[Senate Hearing 110-227]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 110-227
 
                  FIELD HEARINGS FOR FISCAL YEAR 2008

=======================================================================

                                HEARINGS

                               before the

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________


February 20, 2007--THE IMPACT OF FEDERAL FUNDING ON LAW ENFORCEMENT AND 
                            FIRST RESPONDERS

  August 7, 2007--AN EXAMINATION OF HEALTH CARE COSTS: CHALLENGES AND 
                           OPTIONS FOR REFORM

                                     
                                     




           Printed for the use of the Committee on the Budget








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                        COMMITTEE ON THE BUDGET

                  KENT CONRAD, NORTH DAKOTA, CHAIRMAN

PATTY MURRAY, WASHINGTON
RON WYDEN, OREGON
RUSSELL D. FEINGOLD, WISCONSIN
ROBERT C. BYRD, WEST VIRGINIA
BILL NELSON, FLORIDA
DEBBIE STABENOW, MICHIGAN
ROBERT MENENDEZ, NEW JERSEY
FRANK R. LAUTENBERG, NEW JERSEY
BENJAMIN L. CARDIN, MARYLAND
BERNARD SANDERS, VERMONT
SHELDON WHITEHOUSE, RHODE ISLAND

                                     JUDD GREGG, NEW HAMPSHIRE
                                     PETE V. DOMENICI, NEW MEXICO
                                     CHARLES E. GRASSLEY, IOWA
                                     WAYNE ALLARD, COLORADO
                                     MICHAEL ENZI, WYOMING
                                     JEFF SESSIONS, ALABAMA
                                     JIM BUNNING, KENTUCKY
                                     MIKE CRAPO, IDAHO
                                     JOHN ENSIGN, NEVEDA
                                     JOHN CORNYN, TEXAS
                                     LINDSEY O. GRAHAM, SOUTH CAROLINA


                Mary Ann Naylor, Majority Staff Director

                Scott B. Gudes, Minority Staff Director

                                  (ii)



























                            C O N T E N T S

                               __________

                                HEARINGS

                                                                   Page
February 20, 2007--The Impact of Federal Funding on Law 
  Enforcement and First Responders...............................     1
August 7, 2007--An Examination of Health Care Costs: Challenges 
  and Options for Reform.........................................    49

                    STATEMENTS BY COMMITTEE MEMBERS

Chairman Conrad.................................................. 1, 49

                               WITNESSES

Candace Abernathy, Patient, Minot, ND............................81, 84
Burch Burdick, State's Attorney, Cass County.....................11, 13
Janis Cheney, State Director, AARP North Dakota, Bismarck, ND....    78
Ken Habiger, President, Casselton Ambulance Service..............40, 42
Terry G. Hoff, Chief Executive Officer and President, Trinity 
  Health, Minot, ND..............................................91, 94
Bruce Hoover, Fire Chief, Fargo Fire Department..................27, 29
Mark A. Johnson, Executive Director, North Dakota Association of 
  Counties.......................................................32, 34
Paul Laney, Sheriff, Cass County Sheriff's Department, Cass 
  County.........................................................19, 22
L. John MacMartin, President, Minot Area Chamber of Commerce, 
  Minot, ND......................................................88, 90
Keith Ternes, Chief of Police, Fargo Police Department...........15, 17
Terry Traynor, Assistant Director, North Dakota Association of 
  Counties.......................................................    32
Mary K. Wakefield, PhD, RN, Associate Dean for Rural Health and 
  Director, Center for Rural Health University of North Dakota, 
  Grand Forks, ND................................................58, 63
Hon. Dennis Walaker, Mayor, City of Fargo, ND....................     9




























 THE IMPACT OF FEDERAL FUNDING ON LAW ENFORCEMENT AND FIRST RESPONDERS

                              ----------                              


                       TUESDAY, FEBRUARY 20, 2007

                                       U.S. Senate,
                       Committee on the Budget, Fargo, N.D.
    The committee met, pursuant to notice, at 1:32 p.m., in 
room 201, Fargodome, Hon. Kent Conrad, chairman of the 
committee, presiding.
    Present: Senator Conrad.
    Staff Present: Mike Jones, John Fetzer, Sean Neary, and 
Jolene Thorne.

              OPENING STATEMENT OF CHAIRMAN CONRAD

    Chairman Conrad. The hearing before the Senate Budget 
Committee will come to order.
    First of all, I want to thank the witnesses for being here. 
I want to especially thank the very distinguished panels that 
we have to talk about the resources needed for law enforcement 
and first responders.
    As you know, we face now the challenge of writing a budget 
for the United States, and we have to do that in the next 30 
days. So this is a critically important time to get input from 
those who are especially affected by these decisions.
    Let me just start and talk about the budget the President 
has sent to us and how it affects law enforcement and first 
responders. There are parts of the President's proposals that I 
must find--I must say I find startling.

[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]


    The first is the COPS program that the President has 
proposed cutting by 94 percent; from $553 million to $32 
million.
    A second area the President has proposed major reductions 
is the Byrne grants; so important to local law enforcement. 
$530 million provided in 2007 by the Congress, and the 
President has proposed cutting that 34 percent.
    On State Homeland Security Program funded at $535 million 
for fiscal year 2007, the President proposes cutting that 65 
percent. And we are not talking about here Washington talk 
about cuts where they talk about reduction in the increase. I 
am talking about real cuts. I am talking about dramatic 
reductions from the amount of money we had last year.
    On Law Enforcement Terrorism Prevention Program. $382 
million last year. The President proposes 263 million; a 31 
percent cut.
    Firefighter grants. Last year Congress provided $675 
million. The President has proposed $300 million; a 56 percent 
cut. Let me just say the needs of law enforcement, the needs of 
first responders have not been reduced. If anything, the need 
for law enforcement, the need for Homeland Security, the need 
for first responders' resources, has increased in the country. 
Certainly not been reduced.
    Let me go to the next slide, if we could. In terms of the 
funding, these programs have provided North Dakota.


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]



    The COPS program from 1994 to 2006 has provided over $36 
million.
    The Byrne grants and local and law enforcement block grants 
from 1988 to 2006 have provided $42 million to North Dakota.
    State Homeland Security Program from 2003 to 2006 has 
brought over $48 million to North Dakota.
    And the Law Enforcement Terrorism Prevention Program from 
2004 to 2006 has brought $12 million to North Dakota.
    Now I know in Washington sometimes they ridicule the notion 
that North Dakota gets terrorism-prevention grants. I just say 
to those people you are only as strong as your weakest link. 
This is the United States of America. It is not just the East 
and West Coast of America.
    And anybody who has watched how terrorists think about 
coming into this country know that they search and probe for a 
weakness, for an area of vulnerability, and that is where they 
seek to come through the border.
    So yes, we should have less funding--we understand that--
than in New York or Los Angeles or San Francisco or in 
Washington, D.C.
    They are the high-threat areas. They have to get a 
disproportionate share of the funding. But the notion that none 
of the rest of the country gets anything, frankly, makes very 
little sense, at least to me.
    Let's go to the next slide because I want to focus on the 
COPS program.


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]


    This is the President's--one of the President's proposals 
that I find most disturbing, to cut the COPS program 94 percent 
when crime is rising across the country. This is a program that 
has put a hundred thousand police officers on the street. In 
North Dakota it has put 274 officers on the street.
    It just makes no sense to me to take these officers off the 
street. Not only in North Dakota, but right around the country. 
We need these officers on the street.
    We know that it works to have officers on the street. We 
know that it suppresses crime. We know that it leads to a more 
effective law enforcement environment to have more sworn 
officers available, on patrol, meeting the needs of 
communities.
    So the proposal here to cut the COPS program by 94 percent 
just--I do not think is supported by any of the facts, and I 
hope we will be able to establish today the importance of the 
COPS program in North Dakota.
    Let's go to the next.


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]


    Let me just deal with the question of priorities, because a 
budget is fundamentally about priorities. How do we use the 
resources that the taxpayers provide us in a way that is most 
efficient and most effective.
    In the President's budget, the cost of the tax cuts for 
those earning over a million dollars a year for 2008 alone is 
$55 billion. That is the cost of the tax cuts in the 
President's proposal for those earning over a million dollars a 
year.
    The cost of the tax cuts in 2008 alone is $54.9 billion. 
The cost to restore the COPS program is $521 million. Now to me 
that is a priorities that just do not make much sense.
    I think it would be reasonable to ask those who are the 
very wealthiest among us to give up a tiny proportion of their 
tax cuts, a very tiny part, in order to restore COPS funding. 
Frankly, I think it would be in the interest of those people to 
make certain that the COPS program is restored. But we will 
have a chance to raise these questions and these issues as we 
go forward with this hearing.
    I want to first call on our mayor, mayor of Fargo. I am 
delighted that he is here, and I thought it would be most 
appropriate to begin this Budget Committee hearing by getting 
the perspective of a mayor, somebody who is responsible for 
budgeting, for determining what the priorities are and where 
the resources should go.
    So, Mayor Walaker, we are delighted that you are here. We 
especially appreciate your attendance, and if you would just 
give us your perspective on, being the chief administrative 
officer of this city, the importance of law enforcement and 
other first responder Federal resources.

 STATEMENT OF HON. DENNIS WALAKER, MAYOR, CITY OF FARGO, NORTH 
                             DAKOTA

    Mayor Walaker. Well, the No. 1 priority has always been the 
same, and that is what we need, is a safe and a healthy 
community.
    In 2005 we put together the budget, and it made a lot of 
sense to do some things to assist our police chief in early 
hiring and so forth, and that is what we did and we put on 
new--two new police officers in Fargo without the COPS grant.
    The COPS grant basically allows us to transition in our 
budget. They pay basically for police officers for the first 
year, and then it dwindles down after 3 years. Then it becomes 
a city obligation, but it allows you to transition.
    When I saw Senator Conrad's process there on the people 
making over a million dollars, and we are talking about 1 
percent of that to restore COPS grants, it just befuddles me 
that there is that kind of exposure.
    What is going to happen in the next budget is we are going 
to be struggling, and I mean struggling, to hire new people to 
meet our needs once again.
    Our fire chief, which is also a first responder, is going 
to try and staff a new fire station. Our transit facility that 
we just put on will ask for some people, andour new library is 
going to come. So it is going to be a difficult time for us to 
do it locally.
    We need people, because our community continues to expand, 
and, first of all, there is no one among us that does not 
understand the need for safety. It is No. 1.
    Back in the middle 1990's, we had some serious problems 
with gangs infiltrating our basic area, Moorhead, Fargo, and we 
put a foot down and we stopped it and it has been pretty 
decent, but it can come back. They are getting smarter all the 
time. They are not going to identify themselves, but they look 
just like any other business. They want to expand from Chicago 
and so forth and they are looking for new markets and so forth, 
and it will happen if we are not forward in that whole process.
    I would hate to think that I cannot go for a walk in my 
community, in my neighborhood at any time of the day or night 
without feeling relatively safe.
    So we have some huge challenges here in the future, and the 
COPS grants do an awful lot.
    We were criticized some time ago about the money that we 
took from Homeland Security and we spent it on communications. 
Well, now many of the areas of the United States are finally 
understanding how important communications is, and they are 
looking for additional funding to do that.
    Well, where that is going to come from in this very, very 
extremely sparse budget that Senator Conrad has put before us, 
we are going to be above that. We are going to have our--are 
they going to take the money then from our area and use it for 
other areas that did not do communications first? I hope not. I 
sincerely hope not.
    But we need to restore some funding, and I know everybody's 
taxes right now in North--especially in Fargo, they feel they 
are at the brink and so forth, but we have a safe community and 
we need to extend that.
    So I applaud Senator Conrad for bringing this issue to us 
from a national level. And the testimony that you are going to 
hear from the people that are on the front line will only 
bolster those needs to our Congressional, and we spent some 
time out there in January and priorities are, because there is 
not enough money for everything. So you have to prioritize, and 
to me safety is No. 1. Thank you.
    Birch Burdick, our State's Attorney, Cass County State's 
Attorney; somebody who has deep experience in law enforcement.
    Our police chief, Keith Ternes; somebody who is respected 
not only in this community, but regionwide. Weare delighted 
that you are here.
    Paul Laney, our new Cass County sheriff, who has already 
acquitted himself very well and is earning respect across the 
State for the way he has conducted his department. So welcome. 
We are delighted to have the three of you.
    I know, Mayor Walaker, that you have other 
responsibilities, so we will excuse you, but we thank you very, 
very much for coming and providing testimony to the Senate 
Budget Committee.
    Mayor Walaker. It has been a pleasure. Thank you.
    Senator Conrad. Thank you, Mayor Walaker. Mr. Burdick. Good 
to have you here.
    Mr. Burdick. Senator Conrad, glad to be here.
    Senator Conrad. Please proceed with your testimony, and we 
will go right through this panel. We have a second panel as 
well made up of, I probably should indicate at this time, Bruce 
Hoover, our fire chief here in town; Terry Traynor, the 
assistant director of the North Dakota Association of Counties, 
who is filling in for Mark Johnson, I understand, who had a 
little accident over the weekend; and Ken Habiger, the 
president of Casselton Volunteer Ambulance Service, who will be 
part of our second panel as well. With that, again, welcome to 
our Cass County State's Attorney, Birch Burdick.

   STATEMENT OF BURCH BURDICK, STATE'S ATTORNEY, CASS COUNTY

    Mr. Burdick. Thank you, Senator.
    Cass County is, of course, the home, the crossroads of 
Interstates 94 and 29. It is home to about a fifth of the 
State's population, and as a result, we have all the benefits 
that that entails and some of the crime that, unfortunately, 
accompanies that level of population and that kind of travel 
intersection that we have here.
    And as Cass County State's Attorney, my office prosecutes 
everything from essentially traffic violations to murder, and 
we have all of that going on in Cass County.
    In the past, Federal funding has been beneficial to our 
office, both directly and indirectly. We have had in our office 
Byrne grant funds, then later JAG funds that help support part 
of one prosecutor that we dedicated to drug prosecution. That 
is half of three people that we actually have working full-time 
on drug prosecution. So we have benefited from that very 
directly.
    And we have also benefited indirectly, because all of the 
money that comes in to support the law enforcement officials, 
either through the sheriff's office, through the Fargo police 
chief's office or otherwise, help put feet on the street that 
help put cases in our hands. But as a result of having those 
cases in our hands, again, we havegot a heavier caseload.
    And I would like to talk really just about two areas of 
primary interest for me: One relates to drug cases. We have had 
a growing drug caseload in this jurisdiction.
    The drug caseload doubled in the course of about five or 6 
years during--since the year 2000, and as a result, as I said, 
I went from having one person working on drug crimes full time 
to three people doing nothing but drug prosecution.
    And the North Dakota Legislature has responded to the kind 
of drug issues that they have seen here and particularly the 
meth issues that have arisen here in the Midwest, throughout 
the Midwest. They have increased the penalties associated with 
meth-related crimes. There is no misdemeanor meth crime. They 
are all felony meth crimes.
    As a result, defendants are fighting harder because the 
penalties are more severe, which has a corresponding impact on 
our office. We are able to get stronger sentences. We send them 
to the penitentiary, and, of course, we have had problems with 
having enough room at the inn in Bismarck in order to 
accommodate the people that we are sending there.
    But the Byrne grant funds, the JAG funds have helped us not 
only in providing additional support to our prosecution effort, 
but also in the asset forfeiture area. Not only can we punish 
somebody by sending them off to the penitentiaryfor committing 
drug crimes, but we can also take from them the assets that 
were related to their drug crimes so that we remove some of the 
profit incentive from those crimes.
    Senator Conrad. Let me ask you this, if I could. Does it 
make sense to you to cut the Byrne/JAG grants by 34 percent or 
the COPS program by 94 percent?
    Mr. Burdick. It does not make sense to me. I mean, as my 
perspective is that of a prosecutor. As a prosecutor, we have a 
lot of drug crimes going on here, and we need to throw strong 
resources at it, and cutting those resources at this time makes 
no sense to me.
    I have to admit that my vision of what is needed is 
somewhat limited by the scope of my work, but in what I see, 
this is no time to be lessening the impact, lowering the number 
of feet on the street or cutting back on funds that may be 
available to prosecutors to help support processing and 
prosecuting the cases that the law enforcement folks put 
together.
    Senator Conrad. OK.
    Mr. Burdick. So I think that--and I think that there is a 
Federal aspect here. I mean, some could say isn't this just a 
State issue, and my response to that would be no, because drug 
crimes, people who commit drug crimes are no respecters of 
State lines, lines on the map.
    We have drugs that come into this State across all 
fourborders. We have people who are committing crimes within 
our jurisdiction and living in Minnesota or South Dakota or 
wherever.
    So because of the nature of where the drugs come from, the 
nature of the impact that they have on our community, I think 
it is really a shared responsibility between State and Federal 
agencies, and I think that our Cass County folks are throwing a 
lot of resources at it, but we welcome the Federal resources 
that are also available to supplement those.
    I would add one other area, and this is a little different 
and has not come from a Byrne grant in the past, but in 
addition to the drug cases, we see an unfortunate level of sex 
crimes here in our community. Those sex crimes, always odious, 
are particularly reprehensible when they are perpetrated on 
young children.
    And in the not-distant past, we created here a 
Multidisciplinary Child Advocacy Center, and the purpose of the 
Advocacy Center is to put all these people together, to work 
together on these cases in one facility, essentially, to both 
enhance our investigative capability, but also to minimize the 
footprint that law enforcement and criminal justice makes on 
the spirit of those child victims.
    And we do that by limiting the number of interviews that 
have to be done, by consolidating those resources, byworking 
together on those cases.
    I think that the Child Advocacy Center is a remarkable 
resource to our community and is one also that I would like the 
Congress to think about when it is looking at funding for law 
enforcement purposes, because I think that that Advocacy Center 
in this community serves a vital role.
    So I welcome the opportunity to share those couple of ideas 
with you and your willingness to come and speak with us about 
Federal funding for law enforcement.
    [The prepared statement of Mr. Burdick follows:]


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]


    Senator Conrad. Thank you very much. Now we will turn to 
Chief Ternes. Welcome, Keith. Good to have you here.

   STATEMENT OF KEITH TERNES, CHIEF OF POLICE, FARGO POLICE 
                           DEPARTMENT

    Mr. Ternes. Thank you very much, Senator. It is an honor 
and a privilege to be here and offer testimony relative to this 
issue.
    As the city of Fargo continues to grow, both economically 
and geographically, the challenges associated with maintaining 
a safe and secure environment for the city also continues to 
grow, and although Fargo is a community free from most forms of 
violent crime, the city is experiencing an increase in crime 
similar to that of other cities across the country.
    Challenged predominantly by property crime, the Fargo 
Police Department remains committed to keeping our city one of 
the safest in the Nation. The continuous effort that is put 
forth by the men and women of the Fargo Police Department, 
however, has been adversely impacted by the ever-diminishing 
financial support received from the Federal Government.
    With the drastic reductions in funding for the COPS 
program, Byrne grants and other law enforcement programs, many 
police agencies, including the Fargo Police Department, are no 
longer able to readily obtain the resources needed to 
effectively address the increasing crime rate.
    Without question, the most pressing need for mydepartment 
is personnel. Regardless of the crime issue we are attempting 
to resolve, whether it be the continuous challenges associated 
with methamphetamine use, crimes against children via the 
Internet, gang-related crime or petty thefts, I need police 
officers to do the work. The ability to add officers at a rate, 
which, at a minimum, parallels Fargo's growth, is absolutely 
essential for maintaining a safe environment within the 
community.
    And although the city's elected officials recognize the 
need to fund this resource on the local level, there is still a 
need for the Federal Government's financial support.
    In the mid to late 1990's, when the COPS program was 
adequately funded, the city of Fargo took full advantage of the 
financial assistance offered through this program and was able 
to add a number of the much-needed police officers to its 
understaffed police force.
    In fact, during this time, the department was able to add 
nearly 20 officers to the force, which would have been 
virtually impossible without the financial aid of the COPS 
program.
    Since the Federal Government's shift in focus in priority 
from providing support to local law enforcement agencies to 
Homeland Security, the Fargo Police Department has found it 
increasingly difficult to add police officers.
    The policymakers in Washington, D.C. have repeatedlytold 
local officials that the concept and strategy of Homeland 
Security starts at the local level, but as the support received 
from the Federal Government becomes less and less available, it 
becomes increasingly difficult for police agencies such as mine 
to effectively follow this plan.
    What has become even more frustrating is that the one thing 
I, as the city's police chief, need more than anything else, 
personnel, it is the one resource I cannot seem to get my hands 
on, while other resources which I do not need are readily 
available.
    I do not need any more gas masks, flashlights, generators 
or duct tape. What I need is people. What the city of Fargo and 
its police force needs is the reestablishment of the funding of 
the COPS program and Byrne grants, which allows the Fargo 
Police Department and other law enforcement agencies to be 
successful in keeping our community safe.
    And in that regard, I respectfully ask that these programs 
receive their due consideration and an appropriate allocation 
of funding, and I sincerely appreciate your efforts, Senator 
Conrad, in assisting us in that endeavor.
    [The prepared statement of Mr. Ternes follows:]


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]


    Senator Conrad. Well, let me just say, one night I had the 
opportunity to ride with the Fargo Police Department, and I was 
so impressed by the professionalism of the way your officers 
conducted themselves. And I saw them in a lot of different 
situations, and they were just such first-rate professionals, 
so you are to be commended for what you have done here.
    Let me just ask you this question: Does it make sense to 
you to cut the COPS program by 94 percent, to cut the Byrne/JAG 
grants that are used for law enforcement by 34 percent, to cut 
the State Homeland Security Program by 65 percent?
    Chief Ternes. Senator, absolutely and unequivocally, no, it 
does not. It makes no sense to me.
    The one thing that we have here, not only in the city of 
Fargo, but throughout the State of North Dakota, is something 
that I think many, many other jurisdictions around the country 
envy, and that is, a climate of safety. But it is only because 
the people who live and work in our communities are committed 
to that.
    As I mentioned earlier and as the mayor mentioned earlier, 
our elected officials have and continue to make public safety 
the top priority. But the resources are not unlimited on the 
local level.
    And so what we need, what we desperately need is 
thecontinued financial support from the Federal Government to 
not only keep existing programs in place, but really to 
maintain that atmosphere of safety and security in our State.
    Senator Conrad. Let me ask you this, Chief, because one of 
the reasons that has been given for these really draconian cuts 
is that agencies around the country have used these funds for 
gold plating. That these moneys have flowed to local 
departments and they have been used for extravagant uses that 
are unneeded and unrelated to effective law enforcement. Would 
you just comment for the record with respect to how those funds 
have been used locally and in your department?
    Chief Ternes. Well, within the Fargo Police Department, we 
have used those funds in what I would describe as a very, very 
responsible way. We do not ask for things and we do not 
purchase things that we do not need.
    Like I mentioned, my--the one resource that I need more 
than anything else is people, and if there are other 
jurisdictions which have misused funds, then I am all for 
having the Federal Government hold those people accountable. 
But for those of us that have acted responsibly, to cutoff a 
resource that is much needed is not only incredibly unfair, but 
it really puts us at risk of being able to maintain that 
safety.
    Senator Conrad. Well, thank you for that. And I think you 
have hit the nail on the head. I think agencies across North 
Dakota have been very responsible in the way they have used 
these funds.
    Are there places in the country that have abused it? Yes. 
Let us make no mistake about it. We have done our due 
diligence. We know there are places in the country, and, 
unfortunately, mostly on the East Coast and the West Coast, 
that have squandered funds that were provided to them, and I 
might be swift to say not just Federal money. They have 
squandered some of their own money. That is a much larger 
problem than this question before us.
    The question before us is, does it make sense for the 
Federal Government to dramatically cut back in its support for 
law enforcement around the country? Does it make sense to cut 
back on these Byrne grants and JAG grants that have been very 
essential to the fight against meth? Does it make sense to cut 
back on the State Homeland Security Program? I just say my 
experience in North Dakota is those moneys have been used 
wisely and well and responsibly.
    Sheriff Laney, good to have you here. This is the first 
chance we have had an opportunity to meet, but your reputation 
precedes you and I have heard very good things from within your 
department and from other departments about the way you have 
conducted your business. So welcome, andplease proceed with 
your testimony.

    STATEMENT OF PAUL LANEY, SHERIFF, CASS COUNTY SHERIFF'S 
                    DEPARTMENT, CASS COUNTY

    Mr. Laney. Well, thank you, Senator. It is truly an honor 
to be here, and I truly appreciate your kind words as well.
    Each year the demands on local law enforcement agencies 
grow. As we enter a time when we are asked to become more 
involved in all aspects of society, we are also seeing proposed 
cutbacks in our support from the Federal Government.
    As the protectors of our communities, we are committed to 
doing whatever it takes to keep our citizens safe.
    We have law enforcement officers in schools, we are 
involved in senior programs, neighborhood watch programs, drug 
awareness programs, youth programs, leadership programs, drug 
courts and a myriad of safety awareness programs to include 
drug interdictions, removing alcohol-impaired drivers and seat 
belt blitz.
    We also provide law enforcement officers to Federal 
programs such as the Drug Enforcement Administration's Drug 
Task Force and the Federal Bureau of Investigation Joint 
Terrorism Task Force.
    With all of these programs, we are also asked to step up to 
the plate and take on larger roles in Homeland Security.
    We are active in development of the buffer zone protection 
plans for local businesses designated as potential terrorist 
targets, we develop training and are active in preparing for 
terrorist attacks on our infrastructure.
    We are also developing action plans to deal with security 
at the Points of Dispensing for the Center of Disease Control's 
Strategic National Stockpile through the City Readiness 
Initiative. We do all of this----
    Senator Conrad. Let me just stop you there, Paul, on that 
point, because I do not want that point to be lost.
    Let me just say that all of us know one of the great 
potential threats to our country is the threat of avian flu or 
some other epidemic.
    We have just held a hearing in the Senate Budget Committee 
about that matter. We are spending billions of dollars in 
preparation for some kind of pandemic.
    We all know the 1918 flu epidemic was devastating to our 
country and devastating in North Dakota. We know that we are 
overdue for some kind of similar incident. We know that there 
is the potential with avian flu.
    If, God forbid, something like that were to occur, the 
dispensing of medicine would be absolutely critical, because 
the whole strategy and plan is if there is an outbreak, to 
attack that outbreak, to keep it from spreading.
    This requires close coordination with law enforcement, and 
that is what Sheriff Laney is just referencing with respect to 
working with the Centers for Disease Control in the case of 
such an outbreak.
    And one thing we know with air travel, with people being 
highly mobile, that a disease that might start in Asia could 
come here, could come right here to Fargo, North Dakota.
    Mr. Laney. Absolutely.
    Senator Conrad. And the whole strategy is to kill it before 
it spreads, and that is why what he is referencing is very 
important.
    Mr. Laney. Yes, sir. I agree.
    We do all of this while also providing critical members of 
our agencies to National Guard units who are regularly being 
called up and deployed. This puts a strain on our ability to 
meet our everyday service needs, much less support the requests 
put on us from the State and Federal Government.
    The support we receive from the Federal Government is 
critical to our success in all of the above-mentioned programs. 
The following Federal grant programs assist us daily in serving 
our communities.
    The Byrne/JAG grants. They allow us to participate in drug 
task forces that attack the ever-growing and 
changingmethamphetamine problem.
    The Law Enforcement Community Block Grants. These grants 
allow us local law enforcement agencies to identify a critical 
need and apply funding to meet these needs. This grant assisted 
our region in 2003 by allowing us to purchase a SWAT command 
post transport vehicle. Our team serves a seven-county area in 
southeastern North Dakota. These funds benefit the entire 
region.
    The COPS grants. The COPS grants have allowed so many law 
enforcement agencies to add additional personnel to meet the 
demands placed upon us. It has put more law enforcement 
officers on the streets, in the schools and on State and 
Federal task forces, while allowing local governments the 
ability to budget over a period of time for the additional 
personnel.
    Local Law Enforcement Terrorism Grants. These grants have 
allowed agencies required to respond to terrorist incidents the 
ability to purchase the proper equipment and training necessary 
to ensure our personnel are equipped and trained to respond to 
a terrorist incident.
    Local law enforcement has always stepped up when called 
upon to meet the needs of our citizens. You will never hear 
from us we cannot do it. We continually meet the demands asked 
of us, and we will continue to do so. But we need the 
partnership and the funding from the Federal Government 
tocontinue to meet these demands.
    With the proper Federal support and our local can-do 
attitude, we will be ready to meet the needs of our region, our 
State, and our country.
    Thank you, and thank you, Senator, for allowing me to 
testify today.
    [The prepared statement of Mr. Laney follows:]


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]

    Senator Conrad. Thank you, Sheriff, for really very 
important testimony.
    Let me ask you, for the record, what I have asked the 
others, because I want to--we are, in part, trying to establish 
a record here that I can take to my colleagues as we prepare 
our answer to the President's budget.
    Does it make any sense to you to cut the COPS program 94 
percent or the Byrne/JAG grants by 34 percent or to cut the 
State Homeland Security Program by 65 percent or the Law 
Enforcement Terrorism Prevention Program by 31 percent? Do 
those priorities make sense to you?
    Mr. Laney. No, Senator, they do not make sense to me. You 
know, there is an old saying that every American knows: If it 
isn't broke, don't fix it.
    We have been proving year after year after year in the law 
enforcement community that these funds make a difference in our 
local communities.
    We have been able to demonstrate by the numbers on the 
street, by the way we have been able to go after the 
methamphetamine problems, the way we have been able to meet the 
needs asked of us for these terrorism situations and to be 
ready for an attack on the infrastructure. We have stepped up 
and we have done it because of these grants. It is working.
    So to see it go away is like taking a step backwardand 
where--you know, at a time when every region struggles to meet 
its financial needs, to lose that support is critical to us.
    Senator Conrad. Well, I thank you for that. I would ask 
Chief Ternes, if I could. Some are saying look, this is not a 
Federal obligation or responsibility. The Federal Government 
has got no obligation for these local resources. What would be 
your response to those who advance that argument?
    Mr. Ternes. Well, Senator, I do think that the Federal 
Government does have at least some responsibility to support 
first responders and public safety on a local level.
    It is interesting, at least speaking for my own agency, how 
this seems to work in reverse. Since the--since September 11th 
of 2001, my department has been called upon time after time 
after time to supply officers to meet the Federal needs. In 
other words, in the form of National Guardsmen, the troops who 
have been summoned to overseas military duty.
    And repeatedly those individual officers and the 
organization as a whole have stepped up and met that need for 
the Federal Government.
    Now what I need, what this community needs, is assistance 
in the form of financial assistance to pay for additional 
police officers, and to have those----
    Senator Conrad. How many of your officers, Chief, have been 
called up for Guard duty overseas?
    Mr. Ternes. Well, many, many have been called on several 
occasions, and so to go back the better part of 5 years, I 
would have to say upwards of 30 to 35 as a rough guess.
    Senator Conrad. And how big is your department?
    Mr. Ternes. I have one hundred and--I am authorized to have 
129 officers.
    Senator Conrad. And I recall at one point you had eight or 
ten gone at one time. Is that not the case?
    Mr. Ternes. Actually, immediately following September 11th, 
I was missing upwards of 15 officers to active military duty. 
As we sit here today, I am missing six. Over the course of the 
last four or 5 years, on average, it has been between six and 
ten police officers that are absent for that.
    Senator Conrad. How long does it take you to train an 
officer?
    Mr. Ternes. Approximately 9 months.
    Senator Conrad. And so when there is a call-up like 
occurred, I assume it is very hard for you to fill those slots 
quickly.
    Mr. Ternes. Police officers, sheriff's deputies do not grow 
on trees. I cannot simply walk out, put an ad in thepaper and 
expect somebody to fill that position in 2 weeks. It takes the 
better part of 9 months to hire and train a police officer so 
they are out on the street, functioning as a full-fledged 
police officer.
    Senator Conrad. OK. Sheriff Laney, what would you say in 
answer--again now, this is a question I am going to get from my 
colleagues when I present my budget. I am going to have 
colleagues of mine say, well, Senator, what are you talking 
about? This is not a Federal issue. This is not a Federal 
Government responsibility. Law enforcement is a local 
responsibility. What would you say?
    Mr. Laney. I would say the Federal Government is the 
representative of its citizens, and we are its citizens. We are 
the ones that--we are the Federal Government, and we are 
telling them that we need this support. It is our tax dollars 
that go in there in the first place. It is our money going to 
the Federal Government, and we are asking for it to be 
reinvested back in our people.
    Senator Conrad. Well, that is a pretty powerful answer. You 
know, one of the things I say to my colleagues is crime does 
not respect borders. These criminals, they do not say, well, we 
are just doing crime in Fargo. Doesn't work that way. We have 
gangs coming in here, peddling drugs. I have seen intelligence 
that says they are going from Mexico all the way to Fargo, 
North Dakota.
    And we know that if, God forbid, we faced a pandemic, a 
pandemic can come to our towns, our State from half a world 
away in 24 hours. We have seen the modeling of what could 
happen in a pandemic.
    That would put enormous demands on law enforcement all 
around the country. And, you know, that is not just a local 
matter. That is a matter that affects every American 
everywhere, because to the extent we are able to prevent it 
from spreading is critical to a successful strategy.
    So, Birch, how long have you been State's Attorney now?
    Mr. Burdick. Just over 8 years.
    Senator Conrad. Is crime--are you seeing a dramatic 
reduction in crime? Are people giving up on a criminal 
lifestyle?
    Mr. Burdick. You know, you learn in law school that one of 
the theories behind criminal justice is deterrence. If you 
punish somebody for committing a crime, you have a couple of 
kinds of deterrents.
    You deter them from committing the crime again because you 
are making an example of them that they do not want to repeat.
    Two, you are taking them off the street for a period of 
time so they cannot commit that crime again.
    And, three, hopefully somebody else will see what happened 
to them and not want to commit that crime.
    I believe that is out there in theory. I am not sure how 
well it is working in practice. I would like to think it has 
some value, but I am not seeing a reduction. I am certainly not 
seeing a reduction in drug crimes.
    We have seen a little leveling maybe in the last year or 
last half a year or so, but the drug crimes, as I said, since 
about the year 2000 or so, have doubled, at least through our 
office, the ones we are prosecuting.
    And as you noted, I think two things are important about 
that: One, a lot of it is meth. The meth we have here, a very 
small portion of that is homegrown. It has come in from Mexico 
or California or the West Coast. It is coming here in a variety 
of ways. It is not being developed in our backyard.
    So there is an interstate, certainly an international--
national and certainly international aspect to drug crimes. And 
that is why I think, among other things, there is a 
relationship here between Federal, State, and local agencies.
    And second, we work hand in glove with the U.S. Attorney's 
office here. They handle a certain kind of drug crime. We 
handle other drug crimes.
    And we figure out who is going to handle what crime often 
by picking up the telephone and just chatting about where it 
might best be prosecuted. That relationship is important, but 
it also outlines the sort of integrated nature of the Federal 
and State agencies dealing with drugs.
    Senator Conrad. And really, it is a partnership.
    Mr. Burdick. It is.
    Senator Conrad. To be effective, everything we have seen, 
if you want to effectively combat crime, you want to 
effectively combat drug supply, that you have to have a 
coordinated effort.
    It involves Federal, it involves the U.S. Attorney, it 
involves the FBI, it involves DEA at the Federal level, it 
involves local law enforcement, police chief, the sheriff, the 
State's Attorney.
    And that if you do not have a strong partnership to take on 
these criminal elements that are clearly growing, and they are 
energized by massive flows of money. It is truly startling how 
much money goes through the drug trade in this country.
    So if we want to fight that, you have to have a partnership 
just like they do. The drug networks, they are not operating 
just on a local level. They are operating nationally and 
internationally.
    And if you want to fight them effectively, you better have 
a partnership. That is one thing we have learned with these 
drug task forces.
    I would just ask you, Chief Ternes, do you find these drug 
task forces to be effective? Are they an important part of your 
arsenal?
    Mr. Ternes. Very much so. You know, you just mentioned how 
we have to have this partnership, and I think my colleagues 
here would agree that the one thing that we have that, again, 
many other jurisdictions around the Nation are envious of, and 
that is, a phenomenal amount of cooperation that takes place 
between both the Federal law enforcement agencies, the local 
law enforcement agencies, the prosecutors, and the street cops.
    And so what is befuddling to me is the fact that we have 
something here that is working, and in many other places it 
does not work. Our drug task forces are incredibly important to 
keep our ability to combat that issue.
    And so for the Federal Government to throw a wrench into 
this and withdraw or withhold financial support has a 
potential, at least, to make what is a very functional, working 
thing, dysfunctional.
    Senator Conrad. Well, I think that is pretty powerful.
    Let me just say, I referenced earlier that I have ridden 
with the Fargo police, and I noticed the officer that I rode 
with is in the back, Grant Benjamin. And at the risk of 
embarrassing him, I tell you, that is absolutely a professional 
officer. We are incredibly lucky to have somebody of that skill 
to be willing to put on the uniform.
    And if we are going to be effective, we better have 
partnerships, because these guys are not giving up bringing in 
illicit drugs. These guys are not giving up engaging in every 
kind of scam.
    By the way, a couple years ago I was informed I had won the 
Spanish lottery. They told me I had won $974,000, and all I had 
to do was immediately send 10,000 to some guy over in Europe 
and I would get my money very soon thereafter.
    And, well, it was obvious to me it was a complete scam. It 
was pretty good, though. I mean, it was very impressive. The 
envelope I got, it had seals on it.
    We had the postal inspectors come in and wired up the 
phone, and I called the people I was supposed to call and had 
an interesting conversation. I said, you know, I said, ``One of 
the things that is most interesting to me is that you claim you 
are the Spanish lottery, and yet the phone number I have called 
is in Germany.'' I said, ``How does that work?'' And the guy 
said, ``Well, that is the way all these operations are being 
run now. They are outsourced.'' The Spanish lottery is now 
outsourced to Germany. That is a good one.
    Anything the three of you would want to add? Anything I 
have not asked that I should ask? Anything that you would want 
to add for the record?
    Mr. Burdick. Not I. Thank you.
    Mr. Ternes. No, sir. Thank you.
    Senator Conrad. All right. If not, I want to thank each of 
you for your contribution to the work of this committee.
    I have an obligation to present a budget proposal to my 
colleagues early in March, and this testimony will be very 
helpful as we address these specific issues. And I can tell 
you, no budget that I will present will have these kinds of 
reductions in these very important law enforcement accounts.
    If there is one thing I have learned in my time, first as 
tax commissioner in North Dakota and as a U.S. Senator, is this 
partnership in law enforcement has been very effective, and we 
have faced a really tough change in the tactics and strategy of 
the criminal elements.
    And we certainly see that in meth, where, as you say, 
Birch, we have seen a big reduction in terms of local 
production, but we have seen a tremendous influx of this stuff 
from elsewhere.
    And everybody I have talked to has talked about how toxic 
meth is, how devastating it is for a society and a culture, and 
how devastating it is to families.
    This is not the time to let up on the pressure against 
those people who would just undermine our communities and our 
families. You got to be taking these guys on tough, and it is 
not tough to cut the resources 90 percent. That makes no sense.
    Thank you very much. I appreciate it.
    I will now call the second panel. Bruce Hoover, the Fargo 
fire chief; Terry Traynor, the assistant director of the North 
Dakota Association of Counties; and Ken Habiger, the president 
of Casselton Volunteer Ambulance Service.
    Again, I appreciate very much all of you being here for 
this hearing. I appreciate your willingness to testify.
    You know, sometimes in Washington we put the witnesses 
under oath. I do not feel any need to do that with North Dakota 
witnesses.
    One of the wonderful things about North Dakota people is, 
by and large, the vast majority of them are honest, and one 
thing I know for certain is these officials, their word can be 
counted on. That is one reason I asked them to come here and 
testify.
    Chief Hoover, good to have you here. Please go forth with 
your testimony.

  STATEMENT OF BRUCE HOOVER, FIRE CHIEF, FARGO FIRE DEPARTMENT

    Mr. Hoover. Thank you, Senator.
    I just want to reiterate what the first panel said about 
the spirit of cooperation we have in North Dakota. In North 
Dakota, as emergency responders, we know that there is no 
political subdivision in the State that has the resources to 
survive on our own. So we have to cooperate just to survive.
    Senator Conrad. Maybe if you draw that microphone closer, 
it would be great.
    Mr. Hoover. So, you know, part of that cooperation is that 
on subdivisions like Fargo, cities like Fargo, it does really 
strain our resources. Communities throughout the State have the 
expectation, if they have a major incident, they have resources 
from larger cities that are going to come and assist them with 
that.
    And we want to be a good neighbor, but we have difficulty 
not only providing for our own needs, much less the needs of 
political subdivisions that we do not receive taxes from.
    And the cost of specialized equipment, it is very high, and 
so when we are expected to have this equipment that is used not 
only in our own city, but in other jurisdictions as well, it is 
nice to have an external source of funds to assist us with 
that.
    So, you know, it is important to us to have these funds 
coming in so that we can cooperate between jurisdictions.
    [The prepared statement of Mr. Hoover follows:]


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    Senator Conrad. And, Bruce, the firefighter grants, are 
they something that you think have merit?
    Mr. Hoover. Oh, actually firefighter grants are very 
helpful to States like North Dakota inasmuch as they are need-
based grants, and in areas like North Dakota, there is a 
tremendous need. And so those jurisdictions that have the 
greatest need have the greatest likelihood of getting those 
grants.
    So in rural States, I think they are more valuable than 
they are in other States because we do not have the capability 
to tax for a lot of the resources that we need.
    Senator Conrad. Bruce, when we see one of those bright, red 
fire engines responding to an emergency, I see them go by me. 
In fact, as we drove downtown today, I saw one of your engines 
out. It would help people understand, I think. What does an 
engine like that cost?
    Mr. Hoover. Well, the fire engine that responds to a 
residential dwelling is--probably start at $400,000.
    Senator Conrad. $400,000.
    Mr. Hoover. $400,000 and upwards from there. A ladder truck 
is in the neighborhood of three-quarters of a million dollars 
and upwards from there.
    Senator Conrad. So a ladder truck, something that would 
respond downtown to something that would occur, $750,000.
    Mr. Hoover. Will get you an entry level.
    Senator Conrad. For an entry level. What is the most 
expensive truck that you would have?
    Mr. Hoover. Right now it is our ladder truck, and we have 
had that for several years. We do try to extract the maximum 
out of our equipment. And we paid about $600,000 for that a 
number of years ago we got it.
    We also have--we need heavier rescue rigs and apparatus to 
respond to hazardous materials incidents, and those are in that 
$350- to $400,000 range for a modest piece of equipment.
    Senator Conrad. So this is an expensive business.
    Mr. Hoover. It is very expensive.
    Senator Conrad. All right. Terry, welcome. Good to have you 
here. I know you are filling in for Mr. Johnson, who had an 
unfortunate injury over the weekend.

STATEMENT OF MARK A. JOHNSON, EXECUTIVE DIRECTOR, NORTH DAKOTA 
ASSOCIATION OF COUNTIES, PRESENTED BY TERRY TRAYNOR, ASSISTANT 
         DIRECTOR, NORTH DAKOTA ASSOCIATION OF COUNTIES

    Mr. Traynor. Yes. And he apologizes for not being here, but 
I thank you for allowing me to sit in for him. It is a great 
honor to be here.
    I want to start out by saying that the county officials and 
the counties that I represent are very concerned about the 
Byrne/JAG and the COPS grant reductions; that working with them 
on a daily basis are essential.
    What I really came today prepared to talk more about, the 
Homeland Security, something that our agency is involved with 
directly and how vital we feel this funding is to terrorism 
prevention, disaster preparedness, and public safety, really 
from a local government perspective.
    Just like to note a couple things that have happened since 
this money has been available to local governments.
    Cities, counties, their first responders, including 
firefighters, law enforcement, emergency medical service, 
public works, have received about $22.9 million in North Dakota 
just for response/protection equipment.
    About $21.8 million has been distributed for communications 
equipment; something that we really need in North Dakota to get 
all of us communicating better as we are called more often to 
back up and to cooperate with each other on incidents. We need 
to have that integrated communication.
    Communities and emergency management personnel have 
utilized about 2.1 million of this money for planning, 
firefighters, law enforcement personnel, and other first 
responders have spent about $3.1 million for training and over 
$600,000 in exercise to be ready.
    Today over 32,000 individuals across the State have 
participated in Homeland Security funded training. 32,000 
individuals I think is a huge, remarkable number for a State 
the size of North Dakota.
    I would like to point out, as you know and as everyone 
knows, that Homeland Security funding for States like North 
Dakota has decreased already.
    In 2004, we had $19 million, and in 2006, we are down to 
$10 million. That is about a 50 percent decrease in 2 years, 
with additional mandates that we are responsible for, 
requirements to meet, as well as restrictions on how the money 
is spent.
    The current budget, talking about cutting another $300 
million from Homeland Security grants, is just going to be 
devastating to our efforts.
    A couple of things that we would hope that you would take 
back to Congress is that, first, we feel that there must not be 
a decrease in Homeland Security funding for the State Homeland 
Security Program or the Law Enforcement Terrorism Prevention 
Program.
    These programs place resources in the hands of those that 
are there to respond on a daily basis to both natural disasters 
as well as terrorism threats.
    And second, we feel that States should be guaranteed at 
least a minimum allocation of three-quarters of 1 percent of 
the funds rather than some of the discussion about reducing 
that minimum allocation.
    States like North Dakota, it is not a lot of money when you 
look at it from a State like California or New York, but it is 
so vital to a State like North Dakota.
    We in North Dakota, we have heard it talked about here 
about the cooperation. Our State has developed a Disaster 
Emergency Advisory Committee, or DESAC, as they call it, which 
brings together local governments, first responders from all 
across the State, to help prioritize this money, and I feel 
like it is a very good process. It is proven that we can 
collectively do what is best with this money.
    We feel that North Dakota has been very responsible. We are 
very good stewards of this money and we will continue to do 
that. So we need your Congressional committee's support for 
stabilizing the formulas and the methodology for future 
Homeland Security grants to facilitate multiyear funding that 
supports North Dakota's strategic plan.
    The constant fluctuation and our uncertainty we have 
experienced in the past makes it difficult for planning long-
term investments and setting benchmarks.
    So thank you, Senator Conrad, for coming to listen to this, 
and we are very hopeful that in the future we can retain this 
important funding.
    [The prepared statement of Mr. Johnson follows:]


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    Senator Conrad. Thank you very much for your testimony.
    Maybe I could just ask you, as it is important we establish 
for the record, do you believe it makes sense to cut the State 
Homeland Security Program by 65 percent or the Law Enforcement 
Terrorism Prevention Grants by 31 percent?
    Mr. Traynor. Absolutely not. I think maintaining the money 
that is there, as I said, we have already experienced cuts, and 
I think the level that we are at now is essential to maintain 
and continue to improve our communication infrastructure and 
keep our people well-trained and exercised so they can respond 
to the emergencies that sooner or later we will probably have 
to deal with.
    Senator Conrad. Chief Hoover, if I could ask you the 
question on firefighter grants. Do you believe it makes sense 
to cut the firefighter grants 56 percent?
    Mr. Hoover. Well, see, from my perspective, the scope of 
fire department activities is growing all the time. You know, 
we are getting more responsibilities as time goes on, and with 
that responsibility comes added expenses.
    So from my perspective, of course, I would like to see more 
funding go into the SAFER grants to help us with that personnel 
and these responsibilities, more money into the fire grants, 
because, you know, the scope of our job is growing, and so----
    Senator Conrad. The fact of the matter is, you are getting 
asked to do more. Isn't that the case?
    Mr. Hoover. Right, and the expectations of the citizens is 
that we provide more services, and then here is the funding 
stream that is drying up on us. So it is very problematic.
    Senator Conrad. You know, it is interesting. If you look at 
what the Federal Government is sending out in terms of 
guidelines and requirements and responsibilities for first 
responders, for local law enforcement, for sheriffs, for 
emergency medical services, for fighter departments, dramatic 
increase in what they are asking local law enforcement, local 
first responders, to do. Isn't that the truth? I would ask you, 
Chief Hoover. Aren't you being asked to do more?
    Mr. Hoover. Well, that is exactly correct. The expectations 
and the responsibilities that are coming down to the local 
jurisdiction have increased and, you know, at the very time 
that the support we are getting is going away.
    Senator Conrad. Yeah. I must say it just makes no sense to 
me.
    Ken, welcome. Good to have you here. Ken Habiger, who is 
the president of the Casselton Volunteer Ambulance Service. We 
know in North Dakota volunteer ambulance service is critically 
important to being able to deliver health services.
    Please proceed with your testimony.

   STATEMENT OF KEN HABIGER, PRESIDENT, CASSELTON AMBULANCE 
                            SERVICE

    Mr. Habiger. Thank you, Senator, for allowing me to be here 
today to testify.
    As the Senator said, I am the president of the Casselton 
Volunteer Ambulance Service in Casselton, North Dakota, and 
also a former Casselton fireman. I have been an emergency 
medical technician since we started the Casselton Volunteer 
Ambulance Service in 1978. I am here today to represent the 
emergency service providers in the State of North Dakota, many 
of whom are volunteers.
    I have been involved with the ambulance service starting at 
a very early age when funeral homes provided this service and 
have been part of the evolution of ambulance services to be the 
professional healthcare providers they are today.
    Our services, along with three other volunteer basic life 
support services and Fargo-Moorhead advanced life support 
services, provide medical services throughout Cass County, 
where the main railroad freight line and two interstate 
highways cross.
    We operate under medical direction in a tiered response 
system starting with 911 dispatch, first responders, then 
moving up into basic life support and ALS ambulance services, 
LifeFlight, police and fire departments.
    Our main support in North Dakota starts with the North 
Dakota Department of Health Emergency Medical Services and 
moves down through the county government and the county 
emergency manager.
    The reason we are here today is our concern for the 
cutbacks in funding through the President's budget, which may 
cause our inability to fill all of our needs that Homeland 
Security and other agencies require and mandate of ambulance 
services in the field of preparedness--?
    EMS gets a small portion of Homeland Security and other 
sources of funding. In Cass County, I sit on the Cass-Fargo 
Emergency Planning Committee that assists in identifying 
concepts for preparedness, prevention, mitigation, response, 
and recovery from natural and man-made disasters.
    Nationally EMS funding is around 4 percent of the money 
made available. EMS also has a difficult time getting on 
national boards and on down that are involved in planning and 
funding of EMS. These findings were the result of a large 
number of participants from the EMS and medical community 
through a study done through New York's Center for Catastrophe 
Preparedness and Response. EMS is part of what is called ``The 
Forgotten Responder.''
    Funding we have been able to access provided us a new 
interoperable digital radio system and soon-to-come digital 
paging equipment.
    This leaves us short in funding for equipment, even with 
help from the North Dakota Department Emergency Medical 
Service. We are unable to fully implement the North Dakota 
Regional Response Plan for our services.
    Senator Conrad. You do not have sufficient resources now--
--
    Mr. Habiger. Right.
    Senator Conrad [continuing]. To do that. Well, how about a 
65 percent cut?
    Mr. Habiger. Oh, that 4 percent will be gone that we are 
getting now.
    Senator Conrad. Yeah. Two-thirds of it would be gone. Does 
that make any sense to you?
    Mr. Habiger. No. No. It is tremendous. Statistics show the 
population of North Dakota is aging. We see funding for this 
aging population cut through the President's budget. Also, we 
see beneficial programs like emergency medical services for 
children and many other programs suffering drastic cuts.
    Across the Nation, every State is dealing with a looming 
crisis to attract volunteers to its services. I believe the 
last figure that was presented showed that in the 1980's, the 
average volunteer ambulance squad had more than 35 volunteers. 
Today that figure is down to 12 members.
    I thank you for allowing me to be here today. We are 
grateful for the support and funding we have received, but we 
realize we have a long way to go to move up from that 4 percent 
figure of funding.
    [The prepared statement of Mr. Habiger follows:]


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]

    

    Senator Conrad. Well, I thank you for that, Ken. And I 
thank each of these witnesses.
    I just think we are headed in the direction here that would 
be a profound mistake. If these proposed cuts were actually 
implemented, I think the effect on local law enforcement, I 
think the effect on fire departments, the effect on emergency 
responders and the effect on counties would be very dramatic, 
especially over a number of years.
    I went through before the amount of money that has come to 
North Dakota through these programs over the last several 
years, and we are talking, as I had indicated, $36 million for 
the COPS program from 1994 to 2006. $42 million through Byrne 
and JAG local law enforcement grants from 1988 to 2006. $48 
million from the State Homeland Security Program from 2003 to 
2006. Terry, you especially referenced those. That is over a 4-
year period. $48 million. $48 million makes a big difference in 
North Dakota. Law enforcement terrorism prevention, $12 million 
from 2004 to 2006. The firefighter grants that have been 
important to communities across North Dakota and now are 
proposed to be cut by 56 percent.
    Let me just conclude this panel by asking each of you, if 
you could speak to my colleagues on the Senate Budget 
Committee, because we will be in markup within the next month, 
what would you say to them? What would you want them to 
understand before they cast their votes on these questions? 
Chief?
    Mr. Hoover. Well, I guess I would say that, you know, I 
would like you to realize that the services the citizens expect 
from the fire service today are far greater than they were even 
10 years ago. And they get greater every day. And so as that 
demand for service grows, the needs grow as well. So it seems 
incongruent to me to, at a time of growing need----
    Senator Conrad. Let me just say, if you used the word 
``incongruent'' with some of my colleagues, you will really----
    Mr. Hoover. It does not make any sense to me.
    Senator Conrad. Yeah, that we can understand.
    Mr. Hoover. You know, it does not make any sense to reduce 
funding during a time of growing need.
    Senator Conrad. Yes, sir. Terry.
    Mr. Traynor. I just want to reflect back on what you had 
said in your opening remarks about Homeland Security and North 
Dakota.
    We have this huge, 320-mile border, international border, 
that oftentimes local law enforcement is called to help bolster 
the resources there. We do a lot of exercises on the border 
with Federal officials, Canadian officials, State and local.
    We are constantly working together to keep our State and 
our Nation safe, and I think we have a big role in that here in 
North Dakota. And I hope that your colleagues can understand 
how important it is to keep the funding there so we can be 
ready to respond to any emergency that comes along.
    Senator Conrad. Thank you, Terry. Ken.
    Mr. Habiger. Well, I think a lot is expected of EMS in 
North Dakota, especially with things that--like a pandemic flu 
attack here or a major--something happened to our food-supply 
chain and a lot of people got sick. You could go on and on with 
the preparedness and having the necessary stuff to attack what 
you have to do.
    And then I think when we see the population of the 
ambulance, you know, declining, less and less ambulance 
services, more demands put on, and if something major happens, 
part of the State response plan that we are in now, we are 
expected, our services, to be able to take care of about 10, 12 
people at one major event. So you multiply that to something 
major coming through, why----
    Senator Conrad. We would have our hands full.
    Mr. Habiger. Right.
    Senator Conrad. Let me just conclude this by saying those 
who say there is no Federal responsibility here deny the nature 
of the threat with respect to law enforcement in the first 
order.
    One of the great threats we face is these drug gangs that 
operate not just locally. These drugs are not coming just 
locally. These drugs are coming both nationally and 
internationally. And anybody that does not see a Federal 
responsibility for a partnership to combat that threat I think 
is just missing reality.
    I would say on the question of the threat of pandemic, we 
have just had the Secretary of Health and Human Services before 
the Budget Committee. One part of his testimony talked about 
the very real threat of a pandemic at some point and the 
strains that that would put on us all nationally. And nobody 
can tell you where it might break out.
    It could break out here in North Dakota. It could break out 
in Casselton, North Dakota, could be the first place we see it. 
Somebody could fly here on a plane from some Asian country and 
come here and first have the symptoms in Casselton, North 
Dakota.
    If that were to occur, they would have to cordon off the 
area and immediately try to identify everyone exposed, every 
animal exposed, treat them with vaccine, treat them with 
antivirals, close them off so they didn't infect others.
    That would be a demand that would be put on all first 
responders. EMS would have a role, local law enforcement would 
have a role, firefighters would have a role. I mean, this is 
the plan.
    So to suggest that there is no national or Federal 
responsibility or role is to deny the reality of the threats we 
face. We are in a world that is globalizing, and these threats 
have become global in nature, and you cannot respond just 
locally. You have to respond locally and regionally and 
nationally and even internationally, and that requires 
partnerships.
    And if we are going to have partnerships, we have to 
partner up on the funding. That is just the reality. Some of 
these things are already in place and are working well.
    For the life of me, I do not understand what sense it makes 
to cut the COPS program 64 percent, or to cut the Homeland 
Security program 65 percent, or to cut firefighter grants 56 
percent, or to cut the Byrne/JAG grants 34 percent, or the Law 
Enforcement Terrorism Prevention Program 31 percent.
    I do not think the record sustains those proposals, and I 
can say, without equivocation, they will not be included in any 
budget that I submit. I just think those are the wrong 
priorities for the country.
    With that, I want to thank each of you. If you have 
anything you would like to add, I would certainly want to give 
you that opportunity before we close the hearing. Chief?
    Mr. Hoover. Well, you know, not in terms of local funding, 
but, you know, looking at the President's budget, the National 
Fire Academy is a very valuable resource to a fire service in 
an area like North Dakota, because we do not have the resources 
to develop our own site-specific programs and training. So we 
rely heavily on it.
    And as the demand on the fire services increases, you know, 
I see a decrease in your budget or this year a very incremental 
increase. And so we depend on them for training programs to 
help us train, and they are really not keeping up with the 
changing demand. And I feel a little bad about saying positive 
things about a Federal bureaucracy, but----
    Senator Conrad. That's OK. After that incongruent, you have 
totally flummoxed them down there.
    Mr. Hoover. Thank you, Senator.
    Senator Conrad. Yes.
    Mr. Traynor. I just want to comment. From reviewing the 
President's budget, there appears to be more of a shift away 
from formula funding to a discretionary, grant-based, and too 
often we do not fare very well in North Dakota.
    A lot of the Homeland Security money is based on a risk 
assessment that we do not control locally. It is a national 
risk assessment, and we do not have--we have very little input 
into that. So we do not fare well on those sorts of things, and 
to move away from the formula type funding is pretty difficult 
for us.
    Senator Conrad. You know, the truth is--must be very 
blunt--when they make the decisions in someplace far removed 
from rural America, rural America never does well, because, 
frankly, we are out of sight, out of mind.
    They do not understand our part of the country. They have 
almost no conception of what it is like. They really do not. 
They are good people, they are well-intentioned, but many of 
them have never been anywhere close to here. So they really do 
not understand parts of the country they are not familiar with. 
I guess that is just human nature.
    But shame on us if we do not develop a policy that allows 
the threat, wherever it exists, to be met with resources that 
are sufficient to combat it.
    And that goes whether it is a fire threat, or a disaster 
threat, or a law enforcement challenge, or the potential, God 
forbid, of a pandemic. You know, we have an obligation to kind 
of think ahead here, look over the horizon to see what is out 
there and how we can best prepare ourselves. That is an 
obligation we all have.
    Ken, any last----
    Mr. Habiger. Well, I guess the issue we are dealing with 
is, and it is a nationwide issue, is the lack of volunteers 
because of the time constraints and the lack of anything of a 
financial reward a lot of times, and we are dealing with budget 
cuts on top of that. And we are--I think in our area we talk a 
lot about this pandemic flu. You know, hospitals, will they be 
able to take care of the people?
    Senator Conrad. And this is something we have experienced 
before. My own grandmother died in that flu epidemic of 1918, 
and you know, you look at the statistics. Anybody thinks this 
was confined to the East Coast or West Coast, no, no, no. We 
were very hard hit by a pandemic flu in 1918. And, you know, we 
have an obligation to be ready, and, of course, EMS is being 
very hard hit by the demographic changes.
    We are an aging population. Rural areas, more and more of 
the people are going to the cities. So we have fewer people to 
volunteer, and yet we have more elderly people who are 
vulnerable, that may well, you know, rely on for saving their 
lives by an ambulance service that is volunteer.
    Let me just conclude by thanking each of you. Thanks for 
your contribution to the work of this committee. Thanks for 
what you do in our communities and our State. We appreciate 
very, very much the contributions that you make.
    With that, we will conclude the hearing.
    [Whereupon, at 2:49 p.m., the committee was adjourned.]


 AN EXAMINATION OF HEALTH CARE COSTS: CHALLENGES AND OPTIONS FOR REFORM

                              ----------                              


                        TUESDAY, AUGUST 7, 2007

                                       U.S. Senate,
                                       Committee on Budget,
                                                Minot, North Dakota
    The committee met, pursuant to notice, at 4:02 p.m., in 
Grand Ballroom, The Grand International, 1505 North Broadway, 
Minot, North Dakota, Hon. Kent Conrad, chairman of the 
Committee, presiding.
    Present: Senator Conrad.

OPENING STATEMENT OF HON. KENT CONRAD, U.S. SENATOR FROM NORTH 
                             DAKOTA

    The Chairman. We'll bring this hearing before the Senate 
Budget Committee to order. I want to thank everybody for being 
here, especially thank our distinguished witnesses and thank 
all of you for attending as well.
    This is really one of the great challenges to our country. 
We're facing a health care crisis. I think all of us recognize 
that we're on a course that is unsustainable. As I have said 
many times in Washington, this is the 800-pound gorilla. This 
is the problem that could swamp the boat in terms of our 
budget. It is also the 800-pound gorilla that can swamp 
employers and those who require health care. I think all of us 
understand that the health care system in this country is in 
crisis.


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]

    Probably the most daunting challenge that we face is this 
demographic tidal wave of the baby boom generation, and in very 
short order is going to double the number of people that are 
eligible for our programs that provide for health care, 
Medicare, Medicaid, Veterans health.
    And let's go to the next slide if we could, Lindsey. Let me 
introduce Lindsey Henjum, who is with me. She is my health 
legislative assistant. She is a Minot native. The Henjum 
family, I think, is known to many of you here. Lindsey has done 
a very superb job in Washington and has a very good reputation, 
so Minot can be proud of her.
    Also assisting me today is Chris Gaddie, who is also a 
Minot native. He is my deputy communications director. He is in 
the back. I think many of you know the Gaddie family. So Minot 
is well represented here today.
    This gives you some measure of the problem that we 
confront. We all know about the shortfall in social security. 
That's estimated to be just under $5 trillion over the next 75 
years. But look at the difference. Look at the shortfall in 
Medicare. About $34 trillion. That is truly a stunning amount 
of money. And trillion, that's with a T. We're not talking 
about billions here. We're talking about trillions.


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]


    Let's go to the next slide if we could, Lindsey. And we 
know that our country is spending far more on health care than 
any other country in the world. We're spending about 16 percent 
of gross domestic product on health care. If these trend lines 
continue, Medicare and Medicaid spending, as a percentage of 
our gross domestic product, will be over 20 percent by 2050. 
That's if these current trend lines continue. So we know that's 
unsustainable because that's more than we spend on the entire 
Federal Government today. And here we are, we're just talking 
about two programs, just Medicare and Medicaid. No money for 
social security. No money for national defense. No money for 
parks. No money for education. No money for law enforcement. No 
money for any of the other things. So we know we can't stay on 
this course.


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]


    Let's go to the next. Then we know that while demographics 
play a big role in this cost explosion, the biggest factor is 
health care costs themselves. When we look at rising Medicare 
costs, the biggest factor is not demographics, although that's 
significant, as that first chart showed, but even bigger is 
health care costs themselves. Underlying health care costs are 
driving this equation, and that's something we need to know.


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]


    Let's go to the next if we could. And this goes back to the 
point I was making earlier. Here's where we stack up with the 
rest of the major industrialized countries. You can see in this 
slide we're at 2003, because that's the last year for which we 
have data for all these other countries. We were at 15.2 
percent of GDP then. The next highest was Switzerland with 11 
percent of GDP. We already know we've gone to 16 percent of GDP 
now for health care. That means one in every $6 in this economy 
is going for health care. One in every $6 is going for health 
care. And you have to ask where does it stop.


    We know that this is a challenge not only for government 
and these government programs. It is a big challenge for 
employers. It is a big challenge for employees who are paying 
part of their health care, and certainly for those who don't 
have employment, those who are trying to pay for health care on 
their own.
    This rising health care cost places enormous pressure on 
businesses. Let's go to that slide, if we could. I think we've 
left that slide out. But the point I wanted to make is rising 
health care premiums are putting enormous pressure on business. 
Health care premiums for business are rising twice as fast as 
the rate of inflation.
    I had a businessman stop me the other day in Bismarck, and 
he came up to me and he said, ``Kent, I just got my latest 
premium increase, 18 percent.'' He said, ``Last year my premium 
increase was 18 percent.'' He said, ``The year before that my 
premium increase was 18 percent.'' He said, ``I've had 3 years 
in a row where my premiums rose by 18 percent.'' He said, ``I 
don't know if that's the magic number or they've just targeted 
me.'' I said, ``No, you haven't been targeted, you're not 
alone.'' I think John MacMartin here, representing the Chamber, 
will be able to confirm that our employers are seeing their 
costs rise and rise geometrically.
    Health care providers themselves are feeling the pinch. 
They're feeling it from uncompensated care. That's increased 
from $21.5 billion in 2001 to $28.8 billion in 2005. You think 
of these numbers. They're staggering, aren't they? $28 billion 
of uncompensated care. You know, some have said we've got the 
most expensive health care system in the world partly because 
we provide health care in the most expensive way. That is, when 
we have 45 million people who are uninsured, that doesn't mean 
they don't get health care. That means they go to the emergency 
room for their health care, and that is the most expensive way 
to provide health care. So, goodness, we have to do a better 
job of this. And I'm sure Terry Hoff, who runs our hospital 
here, will be able to give us an insight in terms of how these 
numbers translate locally as well.


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]

    So what do we do about it? Well, I've argued to my 
colleagues one of the first things we have to do is focus like 
a laser on 5 percent of our patient population that uses half 
of the money. Hard to believe, isn't it? Five percent of the 
patient population uses half of the money. They're the 
chronically ill, they're people with multiple serious 
conditions. And we're doing a very poor job of coordinating 
their care. The result is that they're taking too many 
prescription drugs. They're being subjected to multiple tests 
not because, you know, somebody's got bad motive or evil 
design, but because there's a lack of coordination of care.
    We just did a study with some 20,000 patients, a pilot 
study. We went into their homes. We had case managers go into 
their homes. First thing they did was get all the prescription 
drugs out on the table. And what they found was on average they 
were taking 16 prescription drugs. After reviewing them, they 
were able to conclude half of those were unnecessary. They were 
able to reduce it from 16 prescriptions to eight.
    I did this with my own father-in-law in his final illness. 
We went to his house, got all the prescriptions out on the 
table. I got on the phone to the doctor and sure enough, he was 
taking 16 prescription drugs. And I went down the list with the 
doctor, and I got to the third drug, and he said, ``Kent, he 
shouldn't be taking that, he shouldn't be taking that the last 
3 years.'' I get a little further down the list, he said, 
``Kent, he should never be taking those together, they work 
against each other.'' I said to the doctor, ``How does this 
happen?'' He said, ``Very simple how it happened. He's got a 
lung doctor, lung specialist, he's got a heart specialist, he's 
got an orthopedic specialist, he's got me as his family 
practice doctor, and while I'm the one that should know what's 
happening, I don't know.'' And the result is he's taking 
prescriptions. He's getting them far and wide. He's getting 
them at the corner pharmacy, getting them at the hospital 
pharmacy, he's getting them mail order. He's sick and confused, 
his wife is sick and confused, and we've got a mess. Same thing 
with tests. He had three MRIs in a 6-month period. You know, 
hospital in New York, hospital in Richmond, Virginia, hospital 
down at the beach.
    And, you know, this is costing us a ton of money. And we're 
not getting better health care outcomes as a result. That's one 
of the things that jumps out at you that in parts of the 
country they're doing five times as many procedures as in other 
parts of the country and getting worse health care results. So 
another thing we need to look at is researching the 
effectiveness of different treatments, medical devices, and 
drugs, so that we can know that we're using best practices.
    We also need to encourage better life-styles and screening 
tests. You know, we've got a health care system that's focused 
on illness rather than wellness. And we really need to kind of 
change the way we approach it and create incentives to keep 
people healthy, to encourage people to exercise and eat 
responsibly, drink responsibly. This is going to be an area 
where there's personal responsibility, you know. This is not 
all on somebody else. We've got to do a better job of managing 
our own health. We've got to get much more serious about 
exercising, we've got to get more serious about how we eat and 
what we drink.
    And then I mentioned adopting health information technology 
to avoid medical errors and to improve the efficiency and the 
effectiveness of the health care we deliver. One of the things 
that jumps out at you in the studies that have been done, 
things like the Rand study that showed you can save $81 billion 
a year if you fully deploy information technology in health 
care.
    So those are some ideas of things we could do and probably 
need to do. But we won't do it until we've really reached 
conclusion on the direction we're going to take. The thing we 
know now is we're on a course that's unsustainable. That I 
think is beyond dispute.
    Now the question becomes what choices do we make, what 
direction do we turn. And for that reason we have I think 
really excellent witnesses with us today, five witnesses to 
testify before the Senate Budget Committee.
    Let me just indicate we are operating under the rules of 
the Senate Budget Committee. We have a stenographer here. All 
of this will go in the record of the Senate Budget Committee 
and will be provided to the other committees of jurisdiction. 
So this is a hearing that will have resonance beyond the 
borders of Minot, beyond the borders of North Dakota.
    Our first witness will be Dr. Mary Wakefield. Mary is the 
director of the UND Center for Rural Health and is a 
commissioner on the Commonwealth Funds Commission on the High 
Performance Health System. She's also a member of the esteemed 
Institute of Medicine. Mary has done an extraordinary amount of 
research on the health care system, its successes, its 
failures. She is also an expert on the health care system in 
North Dakota, and also for a shining moment in time was my 
chief of staff in Washington. Thank you, Mary Wakefield, for 
being with us, and please proceed.

  STATEMENT OF MARY K. WAKEFIELD, PHD, RN, ASSOCIATE DEAN FOR 
 RURAL HEALTH AND DIRECTOR, CENTER FOR RURAL HEALTH UNIVERSITY 
           OF NORTH DAKOTA, GRAND FORKS, NORTH DAKOTA

    Dr. Wakefield. Pleasure. Thank you and good afternoon.
    I was asked to comment on the national and state level 
challenges facing health care and to identify potential 
solutions to those challenges. The challenges that I'll discuss 
stand in the way of creating a health care system that 
consistently delivers high quality care, every day, to every 
person, everywhere. This goal sounds pretty simple, but as we 
know, the strategies to achieve a high performing health care 
system are quite complex.
    Across our nation, we have some of the most advanced 
technology and the best educated health care providers in the 
world. Yet the United States performs worse than other 
industrialized nations in a number of important areas, 
including poorer health outcomes on some key measures and large 
pockets of people without health insurance, all at considerably 
greater expense. To illustrate how we compare, this line shows 
U.S. average spending on health per capita, which clearly far 
outstrips the next nearest countries. And this slide just 
reinforces your slide, Senator Conrad. Additionally, 
expenditures----
    The Chairman. I like your slide even better.
    Dr. Wakefield. Thank you. We'll get it to you. Actually, 
this is showing both average spending on health per capita, and 
then the other point you make, Senator Conrad, the total 
expenditures of health as a percentage of GDP. Additionally, 
expenditures for some of our largest programs, Medicare, for 
example, are not projected to level off any time soon. You can 
see from the 2007 Medicare Trustees' Report that expenditures 
are projected to continue to steeply rise.
    This slide and the next slide shows you how well the United 
States does in terms of deaths that, with appropriate medical 
care, would likely be preventable. This is just one indicator 
of what we are getting for some of the money that we're 
spending. Here the United States is 15th out of 19 countries in 
terms of deaths per 100,000 people. Of these 19 countries, only 
four do more poorly than we do.
    These data that you're looking at right now have been 
updated using 2002-2003 data and that new information will be 
published next month. But I can already tell you what the new 
slide is going to show. It's going to show improvement in the 
United States on this measure and it's going to show more rapid 
improvements in the other countries. So in the new data that 
will be published next month, the U.S. will no longer be 15th 
out of 19 countries; rather, we will be in 19th place. That is 
last place. Again, this slide is showing you how well we do in 
terms of deaths that, with appropriate medical care, would 
likely be preventable deaths.
    What has happened elsewhere in these intervening years, in 
the United Kingdom, for example, they have mounted a massive 
campaign to address heart disease. They've raised standards in 
hospitals, they've provided technical assistance and so on. So 
other countries are moving much more rapidly to improve. We're 
improving as well, but at a slower pace.
    Additionally, we have troubling variation within the United 
States. On the right-hand side of this slide, you'll see that 
some states do extremely well on this same measure within the 
United States and some do quite poorly. On the next slide you 
see how North Dakota compares again on this measure. That's the 
red bar. And we actually do quite well.
    To achieve a consistently high performing system, the 
Commonwealth Commission, of which I'm a member, advocates 
focusing efforts in four core areas. First, we need to focus on 
delivering high quality care. Second, we need to ensure access 
to care for everyone. Third, we need to provide care that is 
efficient and of high value. And, fourth, we need to re-
engineer the health care system so that it has capacity to 
improve. I'll comment about these areas from both the national 
and state perspective.
    First, delivering high quality care. When care is well 
coordinated with information readily available to clinicians 
and patients, the quality of the care is better. Let's look at 
just a few international comparisons and then I'll go across 
states.
    In terms of coordinated care, this slide indicates when 
compared to four other countries the U.S. consistently performs 
more poorly on care coordination measures such as test results 
and patient records being unavailable at the time of 
appointment.
    This next slide indicates that we have more medical errors 
than in five other comparable countries, and that when you have 
more doctors treating you, the likelihood of medical error 
increases in the United States and in other countries as well. 
Patients report errors, though, most frequently in the U.S. 
While seeing four patients over 2 years might seem like a lot 
of physician visits, 20 percent of Medicare beneficiaries in 
the U.S. with five or more conditions receive services from an 
average of almost 14 doctors per year. Given the tools and 
structures that are available in our current system, this is a 
recipe for fragmented care. In spite of these findings, we have 
some evidence that certain care coordination efforts underway 
in the U.S. markedly improve patient outcomes and care quality.
    Coordinated care is a fundamental underpinning of a concept 
gaining a lot of attention--medical homes. In North Dakota we 
have one award winning example that I just want to mention to 
you this afternoon of collaboration between two stakeholders, 
MeritCare and, the payer, Blue Cross Blue Shield of North 
Dakota. They've collaborated in terms of payment reinforcement 
and the creation of a medical home to build on at its core care 
coordination for patients. And their data are now showing 
improved health outcomes, improved clinician satisfaction, 
improved patient satisfaction with care, and decreases in 
costly interventions like that that you mentioned, emergency 
room visits in a group of diabetic patients.
    The next slide. In addition to testing new models, 
delivering high quality of care is also evident in measures of 
quality that help us see how we're doing in North Dakota. Here 
are just a few slides to give you an example. This slide 
provides one example of the variations--the previous one, 
actually--variation in quality, readmission rates to hospitals. 
North Dakota does better than the national average on 
readmissions to hospital within 30 days, although we're not the 
very best on that particular measure, on this measure.
    On the next slide, using data reported to CMS, we can see 
how our hospitals do on a different set of measures, those that 
focus on care for specific conditions. This one is a measure of 
care for heart failure patients, a costly disease. On this 
measure, on average, North Dakota hospitals do better than the 
national average. On the next slide, care for pneumonia 
patients. I put this up here because I wanted to show you that 
one rural hospital in North Dakota does exceptionally well and 
well above the national average.
    On to the second point or second focus in terms of areas on 
which we need to pay attention, and that is ensuring access to 
care. The national numbers on uninsured across the U.S. are, 
while disconcerting, well known, so I'm not going to spend time 
on those. However, I do want to comment on two special 
populations that are very important when we think about 
ensuring access to care. Those populations are children and 
farm families.
    Regarding children, your work on the Budget and Finance 
Committee was critical to the recent Senate passage of the 
State Children's Health Insurance Program. This program 
expansion is extremely important for all kids, but particularly 
for rural children. National studies tell us that more rural 
children than urban children live in economically vulnerable 
families. In fact, over 1.3 million rural children are 
uninsured.
    Compared to other states, North Dakota does well on health 
insurance coverage with about 85 percent of our state insured. 
However, that 15 percent uninsured includes about 11,000 kids.
    In terms of coverage for another important population, farm 
and ranch families, at the Center for Rural Health, we've 
recently undertaken a survey of non-corporate farmers and 
ranchers in seven states, including North Dakota, to get a 
better sense of affordability of medical bills and medical debt 
in this population. I don't have all the data for you. We're 
about 3 weeks away from having all that completely analyzed. 
But what is interesting is that almost one in four farmers 
across those seven states indicate that health care expenses 
contribute to their financial problems, including difficulty 
paying other bills. And about 27 percent of respondents with 
debt owed money to hospitals, and almost half had debts to 
individual providers, physicians and dentists.
    This brings me to the third of four areas on which I think 
we need to focus, and the Commonwealth Commission members 
agree, and that is trying to focus on ways to solve problems 
around inefficiencies in care. I'm going to briefly comment on 
three dimensions of high performing systems, primary care, 
health information technology, and comparable effectiveness.
    In terms of primary care, the medical program, as you know, 
gets a very good deal in terms of value in North Dakota. North 
Dakota ranks second across all states in Medicare 
reimbursements per enrollee. Part of what is going on in North 
Dakota is what this graph shows. North Dakota is in the top 15 
or so states that has a higher proportion of primary care 
inputs and associated higher quality of health care. There are 
a lot of reasons for this finding, but it's worth noting that 
North Dakota is higher than the national average in the number 
of primary care providers to population, and primary care is 
key to many things, including providing chronic care, care for 
illnesses such as diabetes.
    We know that countries and states that rely more on primary 
care to manage chronic illness tend to have lower spending and 
they use fewer hospital beds. The people who live in areas with 
higher per capita health resources tend to receive in the 
United States more interventions, such as hospitalizations and 
diagnostic testing, yet there is no evidence, as you indicated, 
that people who receive more care have better health care 
outcomes. In fact, there's evidence that more care leads to 
worse outcomes for patients. That's a really important piece of 
information in terms of helping us direct our attention, 
whether you're talking about clinical care or about public 
policy. However, there tend to be greater rewards for providing 
specialty care than for primary care and there is no incentive 
to establish medical homes that have at their core primary and 
the coordination of specialty care.
    The second of the three areas I wanted to mention in terms 
of high value and efficiency is the use of health information 
technology. HIT is an important contributor to efficient high 
value care. The United States lags behind other industries in 
the use of HIT, as this next slide shows. Compared to other 
countries, our primary care providers in the United States do 
not have the tools they need to make their practices efficient. 
Electronic medical records help to reduce duplicate tests. They 
help reduce medical errors. They promote coordination and they 
increase efficiency.
    In North Dakota, as you will recall, Senator, you 
spearheaded a focus on strengthening HIT that you sponsored 
last year. That summit catalyzed the creation of a steering 
committee that has been meeting monthly since then with a focus 
on improving HIT, with improving health care quality and 
efficiency, but facilitating HIT. It's critically important 
that in this state we do not lose ground in adopting technology 
that will enhance efficiency and care quality.
    Comparative effectiveness research. We noted in the IOM 
report, Crossing the Quality Chasm, that our current approach 
in organizing and delivering care just doesn't meet 
expectations. One of the reasons that health care in this 
country falls short of its potential and costs so much is 
because we don't have a very good idea about which drugs, 
devices, and procedures used to treat the same conditions are 
the most effective and most efficient. Senator Conrad, you 
wisely recognized that need and the need to shore up that 
function when, as chairman of the budget committee, you 
included a place in the budget for this important research, and 
the commission has taken note of that.
    Last, building on system capacity to improve. In rural 
North Dakota, as in other rural areas across the country, 
necessity is the mother of invention, and capacity for 
innovation, while challenging, is often led by rural 
administrators and rural providers. Rural health care is 
typically nimble and new interventions can be adopted there in 
a matter of hours and days. Rural facilities, with tools and 
expertise, can be rapid learning organizations that test and 
serve as models for the rest of the country. From a rural 
perspective, I can tell you, too, that quality improvement 
organizations play a pivotal role in working with all types of 
providers to help them improve the way the care is delivered.
    In summary, not only do we see variation among countries, 
we also see considerable variation within our own country, 
variation that costs money, days lost from work, and even 
patients' lives. We also find that there is no systematic 
connection between high spending and high quality care. What is 
needed is a coherent set of expectations, tools, and rewards 
for measuring and improving dimensions of health care that are 
essential to high performance. That means having matrix for 
health outcomes, matrix for access to care, and measures for 
efficiency and care quality.
    It means realigning payment, to pay more for value and pay 
less for valueless care. We need comparative effectiveness 
research, health information technology, and we need to work to 
make sure that all Americans have health insurance. Using these 
approaches to create high performance health care is a big part 
of the answer. Asking health care providers and administrators 
to simply work harder, doing a lot more of the same isn't the 
answer. All of this is hard work, but at the end of the day 
when we invest wisely in good health, we get healthy, 
productive people, we get a strong, vibrant economy, and we get 
healthy communities in return.
    Thank you, Senator Conrad, for your commitment on so many 
of these critical fronts, all of which, taken together, can 
help us create high performance health care.
    [The prepared statement of Dr. Wakefield follows:]


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]

    The Chairman. Thank you, Mary Wakefield. You know, we're 
very lucky to have somebody of her quality. I'll tell you, Mary 
Wakefield is somebody that is respected around the country, has 
served on MedPAC board nationally, and in these other 
positions, which tells you something about the respect she's 
held in nationally, and we're very fortunate to have you from 
North Dakota. So thank you, Mary Wakefield.
    We're joined at the witness table as well by Janis Cheney. 
She's the state director of AARP. Most recently, AARP has 
joined forces with the Business Round Table and the Service 
Employee International Union to push health care reform and 
economic securities as a national priority. Now, you think 
about an unusual coalition. The Business Round Table and 
Service Employee International Union, that's an unusual 
coalition joined with AARP. Janis Cheney offers the insight of 
a consumer trying to afford health care as well as an advocate 
for system change. The Divided We Fail campaign has a number 
of, I think, intriguing ideas for reform, and I welcome your 
testimony. Good to have you here.

 STATEMENT OF JANIS CHENEY, STATE DIRECTOR, AARP NORTH DAKOTA, 
                     BISMARCK, NORTH DAKOTA

    Ms. Cheney. Thank you very much, Senator Conrad. I am 
delighted to be here and appreciate the opportunity to discuss 
the challenges of rising health care costs.
    Health care costs have risen dramatically in the past few 
decades. Since 1975, total health care spending as a percentage 
of gross domestic product in the United States has doubled, and 
it now comprises one-sixth of the U.S. economy, or about $2.2 
trillion. Some of this information echoes what the Senator and 
Dr. Wakefield have provided as well. By 2016 some projections 
show total health spending almost doubling to 4.1 trillion and 
consuming one-fifth of the nation's GDP. A report published by 
the McKinsey Global Institute in January found that the United 
States spends a greater percentage of its national wealth on 
health care than any other country in the world. According to 
McKinsey, the overriding cost of high U.S. health care costs is 
the double failure of the American system to hold down demand-
side pressure from patients and supply side pressures from 
hospitals and clinics, doctors, pharmaceutical companies, and 
insurers.
    Health care costs cannot be measured merely by the impact 
on the general economy, however. The implications of ever-
escalating health care costs are far-reaching. For instance, 
employees, large and small, are grappling with whether and to 
what extent they can afford to provide health care insurance to 
their workers and retirees. Over the past several years, 
employer-sponsored insurance coverage rates have been falling. 
In 2000, 66 percent of non-elderly Americans were insured 
through the workplace, but by 2004, only 61 percent were 
covered by employer-sponsored insurance. Half of this decline 
was the result of employers no longer offering health coverage, 
while a quarter of the decline was due to employees' inability 
to afford their share of the premium. The decline in employer-
sponsored insurance is most severe for small employers who are 
finding it difficult to even offer health insurance.
    Health care costs cause American businesses to be at a 
competitive disadvantage with their global competitors because 
providing health insurance adds to the cost of goods and 
services. For instance, as of 2005, health insurance was 
calculated to add between 1100 and 1500 dollars to the price of 
each automobile manufactured by General Motors, a cost not 
borne by its foreign competitors.
    Public programs are also grappling with rising health care 
costs. Peter----
    The Chairman. Janis, can I just stop you on that last point 
and just tell you, I have had, as you can imagine, all the auto 
makers in to see me because of the energy legislation before 
Congress, and they all tell me their latest calculation is that 
there is close to $2,000 of health care costs in every 
automobile. And they told us unless we find a way to take that 
competitive disadvantage away--because all of their competitors 
don't have that cost; right? You know, the Japanese, the 
Germans, the Italians. All the other auto makers have some 
other health care system and it's not on the employer, it's not 
on the manufacturer. And they've come and seen me in the last 3 
weeks and said if a way is not found to avoid these health care 
costs, and, of course, the legacy cost of all their retired 
employees they're responsible for, if there's not a way to fix 
this, they don't think they can be competitive. Now, that was a 
stunning admission by a major sector of the American economy.
    Ms. Cheney. Thank you for the updated figures.
    Public programs are also grappling with rising health care 
costs. Peter Orszag, director of the Congressional Budget 
Office, has stated that if health care costs continue growing 
at the same rate over the next four decades as they did over 
the past four decades, Federal spending on Medicare and 
Medicaid alone would rise to about 20 percent of GDP by 2050, 
roughly the share of the economy now accounted for by the 
entire Federal budget. This has led Orszag to comment that this 
nation does not face an aging problem, but a health care 
problem.
    And individual Americans are some of the hardest hit. One 
in four Americans have problems paying medical bills. Millions 
go bankrupt every year because of unaffordable medical bills. 
Retail prescription prices have increased three times faster 
than the cost of living in recent years. More than 44 million 
Americans are uninsured, with middle class families the fastest 
growing segment. About 8.2 percent of North Dakotans are 
uninsured, 51,920, nearly the population of Bismarck.
    Real people are struggling to make ends meet while still 
having access to health coverage. AARP has, as part of our 
Divided We Fail campaign, heard some of these stories from 
North Dakota and across the nation. We've heard from a 52-year-
old divorced single mom raising a son alone. She works in a 
part-time job that offers no benefits and is unable to find 
reasonably priced coverage even though she says she maintains a 
healthy life-style. There is a story from a self-employed 
couple. The wife's diagnosis of thyroid cancer 9 years ago made 
her uninsurable until they were able to find a high risk pool. 
Even with this safety net protection, they are paying upwards 
of $1,000 a month each, with a $5,000 deductible. Because 
nothing is covered until they spend $5,000, the couple tends to 
put off basic preventive and screening services.
    There is no single answer to controlling health care costs, 
and the necessary steps will involve not just government and 
policymakers, but many players, including patients, providers, 
pharmaceutical companies, and trade groups. Getting these 
players together to agree to work on focused strategies for 
controlling health care costs is one reason why AARP, along 
with the Business Round Table and the Service Employees 
International Union formed Divided We Fail. Accomplishing our 
goal of affordable quality health care and financial security 
for all Americans will require the efforts of us all. The issue 
is not whether but how solutions can be found. The growth in 
health care costs demands that players come together to find 
the solutions and make the hard decisions.
    AARP recognizes that changes cannot be made all at once. 
They must be phased in over a number of years. We have 
identified a number of key transitions which must occur in our 
health care system.
    The next steps or building blocks for Divided We Fail is to 
identify the solutions to the specific policy and behavior 
changes we believe will be necessary to drive each key 
transition. For example, health technology and greater use of 
evidence-based research can help bring down health care costs 
by making the health care system more efficient. Others will 
have different solutions, and we are encouraging all those with 
a stake in the outcome to join the debate and bring their ideas 
to the table.
    Ultimately, the President and Congress must act. First, by 
reaching agreement on the need to put the critical health care 
building blocks into place, and then further action to achieve 
comprehensive health care reform. AARP's attention will be 
devoted to making sure that health care is at the top of the 
agenda of all the candidates in the 2008 election.
    Senator Conrad, we commend you for holding this hearing 
today to draw attention to rising health care costs and the 
need to transform the entire health care system. Addressing 
health care costs overall will not only help the citizens of 
North Dakota, but across the nation.
    AARP stands ready to work with you and your colleagues to 
enact meaningful health care reforms.
    The Chairman. Thank you very much. I appreciate that 
testimony.
    We'll next hear from Candace Abernathey. I want to thank 
Candace for coming to share her story with us today. She's a 
consumer who has dealt with the red tape and inefficiencies of 
our current health care system. In 1990 she had health 
insurance and was diagnosed with cancer. As the bills were 
mounting and her health was getting worse, she lost her 
coverage. Her story, I think, illustrates very well at least 
some of the problems with the health care system and why we 
need to fix it. I want to thank you, Candace, and commend you 
for your courage in coming to testify today. Thank you.

 STATEMENT OF CANDACE ABERNATHEY, PATIENT, MINOT, NORTH DAKOTA

    Ms. Abernathey. Thank you, Senator Conrad, for the 
privilege of letting me testify here today.
    In June 1990, my world was turned upside down by a simple 
bruise. Unfortunately, that bruise was a signal of far worse to 
come and I was soon bleeding profusely from my mouth. I was 
immediately referred to the Mayo Clinic. Fortunately, my 
husband was a Boeing employee and we had health insurance. Mayo 
ran test after test, prescribed medication after medication and 
still I had no firm diagnosis. I was told to go home, spend 
quality time with my children and enter hospice care when the 
time came.
    On top of the death sentence, the bills started coming in 
from Mayo Clinic and in from Trinity. Our co-pay was high, and 
my husband had no idea how we were going to pay.
    My health just kept getting worse, and I was soon back in 
the hospital receiving blood transfusions, the one thing that 
was keeping me alive. While I was lying there, my husband 
marched into my room and informed me that he couldn't afford 
the medical bills and he wanted out. He also wanted my 
children, but, fortunately, the Court didn't see it that way 
and did not agree. I had no choice but to turn to the State of 
North Dakota for TANF and Food Stamp assistance.
    I was so ill, I was so lost, I was upset, and I never even 
thought about the possibility that my coverage through Boeing 
would end with the divorce. When my grandmother questioned me 
about that, I called Boeing and learned that my ex-husband had 
terminated the coverage not only for me but for my children. I 
then had the option of their COBRA plan as long as I could pay 
the premiums of $380 a month. That was like $3 million a month 
to me. But, fortunately, my grandmother paid 6 months of 
premiums and that allowed me time to get on state assistance.
    By this time, it was obvious that a bone marrow transplant 
was my only hope. If I only had Medicaid, there would be no 
facility that would accept me. Thankfully, Social Services 
chose to continue paying the COBRA premiums as it would be 
cheaper in the long run.
    I was already floundering in medical bills. I was becoming 
more lost, confused, and scared. My health just continued to 
deteriorate. I was spot bleeding in my brain, which caused huge 
headaches and migraines and temporary blindness. I had pleurisy 
in my lungs and my heart. I was bleeding faster than they could 
replace the blood.
    Finally, a referral was made to the University of 
Washington hospital, but I could not go without approval for 
the procedure from my insurance company and they were giving me 
the runaround. They denied it, saying that it was experimental. 
I had to involve the family's attorney in order to budge them. 
And then when the Fred Hutchinson Cancer Center had an opening 
for me, the insurance company again denied it. I can't tell you 
how scared I was. Something, I'm still not sure what, changed 
their decision again.
    I was so very sick. I was told I was probably not going to 
live more than a couple weeks. But they started me on Cytoxan 
chemotherapy. In this case, the treatment was as sickening as 
the disease I had, but finally on the 45th day of treatment, my 
blood counts started returning. As they increased, I lost the 
fluid around my heart and both my lungs. My bleeding slowly 
stopped. For the first time in over a year I could lay flat on 
a bed and sleep.
    After the bone marrow transplant on March 31, 1991, I was 
put on cyclosporine, an anti-rejection medication. The cost of 
this drug was $800 a day. And that was just one of the 25 
medications that I was on.
    I finally felt like I had a new lease on life and I 
returned to Minot with my children. At this point, the State 
was still covering my insurance premiums. As I grew stronger, I 
moved back to Washington state and started working as a social 
worker. I was working. I was making my way. But I still had to 
file bankruptcy because of the mountain of medical bills I had.
    Then in 2004, the chronic grafts versus host disease was 
affecting my skin, my mouth, my liver, and my memory. Co-
workers noticed that I was becoming very forgetful. After 7 
years of employment, my supervisor asked me to resign. I went 
out on long-term disability, which pays me $240 a month.
    I returned to Minot to be close to family and because I 
thought it would be cheaper to live here than there. Because I 
still had children in the home, I was thankfully able to return 
to the TANF program, and Medicaid continued paying my medical 
premiums.
    Am I well now? No. The impact of the massive doses of 
chemotherapy is really showing up. I'm losing the sight in my 
left eye and will likely be blind in both eyes. My teeth are 
gradually crumbling and I need to guard against chipping at all 
times. The grafts versus host disease continues to take its 
toll. In addition, because none of the over 1,000 blood 
transfusions I had was filtered, my body is being attacked by 
the extra iron, causing constant pain in my arms and legs. I 
will likely need a liver transplant.
    And the latest blow is my youngest child left my household. 
What does that mean for my continued assistance through the 
State? It means everything. As of July 31, I lost Medicaid 
coverage. I lost every kind of assistance.
    I'm completely terrified as I cannot qualify for Medicaid 
help again until I have a disability determination from Social 
Security. I applied for disability in 2005 and I was denied at 
the initial application and the reconsideration level. I am now 
awaiting an administrative law judge hearing, which, 
thankfully, you, Senator Conrad, were able to expedite for me.
    With only $240 a month income, I am struggling to keep a 
roof over my head, to keep my utilities on, put food on the 
table. Poor health, high medical bills, and now the uncertainty 
of whether I will be able to get any medical help for at least 
a time keeps me up at night.
    I don't know what the answer is to making our health care 
system better for average people with serious illnesses, but I 
do know that something has got to be done, and soon. Too many 
people don't have insurance that are forced into bankruptcy, 
like me, in order to afford the health care they need to live.
    Thank you for letting me be here.
    [The prepared statement of Ms. Abernathey follows:]


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    The Chairman. Well, Candace, thank you. That is 
unbelievably powerful testimony and we salute your courage in 
going through all this. I don't know how many people could 
haveten through all that you have been through. That says a lot 
about your strength of character.
    But a person shouldn't have to be swimming against the 
stream of our health care system when confronted with those 
life threatening challenges. And that's really what we're here 
to talk about. Because I think all of us know none of us can 
predict when we or a family member might face something like 
this. We just learned of a family member of ours, my wife's 
brother's wife, sister-in-law, just diagnosed with ovarian 
cancer. Just had an operation and is in a desperate struggle 
for her life. And, you know, thank God they have coverage. But 
you had coverage and lost that coverage and then had all these 
struggles on top of the struggle to defeat the illness.
    So, you know, I very much wanted to have Candace here today 
because that puts a face on the reality of what this all means, 
you know. Sometimes we're very removed from the reality of what 
these issues are about and how they affect real people's real 
lives. And I think you put a face on what this could mean to 
any one of us. And there's nobody sitting here that can be 
certain that we won't have some terrible diagnosis in the near 
future. We don't know that. So again, Candace, thank you for 
your courage.
    I'd like to also welcome John MacMartin. John's the 
president of the Minot Area Chamber of Commerce.
    Businesses are also struggling. As I have indicated, this 
friend of mine that stopped me, that friend of mine seen me 
walking down the street, he had just gotten his health care 
premium, 18 percent increase, and came down the street. Now, he 
is somebody that provides insurance, has over a hundred 
employees, wants to provide insurance, but, you know, he's 
caught in a squeeze, too. How does he stay competitive when 
some of his competitors don't provide health insurance and he 
does?
    John, I know some of your membership faces these struggles 
as well. So it's an important benefit to potential employees, 
current employees, but we know that businesses are finding it 
more and more difficult to afford these benefits. We're 
delighted to have you here to speak to those issues. John 
MacMartin.

 STATEMENT OF L. JOHN MACMARTIN, PRESIDENT, MINOT AREA CHAMBER 
                OF COMMERCE, MINOT, NORTH DAKOTA

    Mr. MacMartin. Senator Conrad, members of the Budget 
Committee. I am pleased to be here today to represent the 
Chamber and to provide a brief general overview and comments on 
health care costs and the challenges and options for reform.
    The Minot Chamber is a private not-for-profit business 
organization in which membership is voluntary and is composed 
of roughly 700 members. I have served as the president for the 
last 17 years. During that time, the Minot business community 
has faced a number of critical issues, including reform of 
workers compensation, the Base Realignment and Closure 
Commission, and the Northwest Area Water Supply, to name just a 
few. As we've recruited new members, talked with individual 
members and surveyed our membership, the issue that is 
routinely brought up is health care; more importantly, 
affordable insurance. That is not to say that insurance 
companies are not offering coverage, but many small businesses 
are unable to find a group insurance program for which they 
qualify. As such, those business owners cannot afford the 
insurance premiums on their own. Not being able to join a large 
group, individuals that are sole proprietors may have real 
large deductibles, 2,500 to 5,000 dollars. Some businesses 
choose simply to go naked.
    The Chairman. What do you mean by that, John?
    Mr. MacMartin. Not have any insurance at all.
    The Chairman. That's good to explain that.
    Mr. MacMartin. Yes.
    The Chairman. This is a congressional record.
    Mr. MacMartin. Somebody might wonder which business that 
is.
    The issues of health care and health insurance bring up a 
myriad of topics. I believe that the business community wants 
to see health care reform. I believe that the reform has to 
remain employer based and it needs to involve the end user, 
whether that is a sole proprietor of a business or the 
employees of that business. I believe further that the current 
situation has the end user removed too far from the choice for 
health care providers and for the payment of the services 
received.
    In business, usually the more often something is purchased, 
the price will reflect a downward trend. In health care, I'm 
not sure that that situation follows, except, perhaps, in areas 
where insurance does not cover the procedure. I would offer the 
case of RK surgery and elective cosmetic surgery where prices 
have fallen in response to patients choosing their own provider 
and also choosing the prices that they want to pay. In most 
insurance models, the patient is removed from both the pricing 
model and the choice of provider. As such, the market system of 
supply and demand, as seen in RK surgery and elective cosmetic 
surgery, is not occurring.
    Health care is and will remain a critical issue facing 
small business. I thank you for the opportunity to appear here 
today and provide these brief comments to the committee. I 
would interject, given more time, more specific individual data 
could be obtained, and perhaps with the chairman's indulgence, 
we could be allowed to revise and extend our remarks in the 
record.
    The Chairman. You've been watching the House. Revise and 
extend, they love that in the House of Representatives. You 
know, in the Senate, the senators just talk on and on and on 
and have no time limit, for the most part. But in the House, 
they're usually strictly limited to 2 minutes, so they always 
want to revise and extend. And we'll certainly grant you that 
privilege here today.
    Mr. MacMartin. Thank you.
    [The prepared statement of Mr. MacMartin follows:]


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]

    The Chairman. Our final formal witness is Terry Hoff, the 
president and CEO of Trinity Hospital, somebody that I have 
grown to know and respect very much and who has been of great 
help to me in our struggles to get more fair reimbursement for 
our hospitals. Not generally well known, but our hospitals 
typically get one-half as much in reimbursement under Medicare 
as more urban hospitals for treating the very same illnesses. 
This puts our hospitals in a very, very tough squeeze.
    Terry is in an interesting situation because not only is he 
the region's largest employer, spending almost $13 million a 
year on health care for its employees, but is also a business 
that's feeling the pinch of the health care crisis. I've 
indicated they're getting squeezed on the reimbursement side. 
They're not getting reimbursed what other hospitals would get 
if they were in a more urban setting. They also are getting 
squeezed by uncompensated care. And so it takes a real 
management challenge. It is a real management challenge to face 
all these kind of cost cutting pressures.
    Terry, welcome. Good to have you here. Please proceed.

    STATEMENT OF TERRY G. HOFF, CHIEF EXECUTIVE OFFICER AND 
         PRESIDENT, TRINITY HEALTH, MINOT, NORTH DAKOTA

    Mr. Hoff. Thank you, Mr. Chairman. I appreciate the 
opportunity to speak to you today.
    I would just comment about Trinity Health. Trinity Health 
actually operates two hospitals, 22 clinics, two nursing homes, 
and two pharmacies. We have over 140 health care providers 
providing care to the citizens in our area. We have 2,800 
employees, a population service area of 140,000 people, 
covering 20,000 square miles. We also have referral agreements 
with ten critical access hospitals in North Central and 
Northwest North Dakota. We provide 315,000 clinic visits 
annually, 137,000 outpatient visits, including 25,000 emergency 
room visits, 10,600 inpatient days, and 98,000 nursing home 
days.
    As you indicated, and other witnesses have indicated, North 
Dakota is the best in the Nation for quality, and Trinity 
consistently ranks at or on the top of all of those CMS quality 
indicators.
    I bring two perspectives, one as an employer as providing 
health care and health care benefits, but also as a provider of 
health care.
    If I could, I'd address the employer portion first. We do 
have a health insurance plan and it is self-funded. It did not 
go up 18 percent a year for the last 3 years, but our costs 
have increased from 9.5 million to 12.8 million from 2004 to 
2007.
    We have done several multiple things to make changes. We've 
changed the plan design, we've increased deductibles. A few 
years ago we even developed an HMO in an attempt to control the 
cost of our own health insurance premiums. In addition to the 
health insurance premium, we also participate with Workers 
Safety Insurance program. We offer employee discounts for using 
our health care facilities. And we have an employee sick leave. 
The sum of those totals approximately $1.9 million.
    We've focused on trying to keep our work force healthy. One 
of our better programs is what we call Health in Motion, where 
employees can participate in a wellness program. They meet 
individually with our exercise physiologists and they establish 
goals, up to six goals. And then they target improvement in 
those goals, and then after a year they're remeasured again. 
And if they make a sufficient progress toward those individuals 
goals, then we reimburse them up to 70 percent of their 
membership in the YMCA for that exercise program. That program 
cost us approximately $70,000 in the last year.
    And one thing that I'm particularly proud of now to improve 
our own employees' health and others is that we just announced 
that we will be going to a tobacco-free environment on all our 
campuses, starting September 15, the day of the Great American 
Smoke Out.
    Speaking as a provider, health care payment has changed a 
lot over the years. Eight years ago, our board of directors 
concluded that the community of Minot could not support two 
full service community hospitals, so they set in motion a plan 
which resulted in the acquisition of UniMed Medical Center in 
2001. And in 2001, the combination of the two facilities 
resulted in approximately a $2 million loss on operating 
margin. Since that time, our operating margin has increased 
every year to the year 2004. And after 2004, which was the peak 
year, it's been declining once again and our margin has 
decreased down to a break even for fiscal year 2007.
    And the question is why is that happening. There's multiple 
issues that are playing onto that. First of all is driving 
costs. Nursing salaries alone increased 41 percent over the 
last 5 years. Our total payroll went from $100 million to $140 
million over that same timeframe. Our drug costs increased 67 
percent since 2003. That's up $4.8 million. You mentioned 
earlier charity care. Charity care nearly tripled from $560,000 
to $1.4 million. And the other part of the problem is the 
payment system. Medicare, Medicaid, and Blue Cross Blue Shield 
of North Dakota are not keeping up with the rate of inflation 
in health care. Our Medicare payments decreased from 52 cents 
on the dollar to 43 cents on the dollar over the last 4 years. 
Medicaid decreased from 45 cents to 37 cents. And Blue Cross 
decreased from 61 cents to 52 cents on the dollar.
    We've taken some actions to mitigate some of these things. 
Relating to charity care, we have a full-time resource 
coordinator that assists the uninsured and underinsured to find 
private or public sources of funds to help pay the bills, 
including drug costs. That person saved those people more than 
$200,000 last year. We support the free clinic in Minot with 
supplies, equipment, and ancillary testing services. The clinic 
is staffed by volunteers.
    We have also been working to create a healthier community. 
We do continuous education about health and chronic disease 
like diabetes, back pain, and heart. And we do screening 
events. I am proud to say we did prostate screening at the fair 
last month, which was co-sponsored by yourself and the Cancer 
and Research Prevention Foundation. We screened over a thousand 
men during that 9-day event.
    The Chairman. What were the results; do you know?
    Mr. Hoff. I'm not sure I can tell you because it might be a 
secret. No. Actually, we were surprised. We did find over 70 of 
the men with elevated PSAs, and that's a pretty high 
percentage, actually, for a random screening like that. So 70 
men will be referred to their physician for further action.
    The Chairman. That's great. You found 70 people that we may 
have stopped from having something more serious.
    Mr. Hoff. And, finally, in our Garrison community clinic, 
our provider there is sponsoring a Reduce Obesity campaign for 
the Garrison clinic, which just was started this summer and 
will conclude by late fall.
    We also formed a partnership with the YMCA in Minot. We 
made a significant investment with the Y in new facilities to 
create a healthier community. We have our exercise physiologist 
there. They do prescreening for people who are new members. 
They help individuals develop their own exercise routines 
through the Y. And also we use their facilities for our sports 
acceleration.
    One of the things I wanted to mention briefly is we have, 
in the last 2 years, invested significantly in electronic 
health care records. We will soon be in the top 15 percent of 
the hospitals electronically in the health care records.
    North Dakota's health care system is in an extremely 
fragile state. We have declining reimbursement, increasing 
costs, an aging population, work force shortages, and expensive 
technologies. We would be in crisis if it was not for the hard 
work and efforts of yourself. We do appreciate the work you've 
done for rural health care and critical access payment, Section 
508 for urban hospitals, and we know that it was a lot of work 
and that torch was carried by yourself. Solutions are not easy. 
And with health care reform mentioned frequently, we're 
concerned that the remedy is not simply reducing payments to 
providers for their same services. Thank you very much.
    [The prepared statement of Mr. Hoff follows:]


[GRAPHICS NOT AVAILABEL IN TIFF FORMAT]


    The Chairman. Thank you very much. Really five excellent 
witnesses. I think this lays out very well, in the brief time 
that we have, the extraordinary challenges that we confront.
    I would like to ask each of you to answer this question. In 
Washington, there is, I think, almost unanimous agreement that 
we're on a course that is unsustainable. I think that was very 
clear from the witnesses here. We've got a train wreck going on 
here. So what do we do about it? I've talked about some ideas 
in terms of health IT and in terms of better coordination of 
care, in terms of identifying most effective practices. But 
there's a fundamental underlying question, and that is how do 
we structure the basic system. And let me give it to you in 
this kind of summary profile.
    There are really three basic options. One is to have a 
single care system. That would be like Canada has, like most of 
the industrialized countries have. A system that is coordinated 
by the Federal Government with all that implies. That's one 
possibility. A second possibility is an employer mandate, 
requiring employers to provide health care for their employees. 
And where people are not employed or where the businesses 
cannot afford to provide the insurance, that there is 
government support to fill in the difference. A third 
possibility, just embraced by the state of Massachusetts is for 
an employee mandate. That is that all of us would be required 
to carry health insurance. And, you know, you could get it at 
your employer, you could get it somewhere else. But there would 
be a requirement that we have it, and there would be assistance 
for those that can't afford it on their own. Those are the 
three basic structures of providing health care coverage. And 
there are arguments pro and con about each one.
    I would just be interested to the extent you have an 
opinion--if you don't have an opinion, that's not a problem--
but if you have an opinion on those three basic approaches, I'd 
be interested in it. I know the committee would. Mary?
    Dr. Wakefield. I think without a doubt there is a role for 
government, State and Federal Government, in terms of assuring 
coverage for vulnerable populations. Employers and even 
employees, vehicles for folks who are over age 65 don't work 
very well. And so there's clearly a role for Medicare, and I 
think that's almost a given. There's also a role for Medicaid. 
Maximizing efficiency and ensuring that we're aligning payment 
with high quality care, so that we're not paying for services 
that don't buy the consumer anything is really important. And 
the government, I think, can use its leverage to realign 
payment policies so that we are paying for high quality care 
consistently.
    I'll just give you a personal example. My mother had gone 
in to have a carpal tunnel surgery done on one hand. Well, 
whoops, it was the wrong hand. Medicare paid twice on one hand 
to have carpal tunnel surgery done and then done on the other. 
A couple of years later at a different hospital she went in and 
had an injection under fluoro done in one of her hips. Whoops, 
Medicare paid again, it was a wrong hip, different provider, 
different facility.
    So the point I'm making is that government has a role for 
vulnerable populations like folks over age 65, like Medicaid. 
But we need to be using those Federal dollars and the strength 
of that program with all the muscle behind it to ensure that 
the care that people are getting through those programs is 
efficient care and effective care. So that role doesn't, I 
don't think, go away.
    With regard to the employee mandates, I agree with Mr. 
MacMartin that employees need to have some skin in the game 
where they can. There have to be private sector pieces to this 
and employees ought not be immune from some of the costs of 
their care. Now, the other piece of that is that a big part of 
their most expensive care is actually not so negotiable. It's 
care that they get inside a hospital, which is often not an 
option. You got to be there, you have to be there. And what 
we're starting to see is a little bit of trickle down of bad 
debt with some of our hospitals now incurring bad debt because 
those bills aren't being paid as consistently as they have been 
historically for the big ticket items. Depends on the structure 
of the insurance policy. But we're going to have to watch that 
very carefully in terms of some of the new planned features.
    The employee mandate in Massachusetts, they're really the 
ones that are leading the charge, but there are about six or 
seven other states now that are doing some variations on that 
theme. I think that's absolutely worth experimenting. And it 
gets it to the point about really experimentation. We need to 
try different models right now. I don't think we've got a lot 
of time. I think ultimately we could well default into what a 
lot of people are very afraid of, and that might be one big 
payer system, because that always seems to be kind of the end 
game in some people's mind. If we don't take care of this 
problem on the front end, business can't afford it, big 
business can't afford it, and somebody eventually has to accept 
the responsibility.
    So you often hear that, well, we might default to just an 
all-government, one single payer program. I don't think we're 
there yet. I think we absolutely need private sector 
approaches. Some experimentation at the state level is really 
important. Massachusetts, I think, is a great idea, because it 
builds on an orientation we already have. If you're driving a 
car, you've got to have insurance. You generally have to have 
insurance on your house if you've got a mortgage on it, on your 
farm, et cetera, et cetera. So the model, the concept, I think 
is an important one to look at.
    The Chairman. I want to say this, I've always been 
intrigued by the German system. Maybe it's because I carry a 
German name and am part German. But I've always been intrigued 
by the German system, which is the vast majority of people, 
like in our country, are insured at their place of employment. 
And they have large purchasing pools that purchase insurance 
which gives them leverage in getting a good deal. And as I 
understand it, where the business can't afford it, or for those 
people who are not employed and can't afford their own 
insurance, that's where government steps in. Government 
provides assistance to very small businesses that can't afford 
health insurance. They provide assistance to low profit 
businesses that can't provide it or they're in a competitive 
position that doesn't allow them to provide it. They help those 
who are not employed, who are disabled, elderly, et cetera. 
I've always been intrigued with that approach.
    Janis, do you have a----
    Ms. Cheney. I think that I certainly don't have an answer 
for how to structure the basic system, but I think that you've 
touched on the point, and as has Dr. Wakefield and others at 
the table, that there is a role for government, there is a role 
for the private sector, there is a role for business and the 
individuals as well. And that is really the genesis of AARP's 
Divided We Fail movement. AARP representing consumers, nearly 
39 million people now nationwide, and their families. I think 
that is an important consideration. AARP is not in this just to 
look out for the interests of our members but all of our 
members' families. And we recognize that this issue is larger 
than just Medicare and the senior population. It affects every 
single one of us and we have to find a solution that will work 
for every single one of us.
    So, you know, I mentioned in my comments relative to key 
transitions that we see as being necessary to finding some of 
these solutions, the health promotion and healthy behaviors 
elements that you spoke of are something that AARP has been 
committed to for a long time. Quality procedures and the health 
IT is something that the association has worked on. 
Coordinating care. I guess personally from my experience with 
cancer and health issues with my children, that kind of 
coordination has really been missing, and if I weren't a fairly 
astute recipient of health care with some resources to access, 
friends and other kind of information, things might have taken 
different turns at different places. Absolutely the individual 
has a role, government, and business.
    And the other piece that I think AARP is stressing so 
strongly is that all of those voices have to be at the table. 
Everyone has got to realize I'm not going to get the ideal 
system that's going to just take care of me. We all have to 
give a little. And that conversation has got to go across party 
lines and across employer and employee lines and really start 
building common understanding that we can then use to structure 
a system that is going to work for everyone.
    The Chairman. Candace, any thoughts on what kind of a 
system we should have?
    Ms. Abernathey. I have some thoughts, but as you know, 
obesity has a high cost on our health care. And I, for one, 
used to weigh 350 pounds and I had a gastric bypass surgery. 
After I had gastric bypass surgery and lost 180 pounds, 
borderline diabetes was gone, all of my health care problems as 
far as related to the obesity was gone. But yet insurance 
companies don't want to get involved with gastric bypass 
surgeries, and Medicaid doesn't want to get involved with 
gastric bypass surgeries, which seems to eliminate a lot of the 
health care problems that go along with the obesity.
    As far as the government being involved, you know, they had 
to remove a lot of my intestines for surgery and I don't absorb 
the way I used to. My doctors say, OK, they did labs and said 
Candy doesn't absorb medication the way she used to before 
this, so now we have to give her two instead of one. Well, the 
Federal Government says, no, she only gets one, only 30 per 
month, one per day. But the doctors say, well, she needs two 
because Candy has got this situation. Doesn't matter, this is 
what she gets.
    As far as when I was an employee for the department of 
social and health services in Washington, every year my 
premiums went up, my health care premiums went up, but I only 
got one cost of living allowance the whole time I worked there. 
You know, I was there for 7 years, and I thought, wait a minute 
now, my paycheck is lower. I'm paying more for this but my 
paycheck is smaller and I even got a cost of living increase on 
this. So I don't know.
    The Chairman. I have so many people, you know, from elderly 
people to people who are working, who are seeing more and more 
of their paycheck go for health care to employers who are 
saying, you know, they're getting squeezed. If there was ever a 
circumstance in which I think there's a general recognition we 
got a big problem, this is it.
    John, any thoughts on structuring?
    Mr. MacMartin. I don't know that I can choose any one of 
the three today, Senator Conrad. When we say like Canada or 
some of the European nations, I think we all see many health 
care professionals that flock to the United States so that they 
can practice under the freedom of the system we have, and 
correspondingly we all read horror stories about perhaps 
foreign health care professionals that we've trained that go 
back to their home country and set up clinics that lure people 
there. So I'm not sure that an all-government system is the 
answer. Mandates always scare employees, and especially 
employers.
    Perhaps it isn't the right analogy, but North Dakota for a 
time has toyed with requiring ethanol in every gas station, but 
when you apply that broadly across North Dakota--and I know you 
drive through a lot of North Dakota--there's lots of places 
that have only one gas station, and that gas station has only 
one pump and it's regular. And to put in a second tank with all 
the EPA would close the station down, you know. So mandates by 
themselves may not be there. And you know this, and you've 
expressed this before, what works in urban America doesn't work 
in rural America. It is going to be some combination. But to 
say one of those three today would work, I can't do that--
    The Chairman. OK. Terry.
    Mr. Hoff. Thank you, Senator. I guess I'd probably look at 
a combination of employer and employee type situation. I don't 
know that I can pick one. From the provider perspective, the 
fear we have is the increased burden of bureaucracy of whatever 
it is. Just recently, the new notice requirements for 
discharging Medicare patients, a small thing, but it's like a 
ten-page document that you're handing out to every patient 
three times. So that part is a mentionable thing. I think they 
have issues like Candace where we have a lot of coverage for a 
lot of people but there are still people who fall through the 
cracks, and we need to make some solutions for those problems.
    And, also, I think that if you're going to talk about 
insurance, one of the things we need to do is change the 
payment mechanism, particularly for physicians. Because certain 
specialists are awarded, rewarded way out of proportion to 
particularly primary care. And for us in Minot, North Dakota, 
and the state of North Dakota, it's becoming nearly impossible 
to recruit primary care physicians because there just aren't 
any.
    The Chairman. I really see that. I've got a brother-in-law 
that's a family practice doctor and, you know, he's really 
seriously contemplating getting out of it. He said just trying 
to get the money from the insurance companies, trying to get 
the money from Medicare, trying to get the money, he's got so 
many people chasing money that he's owed. And, you know, he's 
in his fifties, very able guy, and lots of patients, very 
popular guy. And he said, ``Kent, I sat down and figured out 
what I'm actually making at the end of the day. I've got a lot 
money coming in but I got so much money going out.'' He said, 
``I could make a lot more money doing something else.'' And I'm 
hearing this with increasing frequency for family practice 
doctors.
    Mr. Hoff. We have right now in the western part of the 
state two family practice doctors who will be leaving their 
practice next spring and going to radiology residency. Among 
other things, they get paid a heck of a lot more.
    The Chairman. Mary's husband's a family practice doc. 
What's he telling you?
    Dr. Wakefield. That he's going to stay in Grand Forks.
    Mr. Hoff. He's not available to come out and take over 
these practices?
    Dr. Wakefield. I'm sure he'd be happy to help, Terry.
    Mr. Hoff. I think the other thing I could comment to, as 
John mentioned, is one of the problems we're facing, and as you 
know for the record, the fixes for Washington, D.C. or New York 
or Florida are not the same as the fixes for North Dakota.
    The Chairman. Well, we have seen that repeatedly, this one 
size does not fit all. That's very, very clear. We live in a 
totally different culture, a totally different economic 
reality.
    And I tell you, I've just had the director of Health and 
Human Services come to see me as we were writing this budget, 
and he showed me results of investigations in Florida of fraud 
and corruption that is just unbelievable. Shopping center 
filled with little offices with agencies that were billing 
Medicare on the average of a million and a half dollars a year. 
You go up in the middle of the day and knock on the door, 
nobody is there because nothing is going on there. They're not 
providing any services, they're not doing anything. But they 
have a mill where they're producing bills, and it's a giant 
fraudulent operation. It's not one company like that, it's 80. 
And they've made kind of a boutique out of a shopping center 
where they're running these fraudulent operations. I tell you, 
that's so outrageous. This is the kind of scam----
    A number of years ago we held a hearing here, a budget 
hearing, in North Dakota, and we found out about a wound kit 
scam that was going on out of Pennsylvania, and they were 
billing Medicare hundreds of million of dollars a year and it 
was a phony deal, and they were actually coming to providers 
and bribing them, offering them bribes to get them to take 
their wound kits that cost three times as much as what a wound 
kit should cost. We discovered that in a hearing here in North 
Dakota and were able to shut down at least part of that 
operation as a result.
    I know that we're actually past our time, which I apologize 
for, and we'll end on this note. I would just ask each of you, 
in a sentence or two, if you could send one message that would 
get heard by the budget committee, by the finance committee, by 
the Congress, what would it be? In a sentence or two, what 
would you most want them to know or to act upon?
    Dr. Wakefield. There's a lot of efficiency in North Dakota. 
There's a lot of inefficiency in the health care delivery 
system. And, frankly, you can find some of it in the state, I'm 
certain, too. But there is a tremendous amount of inefficiency. 
I think this is not just about putting more money into health 
care delivery systems. It's about making sure that the money 
we're spending right now is spent wisely. You made a couple 
comments to that very point, part of what I was trying to 
illustrate, in terms of using the power of the Federal 
Government to ensure that dollars are spent not just as a payer 
but as a wise purchaser----
    The Chairman. Let me tell you, some of the Presidential 
candidates have come to me and asked me on the budgetary front 
about putting more money into health care, and I say to them, I 
just don't think that's the answer. I mean, just putting more 
money in. One in every six dollars in this economy right now is 
going into health care. I think we've got to find a way to make 
things run more efficiently and effectively before we pour more 
money. I mean, I just don't see how that's going to work.
    Janis?
    Ms. Cheney. I think the message I might have, and echoing 
AARP's perspective in the Divided We Fail campaign, would be to 
set aside some of the personal and perhaps political interests 
and to really sit down and listen to each other, listen to 
constituents and to employers, to providers, to employees, and 
start hammering out some things that will move us forward. 
Because certainly we have enough money in this country, and 
resources to take care of our citizens. And certainly there are 
things we can learn from our States, other countries. The 
Medicare system works very efficiently, for example. And so 
let's take some of those bright people that are there and 
really start focusing in on this problem. As I indicated, that 
would be AARP's perspective over the next months, up to and 
past the 2008 election, would be to really try to make sure 
that every single candidate accepts some responsibility for 
addressing health care in a serious way.
    The Chairman. Candace, if you had a message that you wanted 
people to hear.
    Ms. Abernathey. A lot of us aren't able to work anymore due 
to no fault of our own. And we're on low fixed incomes. Even 
senior citizens are on low fixed incomes, you know. There 
should be some kind of coverage that we could rely on. Just 
because I'm not a mom anymore, my kids are over a certain age 
now, where it's like I don't matter anymore. Yes, I do matter 
still. I still am a mom. I just don't have the small children 
anymore, but I'm still a mother to three children, one who will 
be serving in Iraq starting next month, you know.
    And if I do get approved for social security disability, 
well, then I find out from social services that my co-pay will 
be $400 a month. I can't afford $400 a month. So something has 
to be done for people who are, you know, getting social 
security disability. That $400 a month, that's just impossible. 
That's my co-pay before I get any help from Medicaid to help me 
with my prescriptions that I have to have, and my oncology 
appointments, my liver doctor appointments. I mean, all those 
appointments I have to go through. Recognize that I am still 
important. I may be a single adult now, but I still need 
medical coverage. And people still need to be able to get it at 
an affordable rate. It needs to be affordable.
    The Chairman. OK. John.
    Mr. MacMartin. I would say please make sure that small 
business is involved. I know, and I appreciate, comments that 
you made from the auto industry and the problems that they're 
facing, but please make sure we talk to small business, mom and 
pop on Main Street, because that's where the bulk of our 
businesses are. And I think the other issue is we as patients 
or consumers of health care are being told to become smarter 
and engage the doctor. I think we have to be involved as that 
end consumer in all aspects of it, including the pricing, the 
insurance, and what is done there.
    The Chairman. OK. Terry.
    Mr. Hoff. Senator, as a provider, I just can't say that you 
shouldn't put money into the system.
    The Chairman. I knew that would get your attention.
    Mr. Hoff. But, you know, I guess the thing is that when I 
say that, half in jest, is that health care costs are 
increasing a lot, but a lot of that is really good stuff. I 
mean, some of the drugs that are really expensive, they do a 
lot of good things. I think the message is that health care is 
a huge, huge industry and there's a lot of money in it and 
there are some bad guys in that system. And my message would be 
go after the bad guys and leave the guys that are trying to do 
the job day in and day out honestly and fairly, let us be.
    The Chairman. Yeah. We have a pretty good idea where some 
of those bad guys are, too. The thing that the secretary has 
just shown me on Medicare fraud in Florida, it's really just 
outrageous. I just gave them in the budget another $200 million 
to go after these guys. And I think that's in all of our 
interests. When I say don't put more money in the system, I'm 
talking collectively. To me, it's very clear that those parts 
of the country that have been unfairly reimbursed, they need an 
increase. I was just at Dickinson hospital today. They are in 
very serious financial trouble, and in part because they have 
been unfairly reimbursed, like most of the hospitals in North 
Dakota. Unfairly reimbursed. Well, there are other hospitals 
that have been overreimbursed, you know. And there are other 
parts of the health care system where we see fraud and abuse 
and corruption and that's got to be taken on. That's got to be 
taken on in a very tough way. And we're going to endeavor to do 
that in this budget that I've helped write for this year.
    Let me just conclude by thanking these witnesses, thank 
each and every one of you. I think you've made a real 
contribution to the committee. I want to thank all the people 
that were here in the audience as well. I certainly appreciate 
your attendance. This is, as I indicated, an official hearing 
of the Senate Budget Committee, will go as part of the record.
    We are focusing now on a series of hearings on health care. 
We have just held one in Washington that was extremely 
interesting on a proposal by Senator Wyden and Senator Bennett, 
a bipartisan proposal. And the next hearing is going to be on 
this question of what is the basic structure, and we're going 
to listen to a lot of people who are very knowledgeable about 
that. Then we're going to be talking about comparative 
effectiveness and what can be done to seize on the 
opportunities there. And then we're going to talk about the use 
of information technology to improve effectiveness and 
efficiency. So we have an ambitious schedule of hearings in 
Washington and some of them will be in other parts of the 
country as well, as we struggle to fashion a policy that makes 
the most sense for the country.
    With that, I declare this hearing to be adjourned.
    [Whereupon, at 5:31 p.m., the hearing was adjourned.]

                                 
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