two weeks ago or less than that . We had mr. Gibson here, and all of a sudden its like a crisis. I think from my perspective i was kind of hoping that you would have a plan to reform the v. A. And, you know, make it you know, all good, and you talked about some of that here, but i have not really seen you come out and tell me maybe the chairman knows something, but i dont know about the reform process going on. I am really disappointed in the 3 billion shortfall. Why didnt we know more about this in advance . What is the story with that . Why dont we know about it sooner . I want to draw your attention to this, we give you this on june 5th. It was about denver, about replacing the denver facility but i thought it was important at the time we published this to give you a heads up on the work to reform the v. A. If you turn to the back of the book, the last 56 pages are all about the transformation of v. A. , and we have sat down with those members of congress who are interested and gone through the detail and they happen to be mostly in the senate, but we would love you to take you through the detail, and we set up an Advisory Board that includes some of the most outstanding ceos in the country helping us, and every member on this committee has 56 pages of what is going on. Were happy to spend more time with you and we would like you to be part of it and in fact we would like to have hearings talking about what we are doing to transform the future. Relative to the shortfall, our first knowledge of it was around the middle of may. At the time we had a meeting with the Eight Corners both the senate and the House Appropriations and authorizing, and at that time we mentioned three issues, one was hepatitis c, and one was denver and denver was the reason for the community, and the third was the cost of care in the community and at that time we thought we could solve the problem, we thought we could solve it by putting more veterans into the Choice Program and therefore not relying as much on our internal care for the community budget. We obviously could not solve the problem. We thought we could use unspent money from previous years to do it, and we got legal opinions and omb opinions is there unspent money from previous years . Yes, sir. Anytime you have budget line items over 70 where you are inflexible in moving money from one budget line item to another you will have unspent money. One way to rid the government of unspent money thats the way businesses do it. So in the last five years and as those obligations are expensed the obligations there are funds that get deobligated, and those funds sit in the treasury. How much is there . For about the last five years, there is 1. 3 billion. I had another question about maybe Third Party Reimbursement for nonservice connected care, and i have heard that is an issue that the collections are not what they should be. Can you give me a situation update with that . I think so our collections this year are actually up significantly. I have not refreshed that number in my head and i think its about 7 higher than we anticipated, and we are working hard to improve the collections. A lot of patients who have insurance have a gap coverage, and without an eob they eob . Explanation of benefits. Because we are not medicare those