Transcripts For CSPAN Washington This Week 20150411

Is somewhere in the order of 180 or 200 billion plus. But we are talking one to 1. 5. There is no trillion dollars. There is no way to get there without the private sector. It is a very difficult time and capital now is without question beginning to get out of the emerging market. In order to be able to reach this goal, we have to be much more clever about how we utilize the Development System that countries provide and link to it to the kinds of investments that we know will be the creator of jobs. How do you do that . One of the things are trying to do in one of the papers we will be presenting next week is one in which all of us, all of the Multilateral Development banks, sat down together and said lets get all the different sources of financing for development. Lets put them all together and think strategically. If you look at all the different sources and you start really with improved domestic resources. Weve got to help countries have taxes in a more fair and we move reasonable way. That has got to be on the table. I was in london paying tribute to the u. K. Government and Prime Minister cameron for sticking with this pledge of providing 0. 7 of Gross National income to development. There were a lot of criticisms inside the u. K. It is remarkable they set up under the stood up under the criticism they keep going. Why should we provide aid to countries that they themselves dont collect taxes, especially from the rich. This is a question put on the table. One of the things we are learning is the public and the synergy between the public and private sector are part of the great hope Going Forward. For us, we focus specifically on supporting the small and Medium Enterprises in developing countries that can create the kind of jobs that lift people out of poverty. It is a very complicated business getting that right. Even within their own organization where , we have people who are very focused in the Public Sector and are very focused in the private sector and they are now talking to each other much more, but its relatively new. My own sense is we have to bring the private sector into our development. People have been extremely dedicated to getting into the Development Conversation from the beginning. For the Millennium Development goals, the private sector with was never part of the conversation and we asked them to make donations after everything was settled. This time in addis ababa, for the first time the private sector will be at the table talking about how we can meet these goals. John hamre its not a bad thing for the private sector to make profits, especially if they can channel it into a way to make good in the world. Dr. Kim there are many different situations out there. The bottom line is unless we create bankable projects projects in which there will be a return, we are not going to get infrastructure. We have focused so much on doing this that weve created something called the Global Infrastructure. Specifically it is focused on using all of our a Sovereign Wealth Fund doesnt have a whole staff of people who are used to putting together projects. So what we are hoping this will put those projects together. We will bring our safeguards and procurement standards to the table and prepared those projects and the decision will be on whether to invest. We feel we will create a very clear picture of risk and reward. A lot of these people, they have all these ideas about projects being too risky. We think by bringing our experience to the table they will understand the risk reward ratio is very favorable. We are going john hamre we are going to open up. You there. We dont have time. Thank you. Audience member the question is about Chinas Initiative to establish the a. I. Ip. What do you think of this event and what are the ways that the world they can cooperate with aiib . Dr. Kim the World Bank Group is in a very close relationship with china. It is a remarkable relationship and it goes back a long way, but the recent relationship shaped by my predecessor bob, worked very closely with the Chinese Government to put together a report called china 2030. The change of the chinese growth model from one focused on investment to one focused on to one focused on consumption services. All of these things the growth rate of 7 is continuing. This is part of a long conversation we been doing with china. We did a report on urbanization now one on health. Weve been talking about the infrastructure banks from the beginning. My position has been missing from the beginning, oh my goodness, we have so much need for infrastructure, that we welcome any new player. The Chinese Government has been very clear to us that this is not a competition for us, they have been very, very clear that they want to cooperate and weve already seen corporation. It is still early. They dont have articles of agreement. They havent decided what instrument they will put together. I can think of many potential joint projects. We have this Global Infrastructure facility they could invest there. The fundamental issue for a busier us is that the enemy has to be poverty. If your enemy is poverty, the natural thing to do is welcome new players interested in developing the infrastructure that will end poverty. Alex in the second row with a blue jacket. Audience member good morning, dr. Kim. My name is simon. My question is pretty much the african point of view. Most of the things you raised was pretty much about how developed countries use the tax to aid most of the developing countries. What is the world bank doing in a situation regarding having to build social safety and Social Security or situation of the tax system because if you as a world a group actually involve and engage this developing countries in the aspect, then they will learn as the policy of the world bank to engage their citizens, to come into that line. Even if there is no money in terms of poverty for the low income or poor people but the system and infrastructure is already infrastructure in place. So that is one aspect. John hamre have to limit it to one question. Dr. Kim let me take what i think i understood your question to be. You know, on the one hand, if there is one thing i think that has changed most dramatically about the World Bank Group, it is the extent to which we engage our clients in discussions about the in the early 1990s i was part of a group called 50 years is enough. We were on the streets trying to argue for the closing of the world they grew. We lost that argument and it is good because i have this job now. And i have to tell you, i have not seen any institution that is open to the world bank that is as open to the world bank and taking criticism and changing its practice over time. Now the World Bank Group works closely to try to figure out what they want in terms of their own development. Secondly, we are now aggressively moving forward so that every single project for beneficiary feedback. In other words, the people benefiting the program , we will get feedback directly from them. We have also worked on programs that increase the accountability by very simple things like putting posters on the outside of school, saying to the community the hours the teacher is supposed to be there and giving them a number to call if they dont show up. Working with countries, accountability, working with the citizens themselves is extremely important. A critical part of it and one of the things i mentioned is building his institutions is extremely important. We are working very hard to build institutions. One of the problems is the inability to collect taxes. There are countries, extremely poor countries where the top 1500 wage earners are exempted from paying taxes. Weve got the to call it what it is. This is not acceptable. We want to bring about their tax systems. We think that what we will find is that often the collecting of higher taxes or doing other things like removing fuel subsidies, which are basically the most regressive tax system you can imagine. Those things bringing more money into the public budget will allow countries to be able to provide the kind of social support mechanisms like cash transfers that we know to be effective. The strategy that i laid out grow, invest, cher is not the insurer, was not always the strategy of the World Bank Group. For a long time we focused on growth of gdp. This particular formulation is new. Putting growth, investment in people and ensuring the poor against plunging into poverty, this is something new for us and we want to help every country, especially in africa, get there. A huge part of the focus is in africa. That is where some of the most difficult challenges exist, but it is also the place where we have the highest ambition. John hamre alex, fourth row, lady with the green blouse. Audience member julie howard with food security. Thank you for focus on agricultural product entity. I wonder if you would comment on the world banks decision to withdraw funding from the centers of the International Research and world bank leadership. Dr. Kim we have not withdrawn money. We recognize the importance of Agricultural Research and we are in the process of finding how we can support it over time. We are focused on Agricultural Research, Getting Better at the expansion of extension services. This is all very real. It is simply what we did was a part of the budget that had been without review, simply renewing different grants to different groups over a long period of time. We simply moved that up into the light of day and find are finding the right way to support to other parts of the budget, these particular efforts. Audience member you said almost nothing about the institutional foundations and requirements particularly Civil Society and democracy. Dr. Kim it is a 20 minute speech. [laughter] but those issues are critical. The reference to Civil Society was on accountability. Weve been working very closely to increase accountability. There are many ways we have been doing it. For example, in afghanistan, where travel is so difficult we have actually , brought villagers and members of the Civil Society into the project itself by giving them cell phone cameras so they have cell phones and cameras and they take pictures of the project. They have a function that can get rid of the pictures if they are ever question, so they dont get in trouble. The level of involvement with Civil Society wasnt happening 20 years ago when its part of their tremendous change in the world they grew. Also, tenure is a critical issue in one that sorting out is often one of the most difficult thing to do. A country i know well, e. , has haiti, has been a problem. We are working on it and youre right. It is extremely important. Audience member could you elaborate on any World Bank Initiatives or plans to encounter the poverty emanating from the hot pot in the middle east like libya, yemen, syria, iraq, gaza and so on. You dr. Kim when i meet with leaders of government in the area, especially the new leaders, sometimes they ask us for arms. We cant do that. But it is a constant conversation that i have been having with the great thinkers and leaders in that particular region. To what extent is the problem ideological and to what extent is the problem economic . I get a surprising variety of answers and they span the entire range from people who say you cannot approach this from an Economic Development perspective, it is an ideological problem. There are those who say it is very much an economic problem. So my guess is that it is somewhere in the middle. Right now, what we are really, really focusing on is to try to do everything we can to at least eliminate the potential recruits that are there because they cant get a job and dont have an education. What are the major things we are trying to do . I agree with dr. Ali, the revered president of the economic Islamic Development bank. We are going to Work Together on a major education issue. What we know is even though the gdp per cap but it in some of the countries in the region have gone sky high, educational outcomes are still very low. And so, i think that something fundamentally different has happened in the prospects for quickly improving educational outcomes. The academy i told you about is essentially taking learning modules from the conkahn academy. Kahn is an amazing teacher. I have done it myself. There are fantastic teachers in every language. What they do is essentially put very simple but affect a lesson into a very simple format on software. So at what Bridge Academy does is essentially put very lowcost tablet and tablets are as inexpensive as 25 to make. They put them in the classrooms and as the students learn, the great secret is that teachers are learning, too. Rather than waiting 25 or 30 years to improve the quality of teachers, you bring Great Teachers into the classroom right away. For 6 per student, per month, they are able to do that and the teachers walk around and help the students who need the most help. The great news about the middle east there is a shared language, shared literature. There is a way that we think we could take scale, a new kind of educational program. We focus on areas that are weakest, the science technology, engineering and math. Will that make a huge difference . I am not sure. We know its a huge issue and we know that if we can have a regionwide discussion and take on another huge issue, which is water. We are not naive in thinking that measures focused on Economic Development full will stop all conflict. We now are convinced weve got to try it. Weve got to be aggressive about it in ink about and think a new about the intervention we may take to scale that might have an effect on the conversation. John hamre one more question. Audience member thank you. Good morning. Charles neustadt for the state department. Given the fact that the chinese and soviet systems are so different, both economically politically and ideologically from those in the west, is it really possible to work with bad them to help end extreme poverty or in particular, are they seriously interest in doing that and what would the strategies be with the west in the world bank would have to use to work with them on that problem. Dr. Kim did you say you are with the state department . John hamre audience member i speak for myself. Dr. Kim i ask because he used the term soviet. Audience member im too old to change. Dr. Kim you know, of the lessons for the bank and the new Development Bank will learn is multilateralism is very hard. Its always been really hard, continues to be hard and the reason it is hard is for us, the reason i have to run back is that our board lives with us. The conflicts that exist in the world are present on the board. One of the great things about having a board that lives or with us, is the people on the board get to know each other and what is happening is that they find ways of getting past difficulties that they wouldnt, i dont think, if they only came a few times a year. So is china serious about reducing poverty . The chinese have lifted more people out of extreme poverty than anybody in the world by far. Probably 600 Million People. They did it to a very strategy. A great extent in the manufacturing sector, but also agriculture. Are they serious about it . Absolutely. Are the russians serious about us . They are also a member of very Good Standing of the World Trade Group and endorse fully our goal of ending extreme poverty. I would say the end of extreme poverty is one of those things that the entire world has been able to agree on. It is probably the one Sustainable Development goal Going Forward in september that everyone seems to agree on. For us, it is not a question of ideologically whether we agree or not. For us, it is a question of just ensuring that we get every single bit of experience , advice and solutions in other , areas than provide them to everyone who has embraced this target. You know, for the first time in history, in my understanding, and i may be wrong, but my understanding is that in april of 2013 when the 188 member world government endorsed the goal to end extreme poverty, was the first time the World Bank Group as a whole had ever had clear goals. You know one of the fundamental lessons in management is if you try to accomplish something you have to have a clear target with a clear ending. The end extreme poverty by 2030. If you go backwards you have to rethink fundamentally if your organization is structured in the right way to get to the end of poverty. We restructured because we knew Global Knowledge was not flowing as well as it could throughout the organization. I think were all happy we did that because with the emergence of these new banks, the one thing they are not able to do quickly is to have 50 years of local knowledge inside the dictation. We want to be the group that provides that to them and everyone else. John hamre at least 50 other people would like to ask questions. We dont have time because president kim have to get back to the bank. Let me say this is an agenda allied not just for the world bank, but all of us. This is a goal everyone in this room and everyone in the country should embrace. We should all stay thank you for your vision your leadership. And would you please thank him with your applause. In march, the l. A. Times reported that california will run out of water in one year. Governor jerry brown recently announced mandatory water restrictions in for the first time in state history. Maude barlow discusses what she calls the global water problem. Maude we have Invasive Species overpumping, overexploitation of the water system itself. One study on groundwater taking says that if the great lakes are being pumped as mercilessly as groundwater around the world the great lakes could be dead or i indry in 80 years. You cant imagine. But it is possible to take a massive amount of water and destroy it. We are also doing with peter fixation, the green lj future for caseputrification, the green algae. There are 67,000 square miles of agriculture around the great basin and it is poisoning the patch we thought we got rid of. It is back in the very serious issue. Food and water watch chair maude barlow on the water crisis. Monday, aetna ceo said that his employees got a wage increase beginning that day. He called on corporations to invest more in their people. He said that income inequality in america is not sustainable. The Peterson Institute for International Economics posted the onehour discussion. Welcome back to our previously scheduled programming. It is my pleasure to continue from our Economic Panel into our practical world. We have, as a special treat today, mark, the chairman ceo of aetna, to talk about reestablishing the middle class. That is about as blunt a title as you can have. I find it typical of mark. Many of you have become familiar with him recently as he got immense coverage in the New York Times and elsewhere for his leadership. I think it is fair to say the word leadership. In taking the company forward, and amongst other companies, voluntarily raising wages of its share of lowwage workers within the company. Something that so far at least none of the other Major Health Insurers in the u. S. Have announced. We have gotten to know mark over the last few years. He is a member of the board of the Peterson Institute. We always knew he was an interesting, provocative realworld person. We did not quite know that he was going to do this. He came to us and asked us to think of the economics, not for aetna, because he it already showed that with managers and shareholders. That is not our expertise. But to think through, what would this been out and policies and encouragement that it would go with . His view has always a bit about what Corporate America can do, which i do not think certainly does not end the conversation there, but is a part of the conversation that has to be said. We are very grateful to have mark with us today. I can go through his bio. He is a has had a distinguished leader at aetna. He has done a pretty good job of delivering earnings per share of shareholders. He has previously held executive positions at cigna, medicare, he is on the director of the Verizon Communications Insurance Company, a couple of leading charities, and a member of our board. Aetna supports us, but in this case we have something to learn from them. I invite mark to the stage. Thank you very much. [applause] Mark Bertolini good afternoon. A little bit about who im not. I am not an economist. I will offer those apologies up front. I am also not your typical ceo. I am probably one of the quickly vanishing examples of living the american dream. I paid my own way through college, working for three different unions. I came from a union family. My dad and mother both worked parttime so we did not have insurance most of the time. My dad was a pattern maker in the Auto Industry and my mother was a nurse. It took me years to get through undergrad because i was serious about it. I was fortunate enough to get a scholarship to cornell, where i intended on going back to work in the Auto Industry and unions, but was enticed to start an hmo with four friends of mine. Here i am in front of you to talk a little bit about why we did what we did. At aetna. And more importantly, why we think corporations and leadership and corporations have lost their way. There is a big story in all of this that we can have a real impact. When i took this joeb as ceo of aetna four years ago, and i said, i have three goals. I am the 14th chairman of a 164yearold company. I have an obligation to make sure we have a commercial asset that continues into the future for another hopefully 164 years. The second, im a strong supporter of Health Reform in the United States. Its a shame we have people who are uninsured in this country. Even though they may have access to health care, it is poor access. I wanted to make that really work. Ive devoted our organization and my time to find a way to make Health Reform work. The Affordable Care act work. We have been behind the scenes as a company and will soon be the Largest Company in the federal exchanges in the United States in supporting the Affordable Care act. Finally, the last was a small one, but worth tackling. Reestablish the credibility of corporate leadership in the eyes of the american public. That has been a little more daunting than i thought it would be. People had all sorts of suppositions about how i should behave. I dont summer. I learned that was a verb when i was ceo. I hang out with motorcycles. Im a pretty straightforward person. I want to start with our mission as a company. That biggest threat to the Financial Security of every human being would be health. In the future. 75 of the next 10 trillion worth of debt and the United States will come from medicare and medicaid. When you look at the impact of Health Care Costs around the world, in every country we are involved in, there is an economic problem that threatens every economy. I think, if we can create a healthier world with healthier individuals, healthier communities where health care ought to be based, not in Big Companies like ours and healthier nations, we would have a better world to live in. Our view of health is that if healthy individual is productive and economically viable. That economically viable person is happy. We want to create a great economy around the world. That is what we mean by a healthier world. We can talk about this all day. A couple of words we look at Household Income has been flat for the last 30 years. Wages are not supporting lifestyles for the people who do work for us and our company. At the lower levels of our organization, it is 7000 employees at aetna below 300 below the Poverty Level. We look at this number and we just dont believe the income inequality is sustainable. Two christmases ago, i read a book. I got copy for all of my people on the executive team and said here is your christmas gift. I wrapped it up for them, senate to them, and said this is , christmas reading for you. This is a point of view and an alternative. Who are we as an organization, but what are we going to do as a company to find a way to make this different . Versus letting it happen . Do we want to be flat as the company, and how do we make a difference, what do we need to do . It was a dialogue about whether or not we were taking care of our people appropriately. Whether or not we were in best vesting in our employees. When you look at Corporate Cash sitting around in the world, it is 3. 8 trillion in cash, sitting either onshore or offshore. Cash is plentiful. We have lost our way in the way we educate Business Leaders. We are normally taught to husband scarce resources, and to put at risk plentiful resources. For most business education, we are told that scarce resource is always capital. So we should husband capital we. We are doing a great job at that. 3. 8 trillion in cash. I went to the city states in europe, that close their gates if the plague came by, sat in their homes, and then reopened it when they thought it was safe. Here we are sitting on huge wads of cash. The plentiful resources, we have always assumed our people, that there are plenty of people to go around. I would eighth the argument that it is flipped. Our single biggest investment is human talent. We have plentiful cash. We borrowed 2. 5 trillion to do the latest acquisition, at 1. 9 aftertax. You almost cant screw up and acquisition that badly to not make a return on that kind of cash. So ive got a few ideas. These are for those of you educated in business school. These are the numbers we Pay Attention to. We are told that these are the numbers we get measured by. This is how we get rewarded. We maximize return on equity return on investment, capital. That we have to hit our Quarterly Earnings fo her share number. This is sort of a result of dividing stock prices per share. I would argue the most important number on this page, Human Capital. Let me make this argument. We would rather invest in technology and new equipment because we can capitalize and depreciate, then invest in the workforce. Because it is all expense. We have been educated as Business Leaders that we create spreadsheets that have numbers on them that is the truth. Once the numbers are in the cell , it is true. And we manage our businesses to those variants. In reality, the numbers are all lies from the getgo. They will change as we go to our through our business. What we need to understand are the underlying assumptions within each of those spreadsheet cells. What are the variances around them and what are the risks associated with the effort we are about to undertake. Is it a risk worth taking . That is what incenses innovation. Not what is true, not what we prove, but what we believe is a risk worth taking as a business, in order to make the business work. Aetnas total shareholder return is over 275 . Earnings per share have grown at 13. 5 over that time. What is the difference . It is the priceearnings multiple. What is the price earnings multiple . The belief as to whether or not we can create a sustainable, valuable product that customers will continue to buy over time. I will argue that investing in the pe has given a greater return than investing in epf. If you look at guidance over the last four years, it has been well below 15 . We have always guided 8 9 and generated about 13. 5 , and yet are shown holders shareholders turn us up. It is because we deliver a consistently valuable system and sustainable product to our customers. It has been growing the top line by keeping customers. Who does that . 11. 2 billion cost structure 6 billion of it is people. Human capital. That number at the bottom should really be at the top. So, traditional measures of success really should be different. When we look at our employee value proposition, we looked at wages, we looked at benefits and Employee Engagement, and turnover cost. You can see these are traditional costs and a that we would put into a spreadsheet and, with the truth as to whether or not spending 25. 5 million per year is worth in best to reduce 120 million worth of turnover costs. Which is what our turnover costs are every year. That is 120 million loss a year in productivity, retraining, and duplicate staffing. Our Employee Engagement, like most employers engagement has been dropping each year for the last five years. If you look at Employee Engagement across most corporations, those scores have been going down. The economic model was necessary. We started this four years ago. We started first investing in the health of our employees. We started with wellness programs. We started with subsidizing Insurance Coverage based on income at the company. We develop six Different Levels of stratification where the people at the bottom, 45,000 per year did not take anything out of pocket for premiums. We looked at wages, which we found that we had about 5700 employees that were making around 12 13 per hour. We looked at Health Benefits which were becoming increasingly unaffordable for our employees. We did what most employees day increasing deductibles. Reduce the trend every year by virtue of benefits we offer. Not thinking about whether or not employees can afford it. This is a trend you see in all organizations. Invest in wellness lets get , them to exercise, stop smoking, does keep the wages where the market is and Health Benefit cost to us as an employers to reduce. Because it is an expense. It is in a spreadsheet that we can control because these employees work for us. We can touch them every day. What we came to find out, and i asked this question and encourage any of you in organizations to as the same question who are the people at , the lowest levels in your organization . Do you know what they are like and how they live their life . Asking that question is a much more formidable problem than i thought it would. It took us over a year to come up with the actual profile. I will talk about that in a minute. We started with wellness first programs. We started with eating properly, exercising, and invested in mindfulness and yoga. I will give you an example. I am a big yoga proponent and use mindful meditation every morning. Of the top quintile of the stress in our organization measured by heart rate variability and cortisol levels, those employees were spending 2500 a year or more on health care. We have now put 13,000 employees through the program. Those employees took a 12 week online Life Wellness course or a 12 week yoga course. We have seen 69 minutes in higher productivity, Health Care Cost drop by 3000, and we saw the trend in health care go down a reduction in trend of a reduction in costs by seven and 7. 5 . Just by investing in stress levels. We then looked at wages. We found that this employee population was 81 women, most of them single mothers. They had a portion of their children on medicaid because they could not afford dependent coverage. And they relied on food stamps a significant percentage. I said to the team, how is it possible a fortune 100 company with 275 total shareholder return, executives who get paid very well how can we sit here and let people be on medicaid and food stamps . What do we need to do to change that dynamic . We went through the struggle of the terrorism of the spreadsheet. Lets pull up the numbers and do a calculation. What can we come up with . The first meeting was to go from 13 per hour to 20 per i said, hour. Why dont we just try 16 and see what happens . You would have thought we were giving the company away because that was a very big number for a lot of people. About 10 million. Then we looked at the impact of wages on benefits. If you increase wages, they lose benefits. Or, wage increases go to benefits. So we said what can we do we manage the highest level of disposable income among the population . 5700 employees the average , increase is 11 . Everybody gets at least 16 per hour. The increase is effective today. Everybody got their raise this morning. Their bonus and 401 k contributions will be higher because it is based off of their base wage. Second part is we will now offer enhanced benefits for employees where they can get the richest medical plan for the least expensive amount. All they have to do is submit an application to a thirdparty who will verify they are under 300 of the Poverty Level as a family, and we will subsidize their for a lot of these Health Benefits. Employees, the savings can reach up to 3000 for year. That is a significant amount of money. We will take care of them if they take care of themselves we have a number of screening programs that they should go to. If they engage in getting healthier, we will make the investment in them and as long as they take care of themselves. The goal is to bolster engagement. I went down to jacksonville, florida i wish i had a tape of it for you i stood before a group of employees called a meeting on my way down. It was one of the most emotional event i have ever been out. Employees were actually crying in the audience. People were clapping because we had so much challenged their personal lives and be able to put food on the table and make distinguish whether to put gas in the car or food on the table. We had yet to measure engagement scores. We will do that the end of the year. This is the program. Benefits, the richest medical plan for the least cost, and 16 per hour minimum wage. Our wage benefit improvement will cost 26. 5 million per year. That is the full rate in 2016 if everybody takes advantage of the program. What we are finding is that for retail customers back to if we should have a single payer system, we will eventually get there. The United States has its own unique way of finding its way. We will have a bunch of individuals Walking Around with their own money, and a stipend from the employer or their government. And they will be buying health care retail. When they buy retail, 73 of them will make a decision on how much it costs in the first year, and if we honor our promise to them in making it simple and easy to access and having people on the other end of the phone to talk to them, 80 will be based on that relationship with the employees in the second year. For us, from an economic standpoint, it is best to invest in these employees for 26 million per year, in order to drive more. When we put this on the page, we had to go through all of the spreadsheet. Back to the spreadsheet example. In each cell of the spreadsheet, we put a number. Then we put a credibility next to it. What is the risk of reducing turnover costs, rework productivity ramps, reducing the amount of investment to get people up productivity . Then we said, how about free working and moving up in organization for people disenfranchised because they are doing someone elses work. Customer retention and customer satisfaction. Our industry rate has a net promoter higher than congress, but lower than Cable Companies and airlines. Not a great place to be. What can we do to improve net promoter scores . The way people feel about their relationship with our customers. You get to the point where credibility trust and holistic experience matters. We have done a lot to improve and make that 26 million worth the investment. We put those all on the spreadsheet, and credibility factors next to them so what do we need to believe in the way of risk factors . So our view is that companies can invest in their employees. We need changes in Economic Policy and tax policy, because if we invest in employees versus a machine, it will never depreciate. Machines go up to five years. Then you replenish them through the depreciation account. How do we think about investing in people, what are the policies we need, which will ultimately invest in the communities and our country, and around the world. The way the model works is health care should be local. Health systems should be providing care to people in the communities and people should be taking care of others in the community. Think of uber for health care. We get to a retail world we will , be able to invest in those communities and have a healthier Economic Community with a Health System that becomes an economic engine, in improving productivity of individuals, increasing economic viability and making them happy. These are the investments aetna has made. We called on a number of employers to engage in the same dialogue. We have a franchise kit that we hand to folks so you can increase wages to employees, i would say that those ceos are finding the same trouble in finding data about lois lowest compensated employees. I think it will take time, but i i was at a recent session where the ceo of walmart pointed at me and said, you have push me to do this. I cant get to 16, but i would like to move up on the wage scale. I believe there are a number of ceos who will come out with wage increases that matter. I hope we can start on the private sector side, dialogue that says corporations can improve the middle class as a result of investment. With that, adam, i will take questions. [applause] it makes so much sense when you say it. This is the trap of any of us talking about things, that we get into. You sort of see the light go on, and you say, yeah, its biased against investing in Human Capital. Why didnt i think of that, and cant we do that . I guess that the real question is that were coming off a 10year period in which accounting gains, along with corporate c. E. O. s, have not had the best reputation. So youve chosen to focus on this, because it reflects the kind of mindset that you think underlies a lot of other corporate decisions. But can you say a bit more about how someone who has worked in finance, as someone who has worked in a fortune 100 company, about how you legitimize Something Like that . Is it a legislative thing . Is it whats that thing, the Public Accounting Oversight Board . I mean, is it just teaching differently in Business Schools . Mark i think theres four factors. First of all, i think leadership needs to start asking different questions about how were spending our money and where were investing our money. And its a difficult dialogue because we have been so trained to, you know, heres the spreadsheet, heres the truth. Heres the guidance we need to have. Guidance doesnt always need to be the highest number you can achieve. Guidance needs to be a legitimate improvement for the shareholders that theyre willing to invest in. And so it really needs to come from the very top, where you Start Talking about and i asked the very question. I dont want the truth. I want to know what we need to believe, because if we believe it, then well find it. Well get it. Well make it work. So thats one. The second is, you have to deal with your shareholder based on your board. Incredibly, i have a wonderful board who embraced this whole heartedly. It was not a decision of theirs, but when i talked to them, they supported it 100 . The shareholder base, a different one. The shareholders, ive talked to all of them. They love it. They think its a first mover advantage. Theyd see the expense and say thats not too bad. How are you going to cover it . I say, dont worry it. You have to manage your shareholder base. There are a number of shareholders weve had in our base in the past that ive suggested that they probably ought to be better invested in Something Else than what we have. That is a difficult conversation. But i have had that before, or one of our largest investors said i want a higher dividend. I said, well youre not going to get one because we need to invest in the company, invest in the Affordable Care act and make our government work. Her response was, what if i dont like that . I said, get out of the stock. That was painful for three months, while, you know, she sold off her 26 million shares. But that, in the long run, if youre looking about the long run, its not about whether the stock price moves up over the next three months. Im a shareholder. I want the long run to work. Ill be a shareholder for a long time, even after im done with this job. Thats the second beast, your board and shareholders, the governance out there in the community. The third really is, what can we do in washington to get the right kind of Economic Policy and tax policy to support investments in Human Capital . Thats a slog. Fix the debt. Weve been to washington a number of times. Quite frankly, our action was out of frustration, that nothing will ever happen out of washington, so we might as well get something done at the corporate level. Why not step out and instead of pointing at washington and saying, you guys are the problem. If youd only do it, we could you know, release our 3. 8 trillion in cash and invest in the economy, i said, well, why dont we just sort of help everybody in our Organization Share in the economic recovery . Lets make this move. And ask other c. E. O. s to do it which weve done. A lot of other c. E. O. s. I belong to a group called higher ambition out of harvard thats really focused on, how can corporations do good and do well . What are the things we can do that will make a difference in our communities and with our workforce . It started with five of us. Theres now over 40. Last year, we had all the deans from the major Business Schools going, whats going on in here . Who are these people . And actually, harvard wouldnt have me as a student when i applied. My hair was too long and i wore jeans and a tank stop and birk enstocks when i went to business school. I think the nature of leadership is changing. The last piece is your own leadership team, your own employees, how do you engage them in a very d thats sort of the fourth factor. You have to have a real dialogue. I had my own blog. Im on twitter. I engage with my employees all the time. We have our own internal social media platform and we have real conversations. Im approachable. I dont hide behind security. I dont have a blackedout car driving me around. When i took the job, i said to our pr team you cant protect , me. All you can do is prepare me because im going to go out there and do this. So i think those four things really need to Work Together but it starts with leadership. It ends really with leadership and being approachable to your employees. In the middle, we need some help from our shareholders, our boards, and ultimately we do need help in washington. Adam let me focus on before i open up to questions, let me just follow up on two pieces of that. Im not going to flatter you and say how cool your leadership is, because it is cool. Let me focus on the shareholders. You talked about the Quarterly Earnings. I got to participate, again, the work were doing for the foundation, in support of the foundation, part of it is on the wage stuff were talking today. Part of it is on trying to do longerterm investing. So i was at this longterm value summit that was convened in new york and i think you were invited to that. Ultimately, what things kept running up against was in the u. S. , there seems to be a very narrow definition of fiduciary responsibility, that if im cal pers and im voting shares, i have to vote shares, maybe not quarterly but certainly on an annual return basis. I cant have a broad definition of shareholder value. You may or may not think thats fair, but thats certainly something i hear a lot in the investor community. Is that a real constraint, and if so, how should we be dealing with that . Mark if you talk to the south side, you get a very different story than you get from the longterm holders. When you have a conversation with them, you say heres our thinking over a longer time. We actually get some of our south sides to call the other side and say, you guys are thinking about this all wrong. We stopped giving quarterly guidance. We only give annual guidance but we still get beat up when their view of what our Quarterly Results should have been are off a little bit. I think its a continuing process. But i think we do need to have a longer running view. I think larry would say the same thing. We should have a longerrun view, because thats where youre going to make the right investments. Another part of tax policy. Why should an asset, which, by the way, you never assume in capital, at day 366 be incredibly more valuable than it was on day 365 . Why shouldnt our Capital Gains tax by 100 on day one and go down to zero in year eight . So that we make a longerterm investments and have an incentive to do it . And why cant Human Capital be part of that cycle . Weve underinvested in education because its a expense in the municipalities, an expense in the corporations. We just say, you know what . Weve got to cut expenses to make ends meet and this is an easy one. You know, because there are plenty of people out there. Well always find somebody smarter. Weve hit the wall on that. We dont have the talent necessary to move our organizations and our country forward in meaningful ways. Not because theyre bad people. We just havent invested in them in a way thats necessary. Adam my last question then before opening it up is on exactly that point, on training. Part of what we were talking about today, part of what you were talking ant with your about with your numbers, like the 26 million versus turnover costs is an emphasis on the workers youve got, treat them better, treat them differently. Theyll respond. But youre also mentioning the fact that the workers youve got or have available may not be the ones you want in a sense. You need to get more out of them. So youve done this initiative on wages. Where do you see, if you have an initiative on training or education invested, where do you think that goes in the pirate private sector . Mark we have to invest so people can go to school. Thank god i grew up when i did. I went through wayne state. The credit hours were a lot cheaper then. Today i couldnt afford to do that. Id never get out of the hole i was in. So i think weve got to find a way, and weve looked at Tuition Reimbursement as something we need to invest in. We need to give them the time to learn and find more room for them to be able to get educated, on things that matter, which on the skills for americas future out of the white house, which is really, how do we match up Community Colleges to the Workforce Needs of employers in the local community . They dont match at all. Even in heartford, where you only need underwriters and job programmers and people that work in all these new commuter languages. We even have a few systems that still run that. But i think that we need all of that education to happen. Yet we have kids going to Community College getting degrees that arent that helpful. I think weve got to encourage dialogue between the business communities and schools about what we need, so they can charge a legitimate tuition to get value for what theyve educated their students with. But i dont think that match is there today. For us, its a very difficult problem. We have to reeducate most of the people that come to work for us, because they dont have the skills necessary, in written communication. The nuns drilled into me sentence structure and diagramming sentences. I used to take my kids through that. They should actually learn how to communicate and communicate verbally. Its a big problem for us. Weve shortcut everything. Adam you know a c. E. O. Is down to earth when hes still quoting his fortran. I will open it up for questions. We have a mic in the back. So the gentleman in the back first. Hi. Im eric from the wall street journal. Nice to hear about wayne state in a room like this. Im from detroit. Mark great school. one of the first slides you showed was productivity and wage growth. I want to know, do you see any correlation between the productivity line flattening in recent years . You know, maybe since 2007 or so, against the longerterm of Slower Growth in wages . Mark i think the flattening of the republic difficult curve is directly related to engagement, Employee Engagement. I think people arent present at work anymore. And when you spend time talking to employees about what it takes for them, to get them engaged in their work, you actually have a larger number of people as a percentage in the workforce that actually come to work not to work. And, you know, its because weve treated them in a way that i just dont think is fair. And ive used that term before. We havent treated people fairly. So i think we have to find a way to reengage them. That takes a dialogue and it takes leadership from the very top. I think c. E. O. s who can get away with Undercover Boss probably shouldnt be c. E. O. s. They should be engaged with their employees. And thats the only way you get them to buy into what you want them to do to help you achieve what youre trying to do for your customers and for your country. And you have got to make it a Bigger Mission than, if you do this, ill pay you this. So we have that and 22,000 of our employees that work from home full time. Higher productivity, very low turnover, no Carbon Footprint because they dont have to drive to work. Theyre in their communities, with their kids and they have 24 hours a day to chew at 8 hours worth of work. I think all of those kinds of programs that engage your employees in fundamentally different ways are important. I think what were seeing is people actually not wanting to do work. That weve lost engagement of our workforce. David . First, i just want to say what a pleasure it was to hear your talk. I really, really enjoyed it. And secondly, i want to ask you a question, kind of coming off something adam said, because he said and my question is to ask you to reflect on both Business Culture and political culture. Adam said that this issue of fiduciary duty, and i get the the fiduciary duty in this country, at every level, is longterm. Anyone who is telling you they cant do x or y thats smart, because the fiduciary duty is telling you they dont want to. But the belief is worldwide. And this is a Business Culture question. But its also tied to a political culture question because you spoke of what you view as commonsense measures in both accounting and tax that would help facility investment in Human Capital. These are measures that there has been wide agreement on, i think, in some way. The details have never been hammered out, but accounting for investments in Human Capital as a depreciable investment, both in terms of gap accounting and and changing the kacht gains structure so its not a cliff, thats something theres been worldwide consensus on, and yet we cant get it done. So i would ask you to reflect a moment on both the Business Culture that seems to be kind of in our way in some sense and then the political culture. Mark so ill go back to the Business Culture and it will lead to the political culture. In the Business Culture, we have what i call the High School Physics experiment problem where we actually run the experiment to get the results we need in order for the experiment to be a success so we can get an a and move on. We dont do the real science. And so what we have in business, is because of a spreadsheet and because youve got a bunch of people that run a different numbers, people work for the assumption that supports the conclusion they that they want to sell you. I spent a lot of time trying to figure out where im being bull. Thats the issue, is how do we stop the terrorism on the spreadsheet where people search for the right assumption, the right number, in order to support their conclusion, versus using the actually science thats in the best interest of the company and most importantly thats in the best interest of its customers. Weve gotten lazy. We dont ask hard questions. We have no personal courage in saying, is this really something that we can do . What will we stand up for over the long run . And then that just bleeds right over into the political climate, because if the leadership of businesses arent willing to do that, ask those tough questions and have the personal courage to come up with what should be the right answer for everybody longer term, right . Then the Political Community is going to say, well, if you arent doing it, why should we do it . Then we point at them and say well, if you arent going to do it, then we wont do it. The only way you break the logjam is to have your own personal courage to stand up and do it. I look for people with personal courage. Am i willing to put my interests secondary to the interests of the enterprise and its customers and ultimately the shareholders . Because if we take care of our customers, that means we take care of our employees. That will keep our customers and give us that p. E. That we want which is a company thats a growth company, because we provide a consistently valuablened sustainable product over time. Thats the secret. Its kind of crazy, but thats the whole secret. So i think this issue is really around whether or not people have the personal courage. Ive had many a conversation with people in washington that say, yeah, you know what . Youre a master of the universe, i get it. What you say goes. But in my world, i dont get reelected if i do this. Then we have people that call people names because they point at them and say, because youre point of view is different from mine, im going to point you out as a bad person. Not argue the point. Im going to say youre just a bad person, and therefore nobody should listen to what youre saying, because youre an idiot. I dont want anybody to listen to what you have to say, because that would mean wed have to have a dialogue about what is right. There are always multiple points of view. We want that dialogue. Its around who is right and who is wrong and this pollization on points of view that i think are just irresponsible. Fred berk here at the institute. Mark, you made several references to the Affordable Care act. You didnt say much about it. I know you have worked hugely to make it work, make it better. Whats your assessment at this point . How is it working . What more needs to be done . How to make it most effective . Mark i think it started out the whole program was built on a level of mistrust between the industry and the government, because everybody thought that there was some sort of game to be had on this. And i have to tell you, the Prescription Drug program, which, you know, the republicans kicked off and the democrats hated, was really a very good publicprivate partnership. I had to demonstrate that our technology worked a year before we went live, in order to be part of the program. So we had this mistrust that caused the government to believe they needed to build it all in order for it to work. And that got off to a bad start. Which i think put a pox on the program that was not fair, because we do need to get people access to insurance. The other part is, because its such an issue, nobody has really touched it since it was passed. Medicare gets touched every year, like it or not. Congress, interestingly enough runs medicare. And it gets touched every year yet we cant touch the Affordable Care act, because if we touch it, make one change to it, then everything gets opened up and we have a dog fight over the whole thing. So we need to fix it. There are a lot of things that could be done to fix it that could make it a lot better and get more access to people, but right now, because its stuck in limbo, we cant do anything with it other than try and make what we have work, which i think people are doing a pretty good job at, given what weve got to work with. So there are a list of things. I think whoever runs for president next is going to have to, you know regardless of party, is going to have to make promises to the American People that its going to get better. So that list of things is pretty common, quite frankly, between both sides. More power to the states. A little more flexibility around benefits. Probably those are the biggest pieces. Hi. Im nancy with the ilo. Im just interested you know, the socially responsible investing sector is now, including with sovereign funds over 1 trillion, representing over 1 trillion in investment. Id be interested to know whether you, if this Critical Mass builds of your fellow ceos and companies and the Harvard Group you mentioned, the leaders, are in a discussion with that community, because if they get further into the definition around governance, i think it could help push it faster. Mark well, and i think what we need to do is we need to have more, so trillions a trillion is not a lot, unfortunately, if you think about it. Its not a lot. And we do engage with the sovereign funds on a regular basis. Were engaged in a lot of other places. When we go to europe to meet with investors, they love it because they cant stand the dialogue here in the states when they come here to our meetings because they get shut down by the other investors sitting at the table who are very shortterm. They actually get embarrassed by the other investors, because they go stop talking about the strategy stuff. We really need to know whats going to happen next quarter. And so they like it when we go over there. I was just over in the u. K. I met with a number of investors to have that very conversation. It was refreshing for them that we were having that kind of dialogue. I think we need to find the venues to do it. But i think we need to get our policies. We used to offer shares to all after our employees. We all of our employees. We wanted everybody to engage in growing with the company. We cant do that anymore, because iss wont let us issue enough shares. So fewer and fewer people get shares every year. And so weve got this we actually had policies in the interest of good governance, quote unquote, that actually worked against sharing the wealth. My salary hasnt increased for six years, but yet my wealth has increased because i take it all in shares and im growing with the company as a result. Everybody should have that opportunity. We do have employees that can buy shares, but they dont get them. We cant give them to them because we cant issue enough shares as a company to make it happen. Iadam let me pose another related question to you, mark. We have tried to do our bit on thinking about which sectors, which kinds of companies can follow your lead in this area. Youve spoken about it in general moral terms but we talked earlier about mcdonalds or walmart or things like that. How much do you see of what aetna has done as your consumer facing company, an inherently domestically oriented sector versus other industries or other companies . How much do you think this is just general, you can do this . Mark i think generally so it ill say general for this reason. And its not 16 an hour. Its not the benefit change. The real opportunity here is having the i can ask a number of c. E. O. s, and i have, do you know who your lowest compensated employees are . And they dont. And so its just its about taking the journey to understand who these people are. And how are their lives . They are the people meeting your customers every day. How are they living their lives . Do you feel good about how theyre living their lives . Its in that search and that looking for that information that you start to say, well, whats fair . And having that dialogue with your own team. I can tell you, i mean, our team, they all were ready for it, by the time we got to the final. They said, what are we doing with the social contract with our employees . How are we engaging them in different ways . Because we cant do all the work in the c suite, thats for darn sure, running a 58 billion company. So i think everybody has to do the home work. Its really about doing the homework and having the courage to do the homework, and the energy to fight through all the layers in the organization that will prevent you from scrolling up the place. We have screwing up the people doing their best to keep the c. E. O. s from screwing the place up. Youve got to fight through all those layers in the company to find that information and be informed. And say, looking at this, is it right . Its a question of right. Its not a question of fact. There is no truth. 16 an hour maybe 12 or 20 elsewhere but what is the right thing for us to do in the way were leading our organization and engaging our employees to be part of our success . Ted here at the institute. So you i should know this but i dont. So you are mostly youre both a u. S. Corporation and a N International corporation and you have some International Employees too . I dont know what the split is. One interesting question in this sort of International Institute and the comparative, is there a difference from how you have approached all this, dealing with u. S. Employees or nonu. S. Employees . Maybe you dont have i mean maybe the base adjustment process has been primarily the u. S. Phenomenon. But it would be interesting to me whether there are differences about how you have been doing this aspect of your business around the world. Mark the embarrassing fact is that we treated our International Employees around wages better than we treated our domestic employees. Because we were growing, investing in all those markets. We had to get the very best people. So we were changing wages more than once a year. And there was a different number. There was no number that we put on it, like 2 , 3 , 4 . We just said, what do we need to do in Southern China . What do we need to do in indian, in the middle east, in order to get the best people . In retrospect, i never had an argument with the team over there because theyve got a were building out around the world. How do we find the right people . I was a bit embarrassed by the fact i could have that dialogue with them but internally it was the spreadsheet number when we put the operating budget together. What should the merit increase be . We treated our International Employees probably better than we did our domestic. Hi. James sterling. Im wondering if you could reflect a bit of it on government policy and from the business perspective, between the breaks between the larger employeers and the smaller employers, and simultaneously, between the full time and parttime employee, because a lot of the breaks here come when we try to enforce something at one level but cant do it at another level or maybe we shouldnt do it. Id like your reflections on those two break points. Mark our programs for all our employees, so we didnt break it between fulltime and parttime. I would say that weve not yet been able to tackle the issue of smaller suppliers that work with us. Weve encouraged everybody to take a look at it, but everybody has their own sort of issue, set of issues, particularly the smaller suppliers that work with us. I think the smaller market has a much bigger challenge in dealing with some of these, because of the ability to pass prices through, but thats the next level for us to look at as a company is, how do we think about the Supplier Base and being able to help them do what they should do for their employees . Because their inputs are very important for the end results for our customers. But thats the next level, next generation for us to look at. Jacob from peterson. I was wondering if you could elaborate a little bit on how to spread the message and not from the perspective of what you as a ceo can do but how the public, whether we are, you know, just interested individuals, research institutions, csr, guided investors or unions or whatever it is, how you can promote the kind of corporate changes that youve seen at aetna . What are the questions that should be asked of your peers in other organizations in terms of transparency. You mentioned, which i thought was kind of interesting, ask the question, what is your lowest remunerated employee and how does that person live . So are there more of those types of questions that should be basically placed by the public . And is there you know, is there a role for the media here, and how should we think about that . Adam we obviously have a role for the Peterson Institute. Mark i think its one of the reasons, you know, were holding this is not because of some ground swallowing in the community but i actually reached out to adam and said, ok, this is really for our employees but its going to get out into the public domain. What do we do to protect the effort . And how can you help me think through the attacks from the right and left that ill get as a result of making this investment . Which we were able to minimalize. For all intents and purposes even the u. S. We were able to minimize that by doing proactive outreach. The other part is the ceos hang out together all the time so there are a lot of conversations. Going, how did you do it . Why did you do it . We have an Information Packet we can sent out to our fellow ceos. I can tell you some ceos have come to me and say they are embarrassed that they did not think of it first. It has raised the level of awareness amongst ceos about what is happening because we often get a distilled spreadsheet number. It looks pretty good. In there is a number that says we will really give the employees a 1. 5 increase. That is wrong. You never get down to that level of detail. It is getting ceos to understand that there are people around the Organization Need to understand it to do their jobs better and well. It is not poorly intended, it is actually well intended. They are trying to do the right thing for the company. These people need to be taken care of. We cannot continue to do what we have been doing to them. When you send that message, the 1. 5 does not sneak into the operating plan. The last time it did, i said to my team we will move it back up to 3. 5 and the rest will come out of the executive incentive pool. If we find it throughout the year, i will put it back. But, we are not doing this to the frontline employees. If the ceo does not ask they , will not find it. If they dont say here is what we need to do as a company, they have the courage to send that message, an 11 billion operating budget, there are other things we can do to solve that problem. We need to do it. 26 million out of 11 billion is a number we can solve for. If we do, more engaged employees, higher engage customers a sustainable topline, growing model, we can do that equation. Our customers do that and our shareholders do that. That is where we should win. Adam i think that would be the rousing note on which to end it. It has been terrific to have mark with us today. It has been terrific to have this dialogue between the active leadership and the intellectual background which mark has kindly encouraged and put in the time to let us have. Obviously, these are issues where they will be continuing to set an example and push and will be issues we will continue to research and push. And, maybe there is a higher equilibrium we could get to which economist could only hope for. Hope for equilibrium. [applause] this years annual white house Correspondents Dinner is april 25. We will have the program live here on cspan. Leading up to that annual event, we will show you some president ial speeches from past dinners. Tonight, president clinton from 1998. President bush from 2001 and 2002, and president obamas remarks in 2011. It begins tonight at 9 30 p. M. Eastern on cspan. Tomorrow, Hillary Clinton will an and months of speculation and launch her president ial campaign. The first word of her candidacy will come from a video posted on social media online. She will then turn to states such as iowa and New Hampshire looking to connect directly with voters in small, intimate settings. We plan to air her announcement tomorrow on cspan when it becomes available and get your reaction as well. On monday, florida senator marco rubio will announce his candidacy for president at an event in miami. Rubio becomes the third republican to enter the gop race. We will have live coverage of the announcement on monday at 5 30 p. M. Eastern. Were you a fan of cspans first lady series . First ladies is now a book looking inside the lives of all of the first ladies of american history. More than 50 biographers learned the details of each first lady, their lives, their ambitions and their unique partnerships with their spouses. First ladies provides lively stories of these fascinating women who supported their families and famous husbands and even changed history. Cspans first ladies is entertaining and inspiring read and now available as a hardcover or youebook. Former House Majority leader eric cantor and former human secretariy spoke at an event at New York University on tuesday. It talks about technology and reforms to hospital care. This is just over one hour. I am very happy to welcome you here. Tonight, we are honored to host the Third Annual Forum for discourse in the public square, which provides a focus for thoughtful and respectful discussion of controversial topics and issues. A special thanks to the Weissberg Foundation for their generous support of this foundation. We are also grateful for the support of nyus institute of health. The working to on the next generation of Global Health pioneers with the Critical Thinking skills and entrepreneurial appropriate shoes approaches necessary. Please help me welcome dr. Cheryl healton, who will introduce our topic and special guests. [applause] Cheryl Healton thank you michael, for that kind introduction. Good evening everyone. I am delighted to invite you to this installment of discourse on the public square, cosponsored by ny you nyu. And thank you, nina, for the support of the weissberg family. The goal of the form tonight is to explore elements of the law about which americans sharply disagree. Last month, the Kaiser Family foundation reported the narrowest margin of difference yet, with 43 unfavorable towards aca, and 40 in support of it. One thing of which we can probably all agree is that the situation that prevailed from the passage of the aca was not a good one. Over 70 millions lack health care coverage, and millions more were under not insured under insured. First, this complicated law deserves a very brief Health Reform 101. For that, i turned to my longtime friend and mentor, joseph, a former secretary of health under president carter. Joe tells and eliminating story which i will recount here. One that they can that can be told in four short chapters of a winding tale about Health Care Access for americans. Chapter one, the years before world war ii during which Health Insurance itself was actually quite chapter two, president truman was the first president to make it to the conservative concerted effort to provide health care for americans. But he had to settle for a few amendments to the Social Security act. The act in 1960 covered poor people and older people, but while it was meant for the rural poor, the dollars allocated were consumed by high population states like california and new york, leaving it sponsors quite disenchanted. From the time of president trumans first effort, medicare and medicaid was part of the democratic four. But it yielded nothing in terms of legislation. Chapter three, when president johnson was elected or appointed soon after the death of president kennedy, he told him we will fight for medicare as long as we have rough in our bodies. Breath in our bodies. Other issues surrounding the lack of coverage for americans they were able to pass medicare and medicaid linked to the welfare system. Under Medicare Part d, doctors were protected. They were represented by the american medical association, a group that did then and still does oppose socialized medicine. President johnson traveled to independence missouri, the birthplace of president trumans wife, and cited into law, after which she and president truman or ceremonies they given the first two medicare cards. The expansion protected the pharmaceutical industry. And some say that the aca protects the pharmaceutical industry. Finally, we are now at chapter four, which raises the question, does the path we set for ourselves then result in a series of bonanzas . First, for the doctors and hospitals. Second for the pharmaceutical industry. And third now for the certain for the Insurance Industry itself. So here we are tonight, having traveled a long route to new universal health coverage. Something enjoyed by the citizens of every other developed country in the world. But we now stand at the crossroads, with a Pivotal Supreme Court decision in late june, and an election on the horizon in november. Will we stay the course . If we dont, what are the implications . For that discussion, we for turn first to two people who may know more about the aca than anyone on the planet. First, i would like to welcome secretary Kathleen Sebelius. She also served as governor of kansas from 2003 two 2009. Secretary civilians is a strong supporter of the aca and we are honored to have her with us tonight. We are also privileged to have with us former House Majority leader, eric cantor. He served the seventh Congressional District of virginia and in the house of representatives. Congressman cantor has been a strong voice in opposition to the aca. On a sad note, congressman cantor upon father cantor upon cantors father passed away. We express our strongest condolences to you and your family. [no audio] mcmahon is perfectly suited to this challenge. He was an attorney and cofounder of Purple Strategies llc. He got his start on the senate and political staff of edward kennedy. Steve has also served in senior roles in three president ial campaigns. Please join me in a warm nyu welcome to Steve Mcmahon Kathleen Sebelius, and carters been cantor. Congressman cantor. [applause] Steve Mcmahon on behalf of nyu i actually teacher. American Public Opinions. Too bad those of you who are students will not be here next semester because that is when i teach that. Thank you very much for coming. The course that i teach has a lot to do with politics and Public Opinion. And the moving and shaping of Public Opinion and how Public Opinion flows. Theres probably nothing more controversial and politics over the past five or so years than the aca, beginning with the path to passage. And then, of course, the past five years of implementation. I sort of want to start with the notion that president obama came into office with, which was this notion that democrats and republicans could Work Together on matters of great importance to the country. And i think early on in the the the administration, there was contentiousness around the stimulus bill. And the next big thing on the agenda was the aca which took quite a while to negotiate and pass. So, i want to ask both of you was that was that dream or that vision of bipartisanship something that really wasnt possible in washington and the political environment today . Either one of you can start, but i would like both of you to address it. I know democrats were sometimes frustrated that the president took so long trying to get republican support. And it seemed it seemed that it might be possible, but then it was passed on a very partisan line vote. Mr. Leader, if i could start with you, was it possible or is it possible in washington today to get Something Like this put together and passed on a bipartisan basis . Eric cantor well, steve, first of all i would say, yes. But unfortunately, that did not happen in the case of the aca. As you rightfully suggest, we were in a context back in 2009 where the president had just got elected. Obviously, historic election. The nation possible first black nations first black president. The nation had just experienced a financial jolt in the markets. And as you suggested, we passed a stimulus bill, which also was not a bipartisan affair. For a variety of reasons. But there was certainly, i think, a commitment by all of us to try and address and improve the situation of health care in america. I would like to do start i would like to start any conversation of health care in the u. S. And i know that the secretary spent time to make sure that the system we have here, despite what some of the International Number say i would still contend that no matter where you live in the world, if you can afford it, you will come to the United States for health care if you are sick. And that is the condition, if you can afford it. When the president first edit his discussion with us on the hill back in 2009, i remember that he had convened a session and i know the secretary was probably there at the white house. The premise was we needed to do something about the cost of health care. And the cost, because the government, being the largest payer of health care, couldnt afford it, the taxpayers couldnt afford it, and businesses, where most people outside government get the health care plans, they were also saying that it was becoming too expensive. It was that premise that i think brought us all together. I think what happens later, as we got into the spring months that year and into june, there was a divergence, if you will. Instead of that becoming the priority, lowering the cost and increasing the access, it was almost, in my opinion, a sole focus on how to be guaranteed universal coverage and a matter what the cost . I know that that wouldnt necessarily be the view shared by the white house, but from what the kind of input that we wanted to have, it was just unfortunately not integrated into what happened, which resulted in the aca passing the way it did. So Steve Mcmahon secretary . Kathleen sebelius it probably wont come as a great shock, i know it wont, to the former leader, that i will have a slightly i have a slightly different perspective on those early months. But i do want to start with a moment of personal privilege. We have two great Health Leaders here now the dean of the policies go at nyu, but served with me as the head of one of our great agencies. Kind of the think tank at hhs. And peggy hamburg, who just stand stood down as the commissioner. I just wanted to give them a shout out. But i would go back a little bit further than where leader cantor started. The president talked about universal health care on the campaign trail. It was one of the things he committed to from the moment he announced for office. He said the next president of the United States should be a president who is able to sign a universal health care beer bill in the first term. He campaigned about it all over the country. And i would say that the aca really had three goals. They were talked about a lot. One was insurance for the portion of the marketplace. It really was a slice of the marketplace who either were uninsured entirely, or do not have affordable coverage in the workplace. Most americans who worked for government or for big jobs or were poor or were old had health care, but a slice of the market did not. Affordable access for those folks. Secondly, as leader cantor said, was definitely cost control because in the United States and i will compare us to other developed countries we spent about two a half times per capita what anybody spent. And our Health Results are pretty lousy. We have great care for some of the people some of the time, but in terms of great care for everybody all the time, we are not getting very good bang for our buck. I think that was number two, not only better care, but also lower costs. And i would say the third was a real opportunity for the first time to focus on Delivery System reform. And what is it that we could do for population health, how do we get people in the United States to change the pattern of living sicker and dying younger than most of our competitors. You know, the aca had five different committees writing bills, having hearings, three in the house and two in the senate. Lots of amendment. I think the hope was that it would be a piece of bipartisan legislation. And then amendment after amendment was adopted, in hopes that this would bring people together. I think the president was frustrated. I know a lot of us who spent a lot of time on the hill testifying, working with individual members, were frustrated that at the end of the day, the bipartisan issue. And it was passed with a partisan majority. It had a lot of neardeath experiences, not the least of which was when scott brown was elected to fill Teddy Kennedys seat. The 60th vote in the senate was gone. But i would just add one other piece to that scenario. The president said in 2009, you cant fix the economy without fixing health care. And in spite of a lot of internal pressures in the white house, a lot of senior advisers who said do Something Else, do anything else, pass a bill that ensures 20 of your favorite children. [laughter] pick three older people who need insurance. Just get out of this phase because it is too, as we heard earlier, 70 years of contentious debate. Tried and failed over and over again. Lots of people felt this was the wrong time in the wrong place. I think you is precedent. He was precedent. The stock market was doubled. We have the strongest month in, month out job growth that we have seen in decades. We have Consumer Confidence back. The American Economy is thriving. And Health Inflation is the lowest it has been in 50 years. So i would say putting the bet on even that big contentious process was a good bet to make. Steve mcmahon here is a question. Was it partisan because of partisanship . Or because of a principled point of view that people had that they disagreed on . For instance, when you look at what the republicans have recently proposed, the hatch bill in the senate, many of the elements includes things that are in the aca. Yet republicans seem to want to repeal the aca and vote pretty routinely to do that, but the embrace many of the imbalance elements of the aca. Which elements are there broad agreement on, and which elements of the aca to you feel and the republicans feel need to be changed . And just to make sure you dont think im going easy on the secretary, there must be some things in the president s bill that if you are going back and doing over, you would do differently or your change what you are doing now. If you could, after the leader provides an answer, if you could address that, that would be great. Eric cantor i mentioned in the beginning or the substantive policy differences that began to divert or begin to come about. And it started with this notion of cost being the priority. And i think that is derived from basic policy differences. You know, you can never divorce the policy all the way from the politics in this town. But i will say the basic policy difference started with the notion that the government compels you to do something, and in order for that to be the case, the government needs to define what compliance with that mandate is. That is where the fundamental difference starts. With republican position and the democratic position. And it is about the mandates, it is about the the insistence that washington new best what kind of health care had to be present in peoples plans. The proverbial situation where you know, i remember i had a constituent probably in his 60s and was single. He had written in saying he had gotten one of the letters that his Insurance Coverage was being canceled because of the aca. Then he found out what it would cost to get the new coverage with obamacare in place. And he said, wait a minute, why do i have to pay that . And why do i need for to the need fertility coverage . Again, that just points out the case that when you move towards defining what compliance was with amended, that was a real problem. So i do think that fundamentally, there is a real issue with where republicans are and and rejecting what the acas premise was and where the democrats are. And you say, now, what is in there that the republicans would support . I dont think anybody should tolerate their rejection of Insurance Coverage to someone who has a preexisting condition. We just had a different way of going about addressing that issue. There were high risk pools reinsurance funds set up at the state level. If there were adequately funded, they could play the part, if you will, of the reason why there was a mandate. The reason some of the reason why i think there was a mandate in the bill was that you didnt want people running naked with no insurance, then all of a sudden coming in and getting the insurance. So, it would mess up the tables. Steve mcmahon dont those two things have to go together . If you are going to cover everybody without discrimination dont you have to require the younger healthier people the folks running naked, as you say to get in the system . Eric cantor no, i dont think you have to have the mandates. This is working the burwell the decision that the court comes doubts with comes down with you know then the two sides will have to work with one another if theres going to be a resolution here. I think that it is fair to say republicans are not going to accept a mandate. As you can tell now, and the secretary spoke about some of the attributes of Health Care Cost, listen, it is early. Health care costs are somewhat attributed to the fact that they have not gone up because we have not had the Economic Growth that we would like to have. Historically since world war ii, the growth has been 3. 2 . So i am not sure sure that right away we can say it is aca that brought about all these savings. But i would say that if the two parties are going to come together, the one thing that republicans are going to say is that they are not going to be for mandates. I mean honestly, you have a light enforcement of some of the employer mandates or some of the individual mandate. You have the employer mandates for the midsize companies, if you will. That is put off till next year. Because of that, the individual mandate is lightly enforced. These cuts of provisions are what i call sort of your vegetables, or the desert was the coverage of the kids who are 26 and under on your parents plan. The kinds of things that i think both sides will support. Depending on what the Supreme Court says, i think there will be an opportunity for both sides to say we are not getting everything we want, but we have to start over. 4 so what about some Steve Mcmahon so what about some of the vegetables he says here . [laughter] Kathleen Sebelius the vegetables came from the heritage foundation, which is hardly a liberal group. The mandate issue was a longtime republican concept. It was in governor romneys bill in massachusetts. And it was therefore a very specific reason. I hate to sound too much like a geek, but i spent eight years as an insurance commissioner. And what i know from watching state after state after state is if you pass a bill like new jersey did, Like Washington state did, like a variety of states did, which has community rating, no preexisting condition, no differentiation in price based on health conditions, and you dont have a balanced risk will, rates are unaffordable. In fact, in washington insurers just left the market. For two years, they the living they literally had no Insurance Coverage for individuals and Small Business owners. If you want to get rid of preexisting condition coverage, which i would agree everyone says they are for, unless you want a singlepayer plan if you want the private Insurance Industry to survive, you have to tie that to the balanced risk pool. Some people will get sick, some people wont. I find that story about the gentleman who didnt want maternity coverage or fertility coverage, my guess is his drug plan still has viagra, so he didnt get out of it entirely. [laughter] but if you dont want gender rating, which was legal up until the Affordable Care act which meant that women in this market again, we are talking about a small market if you work for a big employer or you work for government, we have always had package benefits. You take the package, but nobody said ok, i am young and single i dont want maternity coverage in mind. You have it. That means that women are charged more than men. And women in this market, up until the Affordable Care act was passed, could be charged 50 more than men. And many plants today cover maternity coverage at all. So women were not only paying more, but then paying outofpocket, for coverage that they needed. Interest is about benefits that some people will use and some people wont, but if you, again believe that gender rating is something that Insurance Company should be allowed to do and many people say we are against that then you have to have a package of benefits that applies to anyone everyone. This is hardly the perfect bill. It was drafted by five committees. We had a snapshot of what the perfect bill could look like. Steve mcmahon you are not talking about romney care, are you . 5 i am not. Kathleen sebelius i am not. There was negotiations that the president was asked at the table and went to every aspect of the bill. There were different approaches. When the Massachusetts Senate seat was lost, you then had to retreat to reconciliation, which is a procedure that only allows some things to be considered and others not. I think at the end of the day there are a lot of things that have to be fixed. The individual mandate did go into effect this year for taxes. It is fully in effect, the way it was exactly written. The employer mandate will kick in, but frankly, for employers folks who have 50 or less employees are exempted from the law anyway. That is the way it was written. That is about 94 of employers. For those they are in, but most of them offer Health Insurance anyway. Things around Administrative Burden had a balance had to balance with the packages are of benefits right now. Every state has the state mandates that they have passed included in the benefits package. We now have i think the biggest harm rights now is that there are lots of people in america who are too poor to afford Health Insurance because they are in a state that didnt expand medicaid. And the way that the Supreme Court determined the medicaid decision, we have now millions of people in the country who literally dont qualify for anything and a kind of in a catch22. So i think there are lots of opportunities to Work Together. Lots of exciting things. I hope we get to the Delivery System area, where there is a lot of agreement about private employers, payers, providers and others that we need to have moved away as fast as possible from people or service into a valuebased proposition. From fee for service into a valuebased proposition. And i would agree with that one additional Supreme Court case. Maybe once this is decided, we can stop really getting relitigating the past. Steve mcmahon you mentioned the Supreme Court case. I want to get to the bending of the cost curve, which seems to be occurring already. But could you give the audience here, and in particular the students, a quick summary of what is at stake in the burwell case . And what you think might happen if the Supreme Court comes in and says you cant have these exchanges funded the way they are funded . Kathleen sebelius it is actually forwards, established by the state. Those other keywords. And the plaintiffs have put forward an argument that suggests that only states that set up their own Health Exchanges are entitled to subsidies for those constituents. And that would be 17 states. So in 34 states, if the plaintiffs prevail in this case, the subsidies which make insurance affordable for now about 8 Million People who have signed up for coverage would cease to exist. But that is just up one. The subsidies would go away. The Affordable Care act also has a provision in it that if you fall below a certain level, if insurance still is not affordable even with the subsidy, there is no if you take away the subsidy you suddenly have an additional perhaps 68,000,000 people who suddenly have unaffordable insurance and they drop out of the market entirely. Insurance companies meanwhile have assigned risk pools based on new customers. They have projected rates waste on the customers