Transcripts For CSPAN3 World Leaders Summit On ISIS 20151005

When you were working to establish the exchange that there was the template your website had issues and im assuming all thats been resolved and the people that went into medicaid temporarily cms approved are now out of that . All of those temporary medicaid members have been redetermined into either requalified health plans or medicaid. Great. And ms. Otoole, do you still have a backlog of about 180,000 public insurance renewals in the system . Thank you for the question, congressman. We do not. That has been resolved. Okay. And it says despite additional funds, im sure you do continue to struggle some, obviously. And again, i applaud all of you for what youre doing. The goal of our committee is to find out where we can make improvements, right . But minnesota announced that theyre going to revert to the old system for minnesota care because of mshares problems, is that true . Congressman, that is true just for a short period of time, and that is we have prioritized that functionality for the very beginning of 2016. Okay, great. And in hawaii, i guess youve totally turned yours over to the federal exchange now. Because the information i have you extended it till october of 2016. Originally announced Health Connector would shut down due to insufficient funds. But recently they have extended it through october 2016, is that true or not true . The outreach will extend through open enrollment and then the Corporate Affairs of our independent nonprofit will wrap up and it will take till october to do the accounting and the like. Okay, great. Mr. Chairman, i yield back. Thank you. Mr. Tonka, youre recognized for five minutes. Thank you, mr. Chair. Let me thank all of our witnesses for joining us today and presenting good information. I know that some statebased marketplaces have faced challenges in building and managing their i. T. Platforms. These challenges are well publicized. What is less well known perhaps is the efforts that statebased marketplaces have in implementing and tailoring the acas of their own citizens. So id like to ask our witnesses, what is your statebased marketplace doing to ensure that consumers in your state are receiving culturally and linguistically appropriate outreach as well as health care . Mr. Allen, we might start with you and well go across the table. Thank you for the question, congressman. In taking over responsibility for the marketplace, that was exactly the number one question that landed with us was given the success weve had in oregon in driving down the rate of uninsured, the remaining population is relatively small, but relatively hard to reach. And so we have made the decision to move from a wide Media Broadcast advertising kind of an outreach approach to something thats much more tailored that works through community partners, organizations that work in communities with color and other areas, much more targeted kinds of technology, outreach to try to work hard to get to those geographic and demographic populations that are amongst the hardest to get insured. Thank you. Ms. Otoole, please . Thank you, congressman. Happy to answer that. And weve learned in minnesota that with the remaining uninsured, like mr. Allen said, they are harder to reach. We have 26 statewide grantees who work in every Community Around minnesota to help reach out to these populations and enroll them. Were really proud of that. And we paired them also with Enrollment Centers around the state that are sponsored by brokers. And so were trying to come at it there afrom all angles. You know, weve learned this is not an easy decision for people. So they need help and they need inperson assistance so weve focused resources there. Thank you. Three principal items. This year our media strategy is very focused on ethnic media dealing with the hispanic, portuguese and asian communities in pockets throughout the state that are underinsured. Secondly, our section of navigators and walkin centers for this fall is specifically targeted towards underinsured communities. And thirdly, theres an Innovative Program where because massachusetts has a state insurance mandate, our department of revenue knows who does not have insurance. Now, they would never share data with us. Thats out of bounds. But they are able, on our behalf, to notify uninsured residents of their opportunity to become insured through the statebased marketplace. Thank you very much. Mr. Kissel. We changed our outreach model from a mediadriven model to a personal model. We added marketplace sisters to speak, the 15 or 20 languages and dialects of the people of the nations of the pacific rim in addition to the cultures of america. We went from a call center to a personal outreach, although we still operated the call center. And we went into the areas where, for an average, there are people who lost their homes due to economic conditions. We find that more than half of those families have one or two working members. And we help them enroll in coverage. We also moved forward with the essentially what was im not a rocket science, but the Social Security model where you have multilayers of a, depending upon the needs of the individual. You can call and if youre sophisticated, you can logon to the computer. And if you need help, we, in fact, make house calls. My telephone number, personal Contact Information is on the website. Wonderful. Mr. Lee. Yes, from day one, weve done outreach, which is anchored in local communities in a wide range of langlanguages. Its not just about outreach. Its about making sure care that is delivered that is culturally appropriate. We have contract requirements in our negotiations with the plans to hold the plans to account. 3 of our 12 plans are among 9 nationally recognized plans for providing culturally appropriate care. Its something were going to hold our plans to account to. Thank you so much. And finally, mr. Wadle, please. Thank you for the question. We, too, have been focusing all of our outreach into our communities where we know that in connecticut, that our uninsured reside in basically ten zip codes. And so we can go right into those communities and work with those residents. Thank you very much. Thank you, the gentleman yields back. I now recognize mr. Flores. Thank you, mr. Chairman. The exchange still shows im ineligible for coverage. Anyway, states continue to opt out of the theyre trying to state up their state exchange, theyre migrating to the federal exchanges, we all know we need to try to understand the impact on that in order to do that, we need to know how sustainable the state exchanges are. So ms. Otoole, would you tell me what taxpayers can expect from your state exchange over the next five to ten years, and will it be sustainable somewhere during that time period . Congressman, thank you for the question. Im happy to answer it. Like i said in my opening testimony, we are financially sustainable at this point. Our budget is balanced. Its based on real numbers and real experience. And the board of directors in march of this year has passed a threeyear Financial Plan that looks out. So we keep a close eye on this. Its something were concerned about. You know, our board and our team is committed to living within our means. So if we have to, you know, revenue has to match expenditures. And if we have to make hard decisions, we will. I also mentioned in my testimony that we have a task force, a Bipartisan Task force in minnesota thats looking into some of these issues that took it out of the legislative arena to have a more indepth conversation throughout this fall. And we look forward to that work continuing. Okay. Mr. Gutierrez. Our current expense profile, because its still a buildout year, is high, and well need to reduce it, making some hard choices along the way. But massachusetts is fortunate in that the Connector Authority was initially substantiated with a reserve fund. It also has dedicated Revenue Sources from our cigarette tax and from the state insurance mandate penalties as well as the carrier administrative fees. So we have a very diverse set of Funding Sources and bipartisan commitment to the effort. Mr. Lee. From day one coverage california has been putting money in the bank from our plan assessments while going through establishment funds. We have over 200 million in the bank. We have a wholly sustainable model over the long term. You talked about the assessments. What impact has that had on premiums in your state . Its actually compared to what health plans were spending to enroll people in the individual market previously, we think it reduces overall effect on the premium dollars. Its about 3. 5 of premium. But enrolling people in the individual market is very expensive. And prior to the exchange coming along, plans were spending as much as 12 on commissions and a whole range of acquisition. Id like to think were the cheapest state in town. Mr. Watley. We, too, have a fully balanced budget that also right now we have about 12 to 15 million in reserves within our budget as well. Okay. And whats the impact been on premiums in your state . The impact on our premiums related to the assessment has similar to california, we feel that it has allowed the marketplace to level off and compete evenly across the state. Mr. Kissel, whats been the impact excuse me, mr. Gutierrez whats been the impact on premiums in your state from the assessments . If i made a statement on that, i think i would be speaking without firsthand knowledge. So id like to respond to that more fully. Thats fine. Okay. Ms. Otoole. Thank you, congressman. Last year we saw rate increases on average of about 4 . Our department of commerce in minnesota reviews that, so we dont thats an independent review process aside from our organization. They have not released rates for this year. That happens later this week. Okay. Would you advise after that happens . Im happy to do so. Okay. Thank you. Given the short amount of time, i dont have time for another question so i yield back the balance of my time. Thank you. I recognize ms. Castor for five minutes. Thank you, mr. Chairman, for calling this hearing in the rate of underinsured americans under the aca. Thank you to all the witnesses here today and what youre doing for families across the country. When i think of the Affordable Care act, i often think i think its helpful to break it up into its pieces. First you have the Consumer Protections, the Affordable Care act brought. You have a piece on medicare. Weve strengthened medicare. And then you have the policies and strategies to reduce the rates of uninsured all across the country. So for Consumer Protections, the aca is working, we no longer have discrimination based upon a preexisting condition like a cancer diagnosis or diabetes. That has been a godsend to families. The Consumer Protections that allow young adults to stay on their parents policies. Ive heard directly from many friends back home what a benefit that has been. And then Insurance Companies can no longer cancel you if you get sick. So thats and there are others, but thats an important piece. Then under medicare, medicare is stronger. We invested savings into lengthening the life of the Medicare Trust fund. We are also we also are closing the doughnut hole, put money back into the pockets of our parents and grandparents through less costly prescription drugs. And then medicare is undergoing reforms so that care is provided in a smarter way. But then it comes to the rates of uninsured. And its pretty remarkable. And this is important as well when you think about it for people who already have insurance because what the Affordable Care act has done is helped people take personal responsibility for themselves and make insurance more affordable. That way you dont have this Cost Shifting to people that do have insurance. So the recent Census Bureau report said that since the passage of the Affordable Care act five years ago, 17. 6 million americans have gained coverage. And that from 2013 to 2014, weve had the largest reduction in the uninsured rate in america in 25 years. And its important to note that at the same time, the rate of employersponsored Health Insurance has remained constant because that was kind of a that was a question mark going in. So so far, so good. And id really like to thank you all for i heard today a little healthy Competition Among the states, how proud you are of some of the things youve been able to do. I certainly heard it from my colleague, mr. Yarmouth, from kentucky where theyve done a fantastic job. Mr. Lee, congratulations since opening of the exchanges, california has provided a life line to so many families in california through covered california, medical. What has happened to the uninsured rate in california . The uninsured rate, depending on census figures, its dropped to about 12 , huge reduction and one of the fifth largest reductions in the nation. Its also, if i may, congresswoman, your note that its also for people that have insurance are seeing the benefit of lower rates. A million californians in the individual market that dont buy through us benefit from our two Years Holding rates down. So i think your note on those benefits arent just for the uninsured, but its also for insured people that are in jobs that have insurance that now have rates being kept in check. Im glad she came in so she could hear that directly after she worked so hard on the Affordable Care act and passage. How are you working to ensure that coverage remains affordable from this point forward and meaningful for families . One of the things were doing at covered california, were working with our 12 health plans that say how do we actually affect care where its delivered . In the end affordability is about delivering the right care at the right time. The movement weve seen in congress, a Common Movement moving from volumes to value is something we are working with all of our health plans to change payment, to promote primary care, to make sure people with chronic illnesses get the right care at the right time. And that needs to be the focus all of us around this table have. As one of the other congresspeople noted, its not just about giving people an insurance card. Its making sure people get the right care and that right care is delivered at the right time. Thats going to be the key for all of us in reducing costs over the long term. Thank you, mr. Wadley. On behalf of access health, youre here on behalf of access health. Congratulations and thank you for what youve done in lowering the rate of uninsured. Tell us what has happened to the uninsured rate in connecticut and what this has meant for your citizens. Thank you, congresswoman. The uninsured rate in connecticut has been cut in half just in the last two years. We see that it will continue to go lower. So that has been very exciting. What i would also say is our next its really what our next step. So similar to what mr. Lee has said, it really comes down to how do we start working through Health Disparities, wellness, access to primary care physicians. Those are some of the goals that we are working on right now as working with the residents of connecticut. Thank you very much. And i yield back. The gentle lady yields back. Everything great with mr. Wall well be able to go next without objection. I thank the gentleman and my colleagues for that. I know theyve asked each of you if there were trouble with your exchanges and you all wisely answered yes because its never easy to roll one of these out. Ive just got to go to an oregonspecific issue, though. Im going to ask each of you to put a highlight on this. Did the governors in your state use their paid Campaign Political advisers to craft official communication and Management Strategies for the rollout or the termination of your exchange . Yes or no . Mr. Wadley . I dont know the answer if our governor did that or not. All right. Mr. Lee . I have no information about how my governor uses his staff. Mr. Kissel . Not to my knowledge, but the governor has very courageously taken on the burden of this exchange by embedding it in all of the departments. Mr. Gutierrez . Not under the current administration. Got it. Ms. Otoole . Thank you, congressman. I have no information about that. I think mr. Allen knows potentially the answer to this question in oregon. Well, congressman, i was not directly involved in the management or operation of the exchange at that point and have no direct experience with that kind of involvement. All right. Good answer on your part. However, i want to introduce into the record, mr. Chairman, a series of newspaper articles that were acquired that investigative reporting that was done that clearly indicate that our governor at the time used his outside Political Campaign staff to manage and coordinate the messaging on cover oregon and may be worse than that based on emails that have been made available from foya. I just think its important for the committee to know, as we investigate what happened to this money, what happened in the behind the scenes apparently in our state of oregon . And so mr. Chairman, without objection, id like to have those entered in. No objection. Do you know how close completion oregon was when they pulled the plug on it . Congressman, i dont have direct knowledge of how close it was to completion. I do know as there is on the record a Technology Assessment report provided to the cover oregon board at the time that the decision was made, whether to move forward with that infrastructure and move to the federal marketplace that indicated that were they to choose to maintain that the existing infrastructure, it was already failing to meet benchmarks necessary to be available for open enrollment in 2015. So my understanding is is about 90 done. I would have no information. You havent asked. Okay. How did oregon inform cms of its zi decision to migrate to healthcare. Gov . Do you have any knowledge of that . I dont have direct knowledge. Thats okay. I know youve only been on it 90 days. But i assume at some point well, then, do you know who oregon worked with or is currently working with at cms either during this transition . Sure, weve been in most close most closely working with myra alvarez who just recently departed cms. Ive been in close contact with kevin as weve dealt with these transition issues, updating them on as well as site visits and those kinds of things. What did cms require of oregon before allowing it to migrate to healthcare. Gov . Do you know on that . Did cms conduct any forensic analysis on cover oregon . Or are they now . Did they conduct an audit of their own . We did recently have an audit on the ground by cms about three months ago. And i should make a comment in that context earlier, i said we have not used grant money for 2015 operations. There are actually two very minor elements that were identified in that audit were working to resolve with them now. I would not be able to characterize anything that im aware of thats forensic. All right. And will that audit be made public by the state when its completed or by cms . Public by cms. All right. Im sure the committee would like to have access to that by either from cms or oregon. Do you know if cms required oregon to return any of the 305 million originally awarded for the establishment . Other than the potential couple of minor items i just mentioned that were in discussions with them about, no, im not aware of it. Okay. And did oregon incur any additional costs when it migrated to healthcare. Gov . Do you know that . Or do you want to get back to me . I realize youve only been at this but this has been going on a long time. Its, as you know, dominated certainly on the minds of oregonians out there. Now that oregon is elected to switch over to the federal exchange, will there be an attempt to recoup any of the money that was used to establish the state exchange . Are you in any discussions about that . To recoup from whom by whom . Im not following. Well, 305 million. Is cms going to come back on the state . Yeah what i am in a position to know is that weve been able to review the grant documents, 300 million went for the entire operation of setting up a Health Insurance exchange. Technology is certainly a piece of that. I think you have a gao report that identifies 78 million of the 300 million for that function. It is my understanding that we are in compliance with and have delivered the deliverables required under the terms of the grant for the 305 various grants for the 305 million. I dont think theres discussion about a return because weve complied with the terms of the grant. Wow, even though the exchange never was functional or online. Congressman, the technology didnt launch, but we were able to cover 70,000 people in the first year despite that 100,000 people most recently. Did you actually use the exchange behind the curtain with paper input . It was a hybrid paper automated im sorry, mr. Chairman, ive gone over. I do want to know, in terms of an audit, mr. Allen, you said i want to know, does hhs or cms require an audit into how you spend the money . Mr. Allen . Were required youre required to report . Ms. Otoole . Is any of you required by the federal plans to do an audit of how you spent the money . Its my understanding that we are required in massachusetts. Weve had three straight years of clean thirdparty audits. Im just curious, requested by the state or the federal government . The federal government . Ms. Otoole . Congressman, we are subject to comprehensive oversight both in minnesota by our state. I just want to know, yes or no . Yes . And the federal government. Mr. Gutierrez, yes . Mr. Kissel . Id say yes, but there is detailed selfreporting and certification and auditing, but it relies on our records so that they dont go to the next level and look at our contractors record to be sure that what we say is actually been done. Mr. Lee . Yes, theres reviews both by cms as well as by state level of our spending. Mr. Wadley . Same thing. Same thing. Well have to get those records. Youre recognized for five minutes. Thank you, mr. Chairman. States that create and run their own statebased marketplaces are testing new models for enrollment, Insurance Market oversight and consumer protection, serving as hubs of innovation. The work being done there can serve as a model for other states and the federal government as the aca continues to be implemented. Mr. Lee, california has been a leader in the, quote, active purchaser model. Can you explain what this is and how this has helped california . Great. Thank you very much, congresswoman and thanks for your leadership. Three things about being an active purchaser. First we dont take every plan that wants to be part of the marketplace. We review them critically and make sure they have the networks in place the systems to deliver quality care. Second, we look very closely at the rates and make sure that the rates align with the quality of care we expect of them. And finally, we hold them to account for delivering quality care. And thats all in the context of what we have which we think is critical, and some of my colleagues up here have similar things which is standard benefit designs. Where right now in many parts of the nation, consumers may buy the lowest cost plan and then find out they need to spend a 3,000 deductible before they get care. That doesnt happen in california. And thats because standard benefit designs for both on and off exchange in the individual market, were reshaping the market so benefit designs are designed for a consumer not a health plan. Thank you. Mr. Wadley, similar question. Do they help consumers make informed decisions . We do. Thank you for the question. We have a standard plan designed for all of our individual tiers. And what we have found is that it makes it easy for our residents to compare apples to apples whereas prior to this, it was much more difficult to compare plans. Thank you. One of the focuses of the aca is to transform the Delivery System and improve quality of care. As a nurse, i find this goal to be incredibly important. Bottom line, really, especially as we reach the goal of transitioning from a sick care system to one that promotes wellness. Mr. Lee, what efforts has covered california taken to improve the quality of care through better coordination, payment reform or other initiatives . Thank you very much for that question. When we released our rates this year which were only a 4 increase, we didnt just release rates. We released background on how our 12 plans are doing better coordinated care, using telehelp, addressing wellness and prevention, addressing Health Disparities and health equity. These are requirements in our contracts with our health plans. We arent just putting products on the shelf and having people get insurance cards. They need to deliver on that promise of care and we think thats something that all exchanges should be looking at to make sure its not just a card. If you have something to add, just so we get it on the record, about what is going on in your individual state, if you want to add . Go ahead, miss otoole. Yes. A similar experience, one thing we are doing differently in minnesota is adding a comparison tool. Someone mentioned it earlier, preef yums are just one part of the cost of care. We are trying to give consumers a morrow bust picture of outofpocket costs and other costs that go into their care to make better choices for themselves. That will be a new feature on our website. Any other examples . I would just add very quickly, we have 120 different plan options available for consumers through 11 companies and a market as small as oregon. It is an incredible range of choices, which becomes a problem for consumers. We are relying heavily on agents to help people so they dont go to the lowest plan when a higher premium and lower deductibles would be better. Are they opting to use those assistors . Yes. Connecticut, we are doing something new, working with with all our carriers. We have met with them to start collaborating on how we can help improve Health Literacy with all of our new customers who have previously been uninsured. Similarly, we have found we needed a Comparison School to help our customers pick the right tier versus the lowest price. In 17 seconds, mr. Lee, what, if anything, has coverage california done to encourage right care at the right time. The one thing i can highlight, we have plans to promote whats choosing wisely. It is an Initiative Led by the community to make sure patients dont get unnecessary care but the right care. Thats the one i highlight. Thank you. I now recognize mr. Collins for five minutes. I want to thank the witnesses. It has been very educational. We all know that everything we are all working on is a work in progress. With differing results. Not being from any of your states, it is interesting to hear what you are saying. Im from new york. With we received 575 million to set up our state exchange. Somewhat disappointingly, the Inspector General of hhs last week revealed that a randomly selected number of applicants on our state exchange, that it investigated 62 were improperly granted subsidies or the application was deficient in some other meaningful way. The most prevalent problems were inconsistencies in reporting their eligibility data and income. The website didnt seem to question those. Applicants received subsidies that frankly they werent entitled to. Before i get back to questions, last week, an insurance called health free public of new york which is a new york city based Insurance Cooperative and a significant player in our state exchange, specially up in the part of new york that i represent, was directedly state and federal officials to stop writing health plans effectively shut down because they were not there. Which means over 12,000 people in western new york, which i represent, are going to lose their health plan z here is the problem with Health Republic of new york. As a new insurer under the a. C. A. , that Company Received government assistance to cover startup cost in return for providing more competition in the marketplace. As you might suspect, their policies were not what the market could sustain. They cost too little and gave away too many benefits. These plans sucked in unsuspecting new yorkers. These new yorkers now have to find a new plan with staggering price invecreases that reflect e real rate of coverage for the aca mandateded benefit. While i know none of you represent new york, i would like to know have your state exchanges been audited like new york just was by hhs where we found 62 error rate and, again, subsidies being given that were not based on eligibility or income. If so, what did your state do . Mr. Allen, i know your state did not. We will keep you. Miss otoole. I am generally familiar with what you are talking about. Not to pie knowledge. We obviously take compliance very seriously. We have a robust team that is checking tho checking on that and making sure only eligible minnesotans are enrolled. Thats what we would hope for. Not to my knowledge on the formal audit but we have an indepth validation program. Glad to hear that as well. We have not been audited. We are a small community. Since everybody has my phone number, we are selfaudited. The inquiries to us went from from the thousands in 2014 down to a few dozen in 2015. We did have a problem. I think it has largely been revolved. The 1095 irs reporting process for us went very smoothly with fewer than 10e0 skroefr alovera coverage california has been the subject of a range of oig, gaos, hhs, enrollment practices, pretty much all of them will find improvement. By and large, they will find that we have been complying with the rules and are better and better each year. Mr. Wildly . Thank you for the question. We, too, have had multiple audits from the gao and we take all those opportunities to improve our system. I dont think i have time for my other question. I yield back. We recognize miss brooks for five minutes. Thank you, mr. Chairman, i apologize i was at another hearing. Mr. Allen and mr. Kinsle, do you know whether or not cns permits establishment dollars to be spent on the transitional costs to healthcare. Gov. If you could tell me what transitional costs are, mr. Allen . I do not know the answer directly. We will respond directly to the committee later. Mr. Kissle . Yes, we have submitted a transition budget. I have to check on its status. I believe it has been improved. These are for the enrollment of new members in healthcare. Gov and the demissional and archiving of our existing technology and certain other items including approximately 225,000 for the Program Management association the state has attained for healthcare. Gov and the states department, the operating department. Was this a wrisle policy that you know hawaii is using . You are using your money from establishment to transition . Correct. Was this a written policy or something you negotiated . I dont know whether it is wrisle but i do know that we agreed on it. Do you know what the basis of that agreement was . Why did cms say that you could use your establishment dollars to transition . What was the rational . I cant speak for all of it. It covered technology and outreach. It is only to enroll new members in healthcare. Gov. We are bearing the cost of reenrolling our 38,000 existing members into healthcare. Gov. Thats coming from internal state funds. Do you believe that this should be permitted . Obviously, its beneficial to hawaii, correct . Let me answer by saying, in hindsight, we are learning a lot. Have the regulations helped options in place, if they were in place now, hawaii would never have undertaken that Building Exchange to support our Prepaid Health care act and harmonize it with the Affordable Care act. This is the kind of issue that i think this transition will be later. I apologize if these questions were asked. Why did your governor choose to shut down the hawaii Health Connector . He worked extensively and they came to the conclusion jointly that because we were an independent, reliable agency, relying solely on issue or fees for revenue, we couldnt get to Critical Mass to be selfsustaining. The governor decided to imbed these functions into state departments, our department of labor and Human Services and bear the cost of essentially the deficit. We were not financially sustainable. Administration encouraged us to do this to maintain encouraged us to do that. Was that your role . What was your role in that decision . Because we are not a part of the administration. We are an independent corporation with separate board of directors. Our role was to make the hawaii Health Connector work. We developed plans that did, we believe, make it work. We fixed the technology and went forward with a financing plan that we thought would be workable. Cms and the state decided that had too high of a risk for our small and tranlgifragile econom. This he decided it was better to continue on the basis of moving to healthcare. Gov. Was there a contractor involved in that transition . There are contractors involved in the transition on behalf of the hawaii Health Connector, the state, and the Medicaid Agency to build the int physical with healthcare. Gov. How many contractors are involved and how was that contract awarded . We have two contractors involved, two principle contractors involved at the hawaii Health Connector, mostly in the archiving and decommissioning of the process. There is a seoul source contract with kpmg for building the interface. Thats done in accordance with state procurement regulation. Are there other contractors involved . Yes, there are. Health Management Associates is providing the pmo, project management for the transition. Do you have any idea of for the cost . The initial is 400,000. The state is going to have to spend its own money to imbed these functions in various departments. I yield back. There will be other questions. Mr. Kissel, you just mentioned other costs. I would love to know what other costs and what you anticipate future costs and how your states are going to absorb those additional costs . It is important to know that. I want to thank you all for being here today and participating. Members, i want to remind you, you have ten Business Days to get other questions for the record. I ask all witnesses to agree to respond quickly and promptly to those questions. With that, this Committee Hearing is adjourned. As the Supreme Court starts a new term, they debut historic Supreme Court decisions. We take a look at the real story behind marbury versus madison delving into the heated political battles between john adams and Thomas Jefferson and john marshall. John marshall established the court as the interpreter of the constitution in the famous decision he wrote of marbury versus madison. Marbury and madison is probably the most famous case this court ever decided. Joining the discuss, Yale Law School professor akehl reed amarch. Landmark cases exploring 12 historic Supreme Court rulings by revealing the life and times of the people who were the plaintiffs, lawyers and justices in these cases. Landmark cases premiers tonight on cspan, cspan3 and cspan radio. Order your copy of landmark companion book for 8. 95 plus shipping at cspan. Org landmarkcases. The Supreme Court begins a new term today meeting for the First Time Since a number of highprofile decisions were announced back in june. Cases this fall include whether a woman who lost her legs after she attempted to board a european train can sue an american court. Affirmative action, union fees and juvenile sentences of life without parole. We heard more about the first day at the court and some of the term cases earlier this morning with a reporter on todays washington journal. Good morning to you. Good morning. What actually happens on a first day of a new term . The first day of the term is when the nine justices are actually sitting in the courtroom together for the First Time Since june when the other case starts. They are sifting through the Different Cases to see side what to hearment. How much of the 2016 docket is set before today and how many more cases are likely to be added . They will still be added cases for the next few months. They already have a decent amount, including some pretty highprofile cases that will be argued in the next couple of months. What are they actually going to be arguing or talking about today . Today, they will be announcing a long list of cases that they are rejecting, cases that they decided not to hear last week, they announces some new cases they would hear and a couple of arguments in lowprofile cases. Whats an example of one of those . A case about an American Woman who had an accident when she was in europe on a train the question is whether she could sue in u. S. Courts. Even though the accident didnt take place here. The term officially begins today and unofficially tomorrow at the red mass in washington, d. C. Can you explain what the red mass is . There is a catholic ceremony. Quite a lot of the justices are catholics and usually attend. It is quite a council event. How many kacatholics are the . Whats the religious breakdown of the justices . Justice obrien and ginsburg and kagan are jewish and the other justices are all catholic. I want to ask you about one of your stories you had recently. The headline, hover craft riding lose hunters case with see prum cou Supreme Court review. Explain that for us. The courts also take up these somewhat colorful tales that arise from hard cases. This is about a moose hunter in alaska who likes to use the holocaust to get holocaust hovercraft to get up to the land. He objected when he was told he couldnt use it to get to the land. He objected saying the waterway he was going on wasnt federal land but was owned by the state which would allow him to use his hovercraft. The dispute is whether he can use his hovercraft or not. I appreciate your time this morning on the washington journal. Thanks a lot. The hill newspaper reporting on the Transpacific Partnership. Trade ministers saying they have come to an agreement after nearly six years of talks. The deal is expected to lower trade barriers and provide greater Market Access for u. S. Exports across sectors, including agriculture. It sets up a global framework of rules to cover Financial Services to medicine, intellectual property and labor rights. Congress will be able to app proor or disapprove of the pact. President obama says lawmakers will have months to read every word before he signs it. The chair of the house ways and means committee, paul ryan, put out a statement that reads, a successful Transpacific Partnership would mean greater american influence in the world and more good jobs at home. Next, a Senate Hearing on one of the navys Aircraft Programs. The first few are facing chronic delays and 4. 7 billion over budget. Defense department and Navy Officials testified on the procurement process. Good morning. For more than seven decades, the Aircraft Carrier has been the center piece of this. A mission that is more important than ever today as Global Threats multiply from the gulf to the western pacific to the north atlantic. For 13 years, the department of defense has sought to develop our newest Aircraft Carrier the uss gerald r. Ford marking a beginning of an entire new class. The ford class Aircraft Carrier program is one of our nation es most complex and defensive acquisition project. It has become unfortunately one of the most spectacular acquisition debacles in recent memory. Thats saying something. The ford Class Program is currently estimated to be month are than 6 billion over budget. Despite the recent announcement of a twomonth delay, the first ship is scheduled for delivery next year. The second ship, however, is five years behind schedule. Significant questions still remain about the capability and reliability of the core systems of these Aircraft Carriers. When i ask the former chief of naval operations, whose responsible for the overrun cost on uss gerald r. Ford. He said he didnt know. Oversight has increased significantly at the direction of senator reid and myself. They have conducting a thorough investigation of the ford Class Program. This has included review of thousands of places of work plan, proprietary documents, Operational Testing data as well as numerous interviews with key players from the office of the secretary of defense, the navy and the industry. This work has been done on a bipartisan basis in keeping with the best additions of this committee. As a result, today, we leave with clear goes to identify who is accountable and assess what this means for the future of our aircraft fleet and navy ship building and determine whether any reforms could prevent these failures from ever happening again. To help us ask these questions today are key civilian and military officials that are responsible for developing, procuring, testing and overseeing the ford Class Program. The honorable katrina mcfarland, the principle adviser to the secretary of defense and undersecretary of defense for acquisition, technology and logistics on matters relating to acquisition, the honorable sean stackry, assistant secretary of the navy for research and development, the navys executive responsible for the Research Development and marine course system. Rear admiral michael menanzer is responsible for Navy Aviation requirement. Rear admiral thomas moore, Program Executive officer for Aircraft Carriers is responsible for Aircraft Carrier acquisition. Rear admiral donnel gattis is responsible for naval tactical acquisition programs including aircraft launch and recovery, the honorable j. Michael gilmore, director of operational tests and evaluation is the Senior Adviser for the secretary of defense for operation on live fire tests and evaluations of weapons systems. Mr. Paul francis, managing director of acquisition at the Government Accountable Office whose 40year career at gao has focussed mostly on major weapons ac qui sis, specially ship building. We thank each have o our distinguished witnesses and thank them for joining us today. In 2002, secretary donald rumsfeld, the office of the secretary defense, when the navy conceived of the uss gerald r. Ford, received it is a transformational nofgs system. They decided to integrate a host of advanced and entirely unproven technologies, including a new Nuclear Reactor plan, a new electrical distribution system, a new and large flight tech, a new dual band radar, a new electromagnetic catapult system to launch aircraft and no to resting to recover them. This was the original sin in my view that so damaged this program. Since 2008, the estimated procurement cost has grown by 2. 4 billion. Or 23 for a total cost of 12. 9 billion. The story of the uss john f. Kennedy could be worse. They began building it before improving the new significance stims and while making major changes, nug a include radar, this has made cbn79, a second fleet ship with all of the associated problems. It is estimated that cost has risen to 11. 5 billion. A 2. 3 billion or 25 increase. The ship has been delayed five years to 2024. These systems face their own significant crossroad and scheduled delays and they still are not ready. For example, the advanced resting gear or aag was build as a more efficient and effective way to recover a wider variety of aircraft on the carrier deck. However, aags Development Cost have more than quadrupled and it is expected to take twice as long as originally estimated, 15 years in total, to complete. As a result, if it goes to sea as planned in 2016, it will do so without the capability to recover all of the types of aircraft that would land on the ship. Further more, the cost and schedule programs with aav has so driven up its perunit cost that the navy will be unable to upgrade on our older nimitz class carriers with this new system as originally planned. By the 2030s, many of our naval aircraft maybe able to land on just a few of our carriers. The dysfunction of our defense acquisition system as a whole. It shows that this has been plagued by the same problems throughout navy ship building and most major defense acquisition programs. Unrealistic businesses cases, poor cost estimates, new systems rushed to production, concurrent design and construction and problems Testing Systems to demonstrate promised capability. All of these problems have been made worse by the absence of competition in Aircraft Carrier construction. Whats more, the ford Class Program exemplifies the misalignment of accountability and responsibility in our defense acquisition system. To my knowledge, no the a Single Person has ever been accountable for the failures of this program due in no small part to difficult fusion of authority across multiple offices and program manager. These allow the leaders of our defense acquisition system to evade responsibility for results. Everyone is responsible, so no one is responsible. Well, the navy and the contractors deserve much of the blame, the Milestone Decision Authority for the ford Class Program rests with the office of the secretary of defense specifically the undersecretary of defense for acquisition, technology and logistics. At l is responsible for determining whether a program has a sound Business Case and for approving the start of development and program. The navy can be faulted for excessive optimism and efficient realism. At l was neither was either complacent or complicit. Indeed, they authorized the navy to Start Construction of cbn78 when only 27 of the ship was designed and just 5 of the 13 new systems were mature. Despite ten years of warning from the own independent cost stim tors and weapons testtors, at l failed to make timely and corrective course correction. Unless anyone think congress is above reproach, we are not. While congressional oversight has helped to control the cost and improved the program, we could have intervened more forcefully and demanded more from the department of defense and which did not. Ultimately, all of us need to internalize the lessons of this program. Im encouraged that the navy appears to be doing so in their efforts to staeblize the program and change their approach to contracting for cvn79. This years nationalle Defense Authorization act contains several provisions that increase oversight of the ford Class Program. Streamline authority and accountability in our defense system. The lesson i would most stress is this. We can not afford another acquisition failure like the ford class carrier in the current environment. We can not afford to pay 12. 9 billion for a single ship. If these costs are not controlled, we must be willing to pursue alternatives that can deliver similar capability to our war fighters on time and on budget. We must be willing to question whether we need to go back to building smaller, cheaper Aircraft Carriers that could bring new competitors into this market. We might have to rebalance our longrange strike portfolio with fewer carriers or morelandbased, precise weapons. If we doont better, everything must be on the table. As long as i am chairman, it will. I thank the witnesses and look forward to their testimony. Thank you very much, mr. Chairman. Let me commend you for going ca an extremely important hearing but for your attention to this issue over many, many years and your advice and insistence that we pay close attention to this program and other programs too. The gerald ford Aircraft Program has costs and todays hearings will focus on many of the problems that we have seen during the execution of the program. Some of these delays are the responsibility of the ship builder operating on a cost Incentive Fee type of contract and slow to ply Building Techniques that they are using in other programs. Some problems stem from including new technologies that were not sufficiently matured into the design of the ship, assistance that is critical to Successful Operation of the Aircraft Carrier. To advanced resting gear, the electromagnetic launch system and the dual man radar. Each system has proposed schedule challenges and are millions of dollars over budget. While we recognize that designing and building an Aircraft Carrier is difficult. The committee is concerned that many so of these problems were foreseeable and should have been resolved years ago. As we look back at the exception of the program. It was scheduled to run out of fuel around 2013 or 2014. This pressurized the schedule for starting the first ship in the cvn21 program which evolved into the next carrier, the gerald r. Ford carrier. It was to install new systems when they had achieved sufficient material to warn an inclusion. The twostep plan was more in keeping with the acquisition approach stated by the weapons defense acquisition reform act of 2009. However, in late 2002, the navy was indicated by the secretary of defense to pursue a program that was more transformational and involved incorporating all of the new technologies of the first ship having them make risky choices and he with are living with the results of those choices. The navy is not blameless in this process either. The navy shares blame for failing out to lay out potential off ramp too the risky tech following if they did not mature in time to meet the schedule. They could have done this even within the parameters of transformation. While such off ramps may not have prevented all the problems, it would have given us Better Options when we had unpleasant discoveries during the development phase. They are blamed for starting the construction of the ship before sufficient work had been completed on the design of the ship. History has shown inefficient reduction, schedule delays and cost increases. Finally, Congress Shares responsibility for having approved this to acquire the Aircraft Carriers. The only change that they insisted upon was instituting a legislative cost cap on the three ships in the program. What i think this cost cap has brought better discipline, it did not prevent a cost and schedule program. I look forward to hearing from these witnesses on this Important Program that has been and can be made in the future foe he to prevent cost and schedule overruns. We will hear from secretary macfarlane, dr. Gilroy and miss frances and we will proceed with questions. We will begin with you, secretary macfarlane, welcome. Chairman mckay and Ranking Member reed and distinguished members of this committee, i appreciate the opportunity to testify about the oversight of the navy cvn78, gerald r. Ford Aircraft Carrier program. I ask that my prepared statement be taken and submitted for the rod. The cvn program was initiated in 1996. Its development has gone through numerous administrations and multiple acquisitions in ablg qui significance policy as the chairman and the Ranking Member noted. The program has been the subject of many, multiple Program Reviews looking to reduce costs and achieve efficiency that have redirected the acquisition approach or technical baseline. As with all of the departments programs, the cvn78 has had to compete for the resources in the president s budget review. While each change in policy, ac request i significanacquisition it was made in the best interest of the department and taxpayer in mind, the cumulative effect has resulted in program instability. Since 2010, and coincident with the introduction of the departments better buying power inish tic initiative, this program has been stabilized. The department continues to wrk with the navy and tailor the program. Weve established an accident relationship with the navy and Work Together to change processes and policies that have impacted the ability of the program to succeed to include revitalizing the Acquisition Workforce and the skills of them, whom we represent here, several thousand men and women that lead our nations ship building acquisition. The timeline and complexity associated with the construction of Aircraft Carriers are enormous and sensitive to a wide range of technological, economic and business factors, many of which cannot be predicted in time to be readily mitigated. Nevertheless, we are committed to applying the resources needed to keep control of Aircraft Carrier Program Costs and scheduled for the cvn78, 79, and all that follow and meet the needs of the war fighter. Again, thank you for the opportunity to appear today. I look forward to your questions. Mr. Chairman, Ranking Member reed, thank you for the opportunity to discuss the cvn78 program. No one, more than you, mr. Chairman, fully understands the role of the care krers in american diplomacy, power projection and global security. George well did in his column yesterday, the navys operation on which the sun never sets are the nations nerve endings connecting it with the turbulent world. The next president may be elected without addressing the navys size or configuration. For four years, he or she will be acutely aware of where the carriers are. The newest will be the gerald r. Ford, cvn79, the first new carrier design since the nimitz in 1967. It will be in service for 50 years in a threeship class until almost 2080. It is, therefore, imperative, that this committee has so clearly impressed upon the department and reemphasized here today, that our future carrier have the capability necessary to defeat the future threat but, two, that it does so at a cost that the nation can bear. Designing, building, manning, operating and maintaining these incredibly complex gifts are beyond any other nations skr d undertaking. Those have visited her appreciate tens of thousands of tons of structure, thousands of miles of kab ber and fiber optic, thousands of compartments, hundreds of ship systems, tens of thousands of sensors integrated to drive greater than 1,000 megawatts of Nuclear Power across the globe throughout its life. It is a remarkable demonstration of what american industry is able to achieve and a quantum increase in capability for our war fighter, capability required by our navy in the the century ahead. This program has had significant challenges resulting in unacceptable cost growth. To understand the cause of this cost growth, it is important to understand the carriers history. As the nimitz approached midlife, requirements were addressed for future carriers, ship design and construction. The 23 new capabilities were to be incrementally introduced across three ships commencing with cvn77. These Development Capabilities would provide a 33 increase in the rate at which aircraft are launched and recovered. If they provide three times the electrical generating capacity and 65 more energy than nimitz, increase surviveability and basic hull design and importantly, a 4 billion reduction per ship in total Ownership Costs over the ships 50year life. Technology development was initiated for the electromagnetic launching system, advanced arresting gear or aag and advanced elevators. The modernization of the systems would be accomplished by incorporating new capabilities developed or being developed by other programs including the stateoftheart dual ban radar, automated control systems would be incorporated to improve survive ability, new reactor plant and machinery control systems would be developed to meet Power Requirements and a carrier superstructure or island would be designed to accommodate the new systems and enable flight deck operations and contribute to a total manpower reduction of 12 sailors. As the chairman has pointed out in 2002, with priority placed on transformation by the secretary of defense, d. O. D. Changed course such as the preship incremental modernization would be accomplished in a single step on a single ship, cvn78. This has resulted in a critically high degree of concurrent development, design, material procurement and construction. Costs were estimated and design and construction proceeded with inadequate information regarding the complexities of the new systems and with inadequate risk factors to account for the high degree of con currency impacting cost and performance in each phase of development, design, build and test of cvn78. Design is effectively complete and production is nearly 95 complete. We are focused on completing the test program and delivering the lead ship. Actions put in place from 2009 to 2011 have been effective in halting the early cost growth on cvn78 including converting the design from a level of effort to a completion target with a firm target and Incentive Fee. Placing this under strict control and refusing fees and incentivizing improvements, removing overly burdensome specifications that impose unnecessary costs, contracting and competing alternative sources of supply to mitigate material delays rg raising completion levels to improve production efficiency, meanwhile, following a detailed, nonmckurdylike review in 2009. The navy converted the emails and contract to a firm fixed place contract for production to cap costs on each of the system. The ship builder subjected its bid process by review of competitive ship yards to improve their performance. Management changes were instituted and coupled with increase readiness reviews focused on cost per forp mans and Critical Path issues to insure we are doing all that can be done to improve cost performance. I personally conduct reviews on no less than a quarterly basis, often monthly and have assigned for these past four plus years a carrier operations, construction and Program Management in the Department Executive officer. Importantly, i would confront the impacts of con currency on cvn78 to eliminate causes for cost growth and further improve performance on cvn 79 and 80. As reported to congress, the requirements for cvn79 are locked down. The design model is complete. 80 of initial drawings are released. New technologies are virtually mature. The Ship Builders have made significant investments to modernize tooling and implemented bill sequence changes to drive down production costs. The navy is implementing a twophase Delivery Plan to allow the basic ship to be constructed and tested in the most efficient manner. The work can be completed and accomplished more effectively and use of skilled installation teams. The net result of all these actions was the recent award of cvn79 as a fixed price construction contract as in conjunction of them, secures cvn79 at or below the congressional cost app. One target will continue to reduce the cost of future ships of the class. Mr. Chairman, you have raised questions regarding accountability. I am accountable for the decisions i make about this ship or any Navy Marine Corps program. This simple statement doesnt adequately address your concern. The Current System is challenged to align responsibility, accountability and Decision Making for large, complex projects that take years to develop and deliver. This program, in particular, has spanned four secretaries of the navy, six chiefs of naval operations, four naval acquisition executives, six defense acquisition executives, four Program Managers and eight congresses. Death and course changes in decisions have been critical. Decision to pursue a transformational approach driving three incrementally enhanced ships into one was made for what was believed to be the right decision at that time. As the acquisition executive, what can be done to stabilize the cost on cvn78 and pursue cost performance improvements i believe is being done. We have much further to go in this regard. I believe we are on the right path. Under the secretarys direction, the commandant and i are changing the way we do business within the department of navy to achieve much greater clarity of authority, traceability to cost and visibility to performance and therefore accountability for cost and schedule on our major programs. We hope to have the opportunity to share these details with you and your staff. In sum, the navy is committed to providing sailors with the capabilities they need to perform their mission around the wormd and clock every single day of the year. We strive every day to do this in a way that enhances affordability, while ensuring we maintain a robust Industrial Base to hedge against an uncertain future. Mr. Chairman, senator reed, ill briefly summarize my statement. Whether the effectiveness in total ownership will be realized that are associated with the new system being incorporated from cvn78 are in the now known. The navy says the reliability, advanced to resting gear and dual band radar will support initial operational and testing evaluation and first appointment. Most recent definitive data i have indicate the reliability of emails is below the navys goal by more than a factor of ten. The reliability of the dvr and redesigned agg are unknown. We only have engineering estimates and very little test data. Aag reliability was a factor 06800 below its ghosoal. It will be available later this year, the result of on going questions. In the case of emails, the navy knows that reliability is above the december 2014 reliability growth curve. As performance andest it testin testing, it indicates it was not on a goal. What the effects thoon short falls, if any, in the ultimate reliability these systems could be will not be known until development, operational tests are conducted in post delivery. The specific nature of the failures encountered and their difficulty of repair will be important to understand. The navy has indicated that the emails and installation on cvn78 is such that failures and components will result in multiple being down for extended period. This is because there is no ability to isolate components