[Senate Hearing 112-842]
[From the U.S. Government Publishing Office]
S. Hrg. 112-842
NOMINATIONS OF WILLIAM B. SCHULTZ AND CHRISTOPHER J. MEADE
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
on the
NOMINATIONS OF
WILLIAM B. SCHULTZ, TO BE GENERAL COUNSEL, DEPARTMENT OF HEALTH AND
HUMAN SERVICES; AND CHRISTOPHER J. MEADE, TO BE GENERAL COUNSEL,
DEPARTMENT OF THE TREASURY
__________
DECEMBER 20, 2012
__________
Printed for the use of the Committee on Finance
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COMMITTEE ON FINANCE
MAX BAUCUS, Montana, Chairman
JOHN D. ROCKEFELLER IV, West ORRIN G. HATCH, Utah
Virginia CHUCK GRASSLEY, Iowa
KENT CONRAD, North Dakota OLYMPIA J. SNOWE, Maine
JEFF BINGAMAN, New Mexico JON KYL, Arizona
JOHN F. KERRY, Massachusetts MIKE CRAPO, Idaho
RON WYDEN, Oregon PAT ROBERTS, Kansas
CHARLES E. SCHUMER, New York MICHAEL B. ENZI, Wyoming
DEBBIE STABENOW, Michigan JOHN CORNYN, Texas
MARIA CANTWELL, Washington TOM COBURN, Oklahoma
BILL NELSON, Florida JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware
BENJAMIN L. CARDIN, Maryland
Russell Sullivan, Staff Director
Chris Campbell, Republican Staff Director
(ii)
C O N T E N T S
__________
OPENING STATEMENTS
Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman,
Committee on Finance........................................... 1
Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 3
Schumer, Hon. Charles E., a U.S. Senator from New York........... 9
ADMINISTRATION NOMINEES
Schultz, William B., nominated to be General Counsel, Department
of Health and Human Services, Washington, DC................... 10
Meade, Christopher J., nominated to be General Counsel,
Department of the Treasury, Washington, DC..................... 11
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Baucus, Hon. Max:
Opening statement............................................ 1
Prepared statement........................................... 29
Grassley, Hon. Chuck:
Prepared statement........................................... 33
Hatch, Hon. Orrin G.:
Opening statement............................................ 3
Prepared statement........................................... 34
Meade, Christopher J.:
Testimony.................................................... 11
Prepared statement........................................... 37
Biographical information..................................... 38
Responses to questions from committee members................ 47
Schultz, William B.:
Testimony.................................................... 10
Prepared statement........................................... 64
Biographical information..................................... 65
Responses to questions from committee members................ 81
Schumer, Hon. Charles E.:
Opening statement............................................ 9
(iii)
NOMINATIONS OF WILLIAM B. SCHULTZ,
TO BE GENERAL COUNSEL, DEPARTMENT
OF HEALTH AND HUMAN SERVICES; AND
CHRISTOPHER J. MEADE, TO BE GENERAL
COUNSEL, DEPARTMENT OF THE TREASURY
----------
THURSDAY, DECEMBER 20, 2012
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 2:34 p.m.,
in room SD-215, Dirksen Senate Office Building, Hon. Max
Baucus, (chairman of the committee) presiding.
Present: Senators Wyden, Schumer, Stabenow, Cantwell,
Carper, Hatch, Grassley, Roberts, Coburn, and Thune.
Also present: Democratic Staff: Amber Cottle, Chief
International Trade Counsel; Rory Murphy, International Trade
Analyst; and Tiffany Smith, Tax Counsel. Republican Staff:
Chris Campbell, Staff Director; and Nick Wyatt, Tax and
Nomination Professional Staff Member.
OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM
MONTANA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The hearing will come to order.
I know that for some on this committee there is a hard 4
o'clock deadline. We will try to move expeditiously and in a
way that all Senators who wish to ask questions will have an
opportunity to do so, hopefully before 4, but, if not before 4
today, then at a later date they can ask questions. But I think
there is a very good chance we can wrap it up today, again, by
4 o'clock.
In his speech on leadership delivered more than 100 years
ago, President Theodore Roosevelt said, ``It is not the critic
who counts; not the man who points out how the strong man
stumbles, or where the doer of deeds could have done them
better. The credit belongs to the man who is actually in the
arena, whose face is marred by dust and sweat and blood; who
strives valiantly; who errs, who comes up short again and
again, because there is no effort without error and
shortcoming; but who does actually strive to do the deeds; who
knows great enthusiasms, the great devotions; who spends
himself in a worthy cause; who at the best knows in the end the
triumph of high achievement, and who at the worst, if he fails,
at least fails while daring greatly, so that his place shall
never be with those cold and timid souls who know neither
victory nor defeat.''
This quote hangs on the wall in my office. It serves as a
powerful reminder about the importance of political leadership.
Today I want to thank four members of our committee who are
leaving. This will be their last hearing. I am not sure how
many will be able to attend, but I want to mention them because
they are such terrific people.
The first is Kent Conrad. We all remember Kent for many
reasons: for his charts--he informs us with great precision on
various economic matters; second, as a valiant member of the
Bowles-
Simpson Committee, the Gang of 6, the Gang of 8, who has
devoted himself to getting our debt down; as someone who worked
so hard on the passage of health care legislation, especially
the Affordable Care Act, and contributed greatly and mightily,
with very precise questions and great contributions, always
looking for a better solution, always trying to make something
better--not critical, but constructive. I just want Kent to
know how much we are going to miss him here.
Second, Jon Kyl. When I think of Jon, I think of a man of
superior intelligence who has an encyclopedic knowledge of
policy, who is tenacious, and who is a great multi-tasker. He
is always very busy, with many balls up in the air. He works so
hard, especially with respect to Federal estate tax. That means
a lot to Jon to make sure it is written in a way that makes
sense to him. All of this has not gone unnoticed. Time magazine
named Jon one of the 100 most influential people in the world
for his persuasive role in the Senate.
Next to Jon, of course, is Jeff Bingaman. I do not know
anybody here with more quiet, thoughtful, statesmanlike
perception, who devotes himself to hard work and does not pat
himself on the back, than Jeff Bingaman. He is really
something. I mean, he reminds me a little bit of the old
commercial, the E.F. Hutton commercial: ``When Jeff speaks,
everybody listens.'' Because what Jeff says is very thoughtful,
he has thought it through, and he is several steps ahead of
everybody else. We will very much miss Jeff on this committee
for his tireless work on the Children's Health Insurance
Program, and helping to improve Medicaid. Not a show-horse at
all, but he is a work-horse in the best sense of the term.
Fourth is Olympia, Olympia Snowe. When I think of Olympia,
I think of someone who is so dedicated to her State, who just
keeps asking the questions, what about this, what about that?
Olympia, what do you think? I do not know. I have to think this
through more; I am not sure. It is because she wants to make
sure she gets it right.
Over here on the dais, if you look at her notes, I have
never seen anyone with more underlines, with more highlights.
Some are yellow highlights, others are red highlights, some are
circled. She is prepared. She came to this hearing fully,
totally prepared. She also is clearly a class act and a real
statesman, very bipartisan.
I will never forget working with her. She is the only
Republican who voted for the Affordable Care Act on the
committee--not on the floor, but in the committee--and in just
talking with Olympia, gee, we will change this, Olympia, what
about this? Then, I do not know, let us see on this. Then
finally she said, ``Okay.'' She is a wonderful, wonderful
person.
So, thank all four of you for all that you have done.
I also want to acknowledge the work of our friend Mark
Matthiesen. There is Mark, sitting in the front row there, who
recently announced his retirement. For the past 31 years, Mark
has worked on tax legislation in the Office of the Senate
Legislative Counsel. Thank you, Mark, very much for your work.
Congratulations for your next endeavor, whatever you choose to
do.
Let us give Mark a round of applause. [Applause.]
On a final note, earlier today I announced that our friend,
whom all of you know and love, Russ Sullivan, will be leaving
the Senate at the end of this Congress. A true friend,
respected colleague for the last 18 years, he is just amazing.
I do not know anybody else like Russ and his ability just to
work with people on both sides of the aisle, talking quietly,
looking for solutions, bipartisan, how do we get this done, how
do we find the right way to do this, not partisan, just looking
pragmatically, practically, getting a good solution for our
country. I can think of no higher honor than the work that Russ
has done for all of us in the committee, the Senate, and for
the country. A big round of applause for Russ Sullivan.
[Applause.]
While we are missing Russ, we are fortunate to have someone
who is just as smart and talented as Russ to take Russ's
position as Chief of Staff of the Finance Committee, and that
is Amber Cottle. She has been my top trade person. She has the
same tenacity, focus, intelligence, and dedication as Russ. So
thank you, Amber, for agreeing to join us and keep up all our
work.
Do you want to say something at this point?
Senator Hatch. Yes, why don't I? Then we can go back.
The Chairman. All right.
OPENING STATEMENT OF HON. ORRIN G. HATCH,
A U.S. SENATOR FROM UTAH
Senator Hatch. Well, I appreciate the chairman allowing me
to pay compliments too. He has mentioned a number of the
people, of course, whom I very much appreciate as well. I
appreciate the opportunity to pay tribute to those who will be
leaving the Senate and this committee at the end of the year.
I want to thank you, Mr. Chairman, for setting apart the
time for this purpose. I appreciate all the hard work members
of this Finance Committee have put in over the past 2 years. It
has been a great experience to work with every member of this
committee, more so than in some other committees in the Senate.
You probably know some of them.
The Finance Committee is often able to accomplish its tasks
on a bipartisan basis. Much of that is due to the leadership of
Chairman Baucus, but it can also be attributed to the
commitment and effort displayed by all of the individual
members of the committee, and I appreciate it.
With the conclusion of this Congress, four great Senators
will be leaving the Finance Committee. They will all be missed,
so I would like to just take a second or two to say something
about each of them.
Let me start by saying a few words about Senator Olympia
Snowe. Senator Snowe has been a fiercely independent voice on
the committee and in the Senate. I have long admired her
commitment to her principles and to the people of her home
State of Maine as well. Maine has been very well-represented
here in these past 18 years, as Senator Snowe has worked to
advance and reflect Maine's values here in the Senate.
In 2006, Senator Snowe was named one of America's 10 best
Senators by Time magazine. In bestowing this honor, they said
that, while Senator Snowe is ``a major player on national
issues, she is also known as one of the most effective
advocates for her constituents.'' I have to say that I agree
with Time's assessment. She has tirelessly worked to be
responsive to the people of Maine, to address their concerns
here in the Senate, and once again to reflect their values with
her votes and her decision-making. It is no wonder that she has
always enjoyed high approval ratings among her constituents.
And do you know who else was on that list? Senator Jon Kyl.
I have worked closely with Senator Kyl on a number of issues
over the years. I have worked with him here on the Finance
Committee, on the Judiciary Committee, and of course in his
position in the Senate Republican leadership. He is an
incredible strategist and a brilliant lawyer, with an almost
unparalleled intellect. I called him a lion of the law the
other day, because he really is.
I do not know of a single Republican Senator who has not,
at one time or another, relied on Senator Kyl's leadership and
expertise on any number of issues. Senator Kyl has been a
relentless advocate for conservative values on issues ranging
from national security to judicial appointments, and in such
areas he has been a leader that I personally have relied on for
advice and counsel.
Senator Kent Conrad was also on the Time magazine list. I
think this says something about this committee. For years he
has led his party in some fierce budget battles here in the
Senate. While I have not always agreed with his views, I have
never doubted that, when it came to the budget, he always knew
what he was talking about. I think it was all about the charts,
myself. It is hard to debate someone who has so many charts to
back up his arguments.
Over the last couple of years I have tried to follow
Senator Conrad's example and have exponentially increased my
use of charts on the Senate floor. I am not as good at it as he
is, is all I can say. Now I see why Senator Conrad does it.
When I use charts, no one wants to debate me either.
[Laughter.] Joking aside, Senator Conrad and his charts will be
missed, both on the Senate floor and here in the Finance
Committee.
Well, I have to say that Senator Jeff Bingaman was not on
that Time magazine Ten Best Senators list; of course neither
was I or our distinguished chairman.
The Chairman. Speak for yourself. [Laughter.]
Senator Hatch. Were you on that list?
The Chairman. No.
Senator Hatch. Well, you should have been. [Laughter.] So
it could not have been much of a list anyway. [Laughter.]
I have sat with Senator Bingaman for most of my time here
in the Senate. If you know the both of us, you know that we do
not often find ourselves on the same side of many of the
issues. Even so, we found ways to work together. For example,
for a number of years I worked with Senator Bingaman on his
legislation to help self-employed individuals deduct their
health care costs when compiling their self-employment income.
Jeff has become something of an institution in New Mexico,
having represented the State here in the Senate for 30 years. I
know that there are many in his State who are, like us here in
the Senate, sad to see him go.
Now, Mr. Chairman, an unfortunate part of serving in the
Senate is seeing good Senators and good friends come and go.
Each of the four Senators leaving our committee this year is a
devoted public servant, and they have worked hard, and they
have worked hard in the best interests of their constituents. I
know that they will all continue to serve their country in
different capacities after they leave the Senate.
I have come to admire each of these Senators. They are
great Senators, and I am proud to call them all friends. I
thank you for taking this time to do this, Mr. Chairman.
The Chairman. Thank you, Senator.
Woodrow Wilson once said, ``I not only use all the brains
that I have, but all that I can borrow.'' This administration,
like all administrations, faces a great number of challenges.
They need a great number of bright and talented people to work
together to find solutions. The two nominees before us today
are among the best and the brightest. They seek to be the
General Counsels of the Department of the Treasury and the
Department of Health and Human Services. These agencies will
depend on their advice and expertise for implementing laws
informing our country's economic and health policies.
In August, President Obama nominated Christopher Meade to
be the General Counsel of the Department of the Treasury. Mr.
Meade came to the Treasury in 2010 and this summer took over as
the acting General Counsel. This experience and his trusted
knowledge of the law will serve him very well.
After graduating from Princeton and then the New York
University School of Law, Mr. Meade clerked for Supreme Court
Justice John Paul Stevens. Years later, he returned to the
Supreme Court to argue four high-profile cases before the
court. In reviewing his career, a consistent theme is apparent:
he is respected, trusted, and Mr. Meade knows the law.
If confirmed, Mr. Meade will use his experience to counsel
the Secretary and all at the Treasury Department on economic
and financial affairs, both domestic and international. These
policies affect every person in America, and Mr. Meade's sound
judgment is essential.
President Obama selected William Schultz to be the General
Counsel of the Department of Health and Human Services. This
position demands a high level of expertise to assist in the
analysis and implementation of our Nation's health care laws.
A graduate of Yale and then UVA Law School, Mr. Schultz
gained experience through a long and varied career, much of it
in public service. He currently serves as acting General
Counsel at HHS. He came to the agency in 2011 after working at
the Department of Justice, the FDA, and in the private sector.
Mr. Schultz was a well-respected professor at Georgetown
Law, sharing his knowledge with hundreds of students. He
published many scholarly articles throughout the years,
covering issues from the FDA to the Supreme Court. His writings
have appeared in the New York Times and the Georgetown Law
Journal.
Both Mr. Schultz and Mr. Meade must bring thoughtfulness
and a command of the law to their respective agencies. Their
records show them to be qualified for these positions. I
believe the administration will benefit from borrowing the
knowledge, experience, and perspective from both nominees, and
I think they will do a great job.
[The prepared statement of Chairman Baucus appears in the
appendix.]
Senator Hatch?
Senator Hatch. Well, thank you, Mr. Chairman. I want to
take a moment to once again express my concerns about a growing
problem relating to Congress's dealings with the Obama
administration, because I believe it is relevant to today's
hearing. But before I do, I know Mr. Schultz very, very well,
and I do know of Mr. Meade, and I support both of them. I hope
we can get you through before the end of the year. I doubt that
is going to happen, but we will see what can happen.
But there is a growing problem relating to this Congress's
dealings with the President, or should I say with the Obama
administration, and I believe it is relevant to today's
hearing.
As part of the case against King George III, the Second
Continental Congress repeatedly noted in the Declaration of
Independence that King George had consistently frustrated the
attempts of the colonies to govern themselves. In these
grievances, we see frustration with a strong executive
authority that dominated the legislative authority.
The very first grievance against the King noted in the
Declaration states, ``He has refused his assent to laws, the
most wholesome and necessary for the public good.'' Later, the
Revolutionaries indicted the King ``for suspending our own
legislatures and declaring themselves invested with power to
legislate for us in all cases whatsoever.''
Now, these grievances were the inspiration for our
Constitution, among other grievances, which created a system of
checks and balances between the executive and legislative
branches. Put simply, our system of government was designed so
that Congress would be tasked with writing the laws that the
executive branch implements.
Now, more than 200 years later, many would argue that the
executive branch has become more powerful, perhaps too
powerful, at the expense of Congress. Congress shares
significant blame for this. In an editorial published last year
in the Washington Post, former HHS Secretary Michael Leavitt
noted that Obamacare contains the phrase ``the Secretary
shall'' nearly 2,000 times.
Even during his tenure, Secretary Leavitt noted that he had
been advised that HHS ``has more power than a good person needs
or a bad person ought to have.'' HHS is more powerful now than
it has ever been before. Among literally hundreds of other
functions, Obamacare designates that the HHS Secretary will
develop ``tooth-level surveillance.''
As such, perhaps the next nomination to HHS Secretary ought
to be jointly referred to this committee and the Committee on
Homeland Security and Governmental Affairs. The continued
abdication by Congress of legislative power and the
accumulation of that power by the executive branch make the
positions of Chief Counsel at HHS and Treasury very important.
The two nominees before us, if confirmed, would wield vast
influence over decisions that might impact the lives of every
American. This is why I, along with many of my colleagues,
believe that thorough oversight of the executive branch is
critically important to preserving our system of checks and
balances. That is in spite of the fact that I support both of
these gentlemen, knowing their qualifications.
The level of responsiveness from the administration,
specifically HHS and Treasury, to written requests for
information, has continued to be lackluster at best. I, along
with many other members, have raised this issue numerous times,
but to no avail.
Both of the nominees today are currently serving in an
acting capacity in the roles to which they have been nominated.
Consequently, they know agency practice--and have worked within
the existing agency structure--including how the agency
responds, or in many cases does not respond, to informational
requests from Congress.
I would respectfully suggest that, when you return to your
agencies, you pass along a reminder that at least some in
Congress find the lack of responsiveness to be entirely
unacceptable. My goal is to be able to work together with the
executive branch, and I think our system of government works
better when our two branches of government cooperate. I hope
that any nominee who comes before this committee does not
believe that their responsibility to work and communicate with
Congress ends with their confirmation.
There have been several recent instances in which nominees
have pledged to me and this committee that they would work to
promote transparency and would be responsive to Congress.
Unfortunately, following confirmation those pledges have too
often been abandoned. I know that Chairman Baucus recognizes
the need for transparency and responsiveness and that he will
work with me on finding a solution to this problem.
To his great credit, he has repeatedly shown leadership in
this committee, backing up any member's request to any agency
of government. I want him to know that I appreciate his
leadership and support in this matter, and in so many other
ways as well.
Finally, I want to conclude with a brief statement on the
scheduling of this particular hearing. Mr. Chairman, I assume
that there are many in the administration and on your side of
the aisle who would like to see these nominations move quickly.
I may be among them. However, when we rush these proceedings,
it seems to me, particularly so near to the end of this
Congress, we may be doing the committee and the nominees a
disservice.
As you know, there is a very important Republican
conference meeting today at 4 o'clock. Despite that, it was
decided that a good portion of this hearing would be devoted to
honoring our colleagues leaving the Senate.
Now, I appreciate the desire to honor those who deserve it,
as our colleagues do, but that should not cause the hearing to
get short shrift. In particular, I do not want to unduly limit
questions from members of the committee in order to complete
the hearing in a shortened time line.
Now, these nomination hearings are more than just a box to
be checked: they are essential to ensuring that we adequately
fulfill our advice and consent responsibilities here in the
Senate. I just hope that, as we go into the future, we will
keep that in mind under all circumstances.
One other thing. I hope when you folks finally get
confirmed that, when we send a request for information, we do
not get stiffed like we have been getting stiffed the last 4
years. Frankly, it has been not only noticeable, it is
offensive. We are going to have to see that that changes.
We do not ask these questions just for meanness or just to
try to make political points; we are asking them because we do
not have the knowledge and we do not have the understanding we
would like and we have some things that we are concerned about.
So, if you will keep that in mind as you serve back there--and
when I say back there, with the administration back over
there--we would appreciate it.
Mr. Chairman, I am sorry I went on so long, but I can
appreciate both of you and I am for both of you, but I wanted
to make those points.
The Chairman. Thank you, Senator. Those are very good
points. Number one is the importance of oversight, in this case
especially with the Affordable Care Act and HHS--this next year
is going to be a very busy year before this committee--to make
sure that that Act is implemented well.
[The prepared statement of Senator Hatch appears in the
appendix.]
The Chairman. There are a lot of questions--a lot of
questions--with respect to implementation, some of them have to
do with the exchanges, and there is going to have to be
interplay between HHS, IRS, and probably other agencies too. To
be honest, I am getting nervous that we are not going to be
ready when the first person is filed, I guess in October, I
think it is. So I am asking you, both of you, especially you,
Mr. Schultz, when you go back, to say, we have to get ready,
because this committee is going to have a lot of oversight
hearings with respect to the Affordable Care Act.
Point number two is just confirming what Senator Hatch
said, namely that this committee is going to be looking for
prompt responses to written requests, written questions that
Senators may ask. We have backed each other up. Sometimes this
party is in the majority, sometimes the other party is in the
majority, but we back each other and every other member of this
committee. We could just be doing ourselves a lot of good if we
just, again, promptly answer.
We are really a team here. We want to help. We are not
performing an adversarial role. We are not here to criticize;
we are here to work, to make this government work, so take
advantage of that. You can take advantage of that by working
very closely, almost even aggressively and cooperatively and
constructively, with this committee.
Senator Schumer. Mr. Chairman?
The Chairman. The Senator from New York.
Senator Schumer. Yes. I would like to make a brief
introduction of one of the nominees who is a New Yorker. Thank
you.
The Chairman. You are welcome.
OPENING STATEMENT OF HON. CHARLES E. SCHUMER,
A U.S. SENATOR FROM NEW YORK
Senator Schumer. Before I do that, I would just like to
mention--I am sure we will have time to say more--that Russ
Sullivan, as you have said, Mr. Chairman, has done an
incredible job. I cannot think of a single staff person who
will be more sorely missed than Russ.
So thank you, Russ, for your total dedication all the years
I have been on the Finance Committee, and you were even very
helpful to many members, myself included, before we were on the
Finance Committee. So, we will miss you, and wish you godspeed.
It is my honor, Mr. Chairman, to be able to introduce to
this committee Chris Meade, who has been nominated by the
President to be General Counsel of the Treasury. Chris is a New
Yorker. He was born in Yonkers, NY. He met his wife Stella, who
is here today with him, in New York. Joining him today are his
mother, Mary Ann, and his beautiful young children: Nora, who
is three, and Elliot, who is 3 months. If they would like to
stand so we can just say hi. Hi, Mary Ann. I think we heard
from either Nora or Elliot a second ago. Anyway, thank you.
Chris completed his undergraduate studies at Princeton
before attending NYU Law School, where he was editor-in-chief
of The Law Review and graduated magna cum laude.
Up until coming to work for the administration, he had
spent almost his entire life in New York. The only 2 years away
prior to his joining Treasury were when he served as a law
clerk to John Paul Stevens, a justice of the U.S. Supreme
Court, and Judge Harry T. Edwards of the DC Circuit.
In addition to these very impressive clerkships, Chris has
been a partner at Wilmer, Cutler, Pickering, Hale, and Dorr.
There he was a member of both the litigation and securities
departments, and the appellate and Supreme Court litigation
group.
Almost 3 years ago, Chris moved his family from New York to
Washington--boo-hoo--in order to serve in the administration.
He has served as the principal Deputy General Counsel at
Treasury since March 2010, and by all accounts has done an
exceptional job. So, Mr. Chairman, I am delighted the President
nominated him to serve as General Counsel, and I hope he is
confirmed quickly.
The Chairman. Thank you, Senator.
I would now like you each to give your statements. Before
you do, Mr. Schultz, I will give you an opportunity to
introduce any friends, family, associates who may be here whom
you want to recognize.
Mr. Schultz. Yes. Thank you so much, Mr. Chairman. I would
like to introduce my wife, Sari Horwitz, and my daughter,
Rachael Schultz. Rachael is completing her senior year at
Washington University in St. Louis. They are the best part of
my life. They make everything worthwhile.
The Chairman. Are they here? Could you stand? Please stand
and be recognized. Welcome, very much. [Applause.]
And, Mr. Meade, Senator Schumer mentioned some of your
family. Why don't you also, again, recognize your family and
friends?
Mr. Meade. Thank you, Mr. Chairman. I would like to
introduce and welcome my family: my wife Stella, who is
standing in the back; my beautiful daughter Nora, who is 3\1/2\
years old; and my baby son Elliot, who is nearly 3 months old.
He is in the BabyBjorn with my wife there.
The Chairman. We see him. Right.
Mr. Meade. My mother, Mary Ann Meade. I also want to
acknowledge my father, Bill Meade, who passed away a few years
ago. We miss him today. Also, I have a number of friends and
colleagues here, and I am very grateful for their coming and
for their support.
The Chairman. Could you all stand up, everybody? Let us
recognize you. Come on, let's go. [Applause.]
All right. Good. Very good. Wonderful. All right.
Mr. Schultz, as you know, your written statement is
automatically included in the record, and we urge you to
summarize for about 5 minutes.
STATEMENT OF WILLIAM B. SCHULTZ, NOMINATED TO BE GENERAL
COUNSEL, DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON,
DC
Mr. Schultz. It is a brief statement. Thank you, Mr.
Chairman, Senator Hatch, and members of the committee. I am
honored to appear as the President's nominee to be General
Counsel of the Department of Health and Human Services.
The Department has more than 65,000 employees whose mission
is to assure that the American people have access to high-
quality and affordable health care, to support children and
families, to ensure the safety of the food supply and that
medical products are safe and effective, and to support
research that will improve health and save lives.
The Office of General Counsel advises the Department on the
legal authorities that Congress has given the agency and on the
legal constraints that Congress has imposed. It also works with
components of HHS and the Department of Justice to ferret out
fraud against the government, to ensure compliance with the
law, and to defend the government against legal challenges to
government programs.
I believe my experience has prepared me for this position
and has equipped me with the relevant skills, as well as with
an understanding of the appropriate role of a General Counsel.
I have worked in all three branches of government and in the
private sector on litigation and regulatory matters.
Since March 2011, I have served as the Acting General
Counsel of the Department. Prior to that time, I was a partner
at the law firm of Zuckerman Spaeder, and prior to that I spent
11 years in government. This included 5 years as counsel to the
House Subcommittee on Health and the Environment, 4 years as
the Deputy Commissioner for Policy to the Food and Drug
Administration, and 2 years as Deputy Assistant Attorney
General at the Department of Justice in charge of civil
appellate litigation.
I began my career as a law clerk to a Federal District
Court judge here in Washington, DC and then worked for 14 years
at Public Citizen Litigation Group, a public-interest law firm.
I am fortunate that the HHS Office of General Counsel is
populated by enormously talented and committed attorneys and
other staff, many of whom are here today, and I appreciate
that.
I am also grateful to have the opportunity to work with
Secretary Sebelius, Deputy Secretary Bill Corr, and the other
extraordinary officials at the Department. Throughout my
career, Mr. Chairman, I have found public service, and in
particular government service, both to be extremely challenging
and extremely rewarding.
I feel very fortunate to be nominated for this position.
The mission of HHS could not be more important. If I am
confirmed, I look forward to working with the members of this
committee and will do my very best to ensure that the laws that
Congress has enacted are faithfully implemented. Thank you for
the opportunity to be here today, and of course I would be
happy to answer any questions.
The Chairman. Thank you very much, Mr. Schultz.
[The prepared statement of Mr. Schultz appears in the
appendix.]
The Chairman. Mr. Meade, you are next.
STATEMENT OF CHRISTOPHER J. MEADE, NOMINATED TO BE GENERAL
COUNSEL, DEPARTMENT OF THE TREASURY, WASHINGTON, DC
Mr. Meade. Thank you, Chairman Baucus, Ranking Member
Hatch, Senator Schumer for the kind introduction, and members
of this committee, for the opportunity to appear before you
today. I am honored that President Obama nominated me for this
position, and I am grateful to Secretary Geithner for
recommending me to the President.
My parents instilled in me a deep commitment to public
service, a value that I hope to pass on to my children. This
commitment has been reinforced throughout my career. At the
beginning of my career, I had the honor and privilege to serve
as a law clerk to Justice John Paul Stevens and Judge Harry T.
Edwards of the DC Circuit. They are not only great jurists,
they are great public servants.
I spent the core of my legal career as a partner at a law
firm that is deeply committed to public service. I learned from
many great lawyers there, including many who have served our
country with distinction.
I have spent nearly 3 years now serving as the Principal
Deputy General Counsel at Treasury. The scope of legal issues
within Treasury is vast, ranging from domestic and
international economic affairs, terrorist financing and
enforcement, tax, ethics, and administrative law.
My service has given me great respect for the Treasury
Department and, in particular, for the talent and expertise of
the career lawyers at Treasury. If confirmed, I look forward to
working closely with Congress, and in particular with members
of this committee. I have enormous respect for this
institution, and it is an honor to appear before you today. I
am deeply committed to maintaining a close working relationship
between Treasury and Congress.
Mr. Chairman, I am grateful to you for bringing me before
this committee today, and I would be pleased to respond to any
questions that you or other members of the committee may have.
Thank you.
The Chairman. Thank you, Mr. Meade.
[The prepared statement of Mr. Meade appears in the
appendix.]
The Chairman. I have four obligatory questions I would like
to ask each of you, if you would just indicate, hopefully
affirmatively, your response to each.
Is there anything that you are aware of in your background
that might present a conflict of interest with the duties of
the office to which you have been nominated?
Mr. Schultz. No.
Mr. Meade. No.
The Chairman. Do you know of any reason, personal or
otherwise, that would in any way prevent you from fully and
honorably discharging the responsibilities of the office to
which you have been nominated?
Mr. Schultz. No.
Mr. Meade. No.
The Chairman. Do you agree, without reservation, to respond
to any reasonable summons to appear and testify before any duly
constituted committee of Congress, if you are confirmed?
Mr. Schultz. Yes, I do.
Mr. Meade. Yes, I do.
The Chairman. And finally, do you commit--this is a new
one--to provide a prompt response in writing to any written
questions addressed to you by any Senator of this committee?
Mr. Schultz. Yes.
Mr. Meade. Yes.
The Chairman. Thank you both very much.
Now, my basic question to each of you is, why in the world
does each of you want this job? What do you want to accomplish?
How do you want to be remembered when you leave and people look
back 10, 15 years from now? I will start with you, Mr. Schultz.
Mr. Schultz. People, when I was in my law firm, said, what
is the difference between working here and working for the
government? What I used to say is, the difference is, I work
here on issues that I would never have time to get to in
government. The reason that I love public service is that you
get to work on things that are important, the most important
kinds of challenges, the same way I did when I was on the staff
on the Hill and in other government jobs.
I am fortunate to have at HHS this terrifically talented
group of lawyers and others to be able to work with. Our goal
is to ensure that the laws that Congress has passed are
implemented and instituted in a faithful way, in the most
honest way. That is our job as General Counsel, in a sense to
protect you, to ensure that we are following the laws, and to
defend the government against challenges to those laws.
The Chairman. You have been here a little while. Is there
anything more specific that you are working on where there is
more focus, something a little more identifiable, so when you
look back after several years you can say, boy, we did that?
Mr. Schultz. The big thing is the Affordable Care Act. It
is so thrilling to be at the Department at a time when we have
the opportunity to provide health care to 35 million Americans,
which is the goal of the Affordable Care Act. I hope I will
look back and say, we got it right, we got it implemented, and
we did it in a way where there were not many challenges and
they were not very successful. That is the basic goal.
There are other extremely important challenges. The Food
and Drug Administration regulates a quarter of all the products
sold in the economy and has the mission of ensuring that
medical products are safe and effective, and there are constant
challenges there, whether they are court cases or other issues
that come up. But I think the Affordable Care Act----
CMS, as you know, has a budget of about $800 billion, and
we are constantly trying to ensure that that money is spent
only in a way that is permitted by Congress, that it is
efficient. There are many court cases. I told somebody
recently, if I only worked on matters that involved $1 billion
or more, I would still be too busy. So part of the effort is
obviously to try to protect the government fisc, but assure
that the agency can do its job and that these very talented
officials can do their work.
The Chairman. Thank you.
Mr. Meade, what about you? Why do you want this job? What
did you tell your family when you told them you wanted to do
this?
Mr. Meade. For me, it relates to the commitment to service
that I outlined in my opening statement. To me, it is a
question that answers itself, because there is really no higher
honor than to be able to serve the country in this way. I am
honored to be considered, and it is a great privilege and honor
to serve. If confirmed, I would look forward to continuing.
In terms of how I would want to be remembered, I mean, one
of my mantras in life is to always want to do better. That is
how I think about us within the Legal Division at Treasury. We
have excellent lawyers, great lawyers, thoughtful lawyers,
careful lawyers, lawyers who strive to be the best lawyers they
can be and to give the best advice to the Secretary and other
officials within Treasury. But in my view, I think we always
want to do better, we want to be more thoughtful, more careful,
more analytically precise. That is what I would hope to do, if
I am confirmed as General Counsel.
The Chairman. Next year could be a big year. We could be
deeply involved with tax reform. Do you think the IRS and
Treasury have sufficient resources? What assistance do you
think Treasury and IRS could provide this committee as we work
toward reform? How do you see your role, your office? What
assistance can you provide?
Mr. Meade. So, Mr. Chairman, the lawyers within Treasury,
at IRS, and the Office of Tax Policy are a group of excellent
lawyers who, time and time again, I am impressed by their
substantive expertise. I am committed, if confirmed, to work
with you and this committee to provide whatever assistance we
can.
But again, I am, time and time again, impressed by this
substantive expertise and the care with which they go about
thinking about the tax laws.
The Chairman. Thank you.
Senator Hatch?
Senator Hatch. Mr. Schultz, on July 12, 2012, the
Department of Health and Human Services issued an Information
Memorandum regarding the TANF program, Temporary Assistance to
Needy Families. Now, this memorandum attempted to explain how
States could seek waivers of work requirements for welfare
recipients. At my request, the Government Accountability Office
determined that this memorandum actually constituted a rule and
therefore was subject to the Congressional Review Act, or CRA.
As part of their analysis, GAO requested the views of HHS
General Counsel to determine why HHS had not determined that
the memorandum qualified as a rule. According to GAO, HHS
responded as follows: ``The Information Memorandum was issued
as a non-binding guidance document and HHS contends guidance
documents do not need to be submitted to the CRA.''
Now, GAO disagreed with that conclusion reached by HHS's
General Counsel's Office and noted that HHS provided ``no
support for this position.''
Can you please explain what role you played in making this
determination?
Mr. Schultz. Thank you, Senator Hatch. I was involved in
the determination. We went back and looked at the statute and
the cases and also what prior administrations have done. This
is obviously an administration-wide issue.
For the 16 years since the Congressional Review Act, every
administration, Republican and Democratic, has submitted
regulations for review, regulations that require notice and
comment and so on. This was an Information Memorandum,
essentially a notice to the States saying, we are open for
business. If you have a waiver that meets the requirements, you
can submit it, and we will consider it. This is not the sort of
thing that has ever been submitted. There are, I think, tens of
thousands of guidances and so on that are not submitted.
We did know how important this was to Congress, Senator
Hatch. The Department did, on the day it was issued, submit it
to the minority and the majority staff in the House and Senate,
so we were trying to be very respectful and notify Congress.
Senator Hatch. Well, in the GAO's language, it said that
``we cannot agree with HHS's conclusion that guidance documents
are not rules for the purposes of the CRA,'' and HHS cites ``no
support for this position.'' The definition of ``rule'' is
expansive and specifically includes documents that implement or
interpret law or policy. This is exactly what the HHS
Information Memorandum does.
Then they also say, ``In addition to legislative history,
the CRA specifically includes guidance documents as an example
of an agency pronouncement subject to the CRA.'' So I am
concerned about that, as you can imagine. I have raised the
issue, and I really do not understand.
Mr. Schultz. No, I understand your concern, Senator Hatch.
I am disappointed that GAO disagreed with us. We have looked at
it very carefully, and we looked at the history very carefully.
In Republican and Democratic administrations, we have followed
the same practices as everybody else. I think we got it right,
but I understand the other side.
Senator Hatch. But can you show any instances where people
applied for this type of a waiver in the past?
Mr. Schultz. I am not aware that there have been any
applications for the waiver. The authority was requested by a
bipartisan group of Governors. The Secretary simply announced,
you can apply for a waiver. But I am not aware that there have
actually been applications; certainly none have been granted.
Senator Hatch. Well, see, I disagree with you on this. I
think it is a very, very important question. On that question,
I do not know whether you can or cannot, but can you explain to
me why the administration has ignored the Hatch-Camp request
for correspondence relating to the development of the waiver
rule between the Office of General Counsel and the policy
officials at HHS? As you can see, I am very concerned that a
recent staff inquiry to the HHS Office of Legislation has not
even been acknowledged.
Mr. Schultz. Well, yes, I can certainly try to respond. I
want to say, I worked as a staffer in the House. I did
oversight, and I understand the importance of oversight and
how, in order to do oversight, the administration has to
respond, and we have the duty to do that. I am told that that
response is being worked on, and you will get a response.
Senator Hatch. Well, I hope so, because I do not think they
have been very forthcoming down there on a whole raft of
issues. Certainly they are not forthcoming with any kind of
speed or any type of real cooperation, it seems to me. I hope
you can bring about a change there.
Mr. Schultz. Yes. I agree with you that you are entitled to
a prompt response. I will do what I can to be that voice. These
are not all my decisions, but I will certainly be the voice on
your side on this.
Senator Hatch. Well, thank you.
My time is up.
The Chairman. Senator, when did you make the request? How
long ago did you make the request?
Senator Hatch. Well, here is the chronology on the request
for information from the General Counsel's Office. Chairman
Camp and I sent a letter to Secretary Sebelius requesting
answers to questions regarding the development of the
Information Memorandum on welfare work waivers. That was sent
September 21st.
We requested information no later than October 25th, which
was more than a month. On October 25th, committee staff sent an
e-mail to the Office of the Assistant Secretary for
Legislation, requesting the information. We were informed ``not
today.'' Committee staff requested a time frame for complying
with the request and were told ``working on it.''
On November 8th--and here we are almost into the next
year--committee staff once again requested a time frame for
compliance with the request and were once again told
``oversight staff working on it.''
On December 11th, committee staff requested an update on
the request. That e-mail has not been responded to. That was
December 11th. It has not been responded to by the Office of
the Assistant Secretary for Legislation. I just think it is
completely unacceptable and shows a lack of respect and
responsiveness by this administration.
The Chairman. Senator, I agree.
Mr. Schultz, if you can get the Department to make a prompt
response, that will not go unnoticed.
Mr. Schultz. I will do everything I can.
The Chairman. All right.
Senator Hatch. This is not some itty-bitty issue; this is
an important issue.
The Chairman. No, I understand.
Senator Stabenow?
Senator Stabenow. Thank you very much, Mr. Chairman. I
want, first of all, to thank you for recognizing all four
colleagues who are leaving, and the extraordinary efforts of
Senator Conrad, Senator Bingaman, Senator Snowe, and Senator
Kyl. Thank you for doing that.
Also, I want to send my thanks and best wishes to Russ
Sullivan--I do not believe I see him here at the moment--for
all of his efforts. We all collectively owe him a great deal
for his public service.
Welcome to both of you, and thank you for being willing to
be involved in public service as well.
Mr. Schultz, I want to, just for the record, talk about
something you and I have talked about that is very important to
me in health reform. I care about all pieces of it, and having
it done promptly, and having it done well.
There is one particular issue dealing with pediatric dental
coverage, which, as you know, because of some ambiguity after
we had passed an amendment here in the Finance Committee about
the intent of the law, that has needed to be cleared up in the
rules.
In health reform we worked to ensure that children are able
to get dental care that they need, and in some cases that would
save their lives. We have had very unfortunate tragedies that
have occurred. We expanded access to affordable dental coverage
for children and wanted to do it in a way that would not
disrupt current dental coverage of families.
So to accomplish this, the law intended to ensure that
stand-alone dental plans of families could meet the essential
health benefit's pediatric dental requirement in combination
with a medical plan outside the health exchange marketplace, as
well as inside. I have spoken to the Secretary a number of
times, and a number of us, as Senators, have sent letters
asking to make sure that this is clarified.
The law intended to ensure that, regardless of how the
coverage is attained, pediatric dental coverage is still
required as a part of the essential health benefits package and
that all relevant consumer protections, such as out-of-pocket
limits, would apply to stand-alone plans. I just wanted, for
the record, for you to indicate your awareness of this and
willingness to work with me and many other Senators to make
sure we are clarifying this in the final rules.
Mr. Schultz. Yes, I am aware of it. We have talked about
it, and it will certainly be a priority.
Senator Stabenow. Thank you very much.
Mr. Meade, thank you also for your service. You have a
broad role as General Counsel when we look at tax reform and
all of the issues that are so important to moving the economy
forward in a global economy. I am wondering if you have any
comments about how we, in our economic recovery, focus on
manufacturing, which of course is very important in Michigan
but also in other States, every State actually.
In fact, according to a New York Times article published in
January of this last year, for the first time since 1997
manufacturing employment has risen in two consecutive years and
in fact is driving much of the recovery as we are making more
things in America again. So, when we are looking at tax reform,
do you have any suggestions in terms of growing the
manufacturing sector as we look at broader tax reform or
particular policies that you have looked at that would help us
to continue to grow that part of the economy?
Mr. Meade. Thank you, Senator, for that question. With the
lawyers at Treasury, we work very hard with our various policy
clients to provide them advice on a range of questions. Many of
the questions that you raise are important policy questions
that could be considered by the Office of Tax Policy on the one
hand, or also by the Office of Domestic Finance.
We see our role very much as partners with those policy
offices. In some instances we are asked to consider possible
legislation, possible proposals, looking at the scope of
authority under current law to do whatever we can to support
the policy officials.
I do not know of any particulars on the question that you
raised. I would be happy to bring those concerns back to
Treasury and commit that the Office of General Counsel will
work with the policy officials to support those goals.
Senator Stabenow. And just very quickly--thank you. If we
are not able to come to agreement as it relates to the fiscal
cliff--and I certainly hope we are going to be able to do
that--and we do not extend the AMT patch, how do you work with
IRS to ensure that families have some certainty? What happens
from your end?
Mr. Meade. That is a critical question that the country is
focused on at the moment. Right now, obviously, there is a fair
amount of uncertainty with respect to what will happen with the
fiscal cliff. The Acting Commissioner, Steven Miller, put out a
letter yesterday on the AMT. I think there are a lot of
questions about what will happen with the return season if the
AMT patch is not put into place. So the lawyers work with the
policy officials on those questions, but I think right now the
hope is that the AMT patch is fixed so that there is some
certainty around that question.
Senator Stabenow. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator. I want to just second
what you said. I very much hope we reach sufficient resolution
by the end of this year that addresses not just the AMT patch,
but there is SGR, there are a lot of provisions which, if not
addressed by the end of this year, are going to cause just
terrific hardship at the beginning of next year.
I will go out on a limb. I think we are going to get some
kind of agreement this year. We certainly must, for all the
reasons that we know. But thanks for mentioning AMT. That is
all the more reason to get an agreement this year.
Senator Coburn, I apologize to you. I did not notice that
you were earlier on the list than Senator Stabenow. You are
next.
Senator Coburn. Thank you. Welcome, both of you. Mr.
Schultz, I enjoyed our talk yesterday. You can see from what
the ranking member had to say the problem with HHS and
responsiveness, and your commitments to me personally that we
would see a change in that, I will hold you to that. I think
you are a man of your word.
I am sorry I did not have a chance to meet with Mr. Meade.
I have a big burr in my bonnet, and, unfortunately, you are the
only leverage I will have to get it cleared up, so it is going
to become an issue. As part of our oversight in Governmental
Affairs, we were looking at the New Market Tax Credits. We sent
a letter to the agency asking for information on it.
After our letter was sent--and, Mr. Chairman, this is very
important, because section 6103 of the code provides protection
for taxpayers, and the protection was not placed on this until
after I sent a letter requesting the information on the two
previous times they had readily granted the information to
members of Congress or GAO.
So the question I have is, until I see the background, with
substantial clarity and transparency, of the decision-making
process that went into it, that all of a sudden, when a member
of the Senate starts asking questions about it, we now decide
we are going to use 6103 to not share the information--I would
just say, if I can get my chairman to agree, we can have the
information with his blessing if he so asks for it.
But that is not the question that I am concerned about. I
am concerned about, when we ask GAO to do further work on this
and when we ask about it, all of a sudden you all make a
determination that it is now protected, and it was not before.
You can understand that that might raise some certain questions
on our part. Our whole purpose is to do good oversight.
As ranking member on the Permanent Subcommittee on
Investigations, as well as ranking member-to-be on Homeland
Security and Governmental Affairs, these are important issues
for us to look at: how, when we put something into the tax
code, it actually plays out. Not having the availability of
this information limits our ability to assess the effectiveness
of tax policy.
So unfortunately, until I see with real clarity an
explanation, with transparency, which would include all the
background information, I am going to be hesitant--and I have
no other reason, after reading all the files on you, to say
that you are anything other than a perfect fit for this job.
Until I can be satisfied on that, this nomination is going to
be held by me, and I am going to work with my colleagues if it
is brought to the floor, because this is the very thing that
Senator Hatch is talking about.
If we cannot have transparency from the agencies when we
are trying to do a good job for the American people on policy,
and then we see a ruling invoked that was not invoked until a
Senator asked for the information, that raises serious
questions.
So I do not know if you are prepared to answer that today.
You do not have to answer that. But I am going to have to be
satisfied on that, because I think it is highly inappropriate,
what was done and the way it was done. What we want is truth.
We are not trying to gore anybody's ox. What we want to know is
how we are spending tax money in tax policy, and is it working
and where is it going?
I do not think we had an illegitimate request. Other than
that, I know you are highly qualified for this job, and I
support you fully, but I want that information, and I want it
in detail with complete transparency.
I yield back.
The Chairman. Mr. Meade, are you prepared to address this
question?
Mr. Meade. Senator Coburn, unfortunately I am not familiar
with the particulars of the situation. But of course I will
take it back to Treasury. I hear your concern, and I want to
work with you to get your concerns resolved.
Senator Coburn. That is all I can ask.
Mr. Meade. I think it is critical that oversight happen,
that we get back to Congress. We work closely, and I work very
closely with our three Inspectors General to make sure that
oversight happens. That is one of my most important
relationships at Treasury. But I will work with you to make
sure you get the answers that satisfy you.
The Chairman. And I will be watching the development of
this and the resolution of this as well, because it is
important.
Senator Roberts, you are next.
Senator Roberts. Thank you, Mr. Chairman. I associate
myself with the comments of Senator Hatch and yourself
regarding our outstanding members who are leaving, and I regret
that I was not here to put a little frosting on the cake.
I have, I think, three questions. The answers are ``yes,''
and ``as soon as possible,'' so you do not have to worry about
it.
Mr. Schultz, along with the Senate HELP Committee, we have
been looking into the New England Compounding Center, the
actions by the NECC, and the potential action by the Congress
in response to the outbreak. But we have made repeated requests
for information and have yet to receive any really adequate
information. It really has hindered any progress.
Of particular interest to me is the timeline of events
related to the NECC inaction by the Department of Health and
Human Services and FDA, both prior to and following the
outbreak. We made this request in early October at the start of
the meningitis crisis, and, even after asking Dr. Hamburg about
it during the HELP Committee hearing a while back, we have yet
to receive a response.
You are 60 days--well, not you, but the folks in charge--in
violation of the new Baucus-Hatch doctrine. If you go 90 days,
you will be sentenced to come to Kansas in January and visit
every rural hospital and say, I am from CMS, and I am here to
help. That might not be something you want to do in January. So
anyway, if you can get that back to us, or at least give us a
report, I would appreciate it.
In addition to that, what do you believe are the scope and
limits of FDA authority as it relates to compounding? What is
the FDA role, and what is the appropriate role for State boards
of pharmacy in oversight of this industry? I realize you cannot
go into that right now, but if you could make a note of that,
and we will submit that for the record for you, and then if you
could get back to us.
Recently, HHS, Treasury, and the Department of Labor have
issued regulations to implement the provisions of PPACA, the
Affordable Health Care Act. These include the essential health
benefits mandated, the actuarial value calculator, market
rules, and wellness provisions, as well as rules to implement
provisions relating to risk programs, cost sharing, the
federally facilitated exchange, user fees, and medical loss
ratio. There is somewhere between 6 to 8 there that I have
noted.
Many of the initial rules in trying to implement the
statute were called the Interim Final Rules, which allowed very
little or no stakeholder input. Of the most recently issued
rules, while none of them are IFRs, many of these only provided
30 days for public comment.
Now, this is after the administration took over 18 months
to draft the regulations and OMB was allowed 4 months for their
review. That is 22 months. I am just going to tell it like it
is on what I am hearing from the rural health care delivery
system, and for that matter our entire health care delivery
system there in the State of Kansas.
We have already heard from many stakeholders. A lot of them
fear they will be unable to meet the timelines for these
comments. The comments will not represent a thorough review of
the new policies, and the administration does not value
stakeholder input in the process--that is not a good thing, to
say the least--to the point that many stakeholders are
considering whether time, effort, and expense is even
worthwhile when they believe their comments are not even being
considered, but instead are treated as a check-the-box exercise
to comply with existing executive orders and
statute-related stakeholder input.
My question is, what is a reasonable and standard amount of
time for review and comment on regulations issued in regard to
PPACA? We also have an important consideration when drafting
and issuing these regulations. I would repeat, if the folks who
are drafting the regulations do not know what is in a rule
after 18 months of drafting and 4 months of OMB review, how can
we expect stakeholders to know such things and provide valuable
feedback in a much shorter time frame? There. You have 35
seconds to respond.
Mr. Schultz. I certainly agree, notice and comment are
critical, because regulations have the force of law, Senator
Roberts. I agree with you that we should use IFRs very
reluctantly, because, in that case, the comment is after the
fact. We did it early on because of tight timelines that
Congress asked us to meet. But as you say, we have done it very
rarely recently, and I would think that would continue to be
so.
We truly value comments from the public. We spent a lot of
time responding to them and typically make many changes in the
regulations in response to them. I think we will continue to do
that. I hope this effort is apparent.
Senator Roberts. Do you ever go out in the field? I mean,
out to, say, a typical critical access hospital in Montana,
Kansas, Oklahoma, Iowa?
Mr. Schultz. I have not. No, I have not in this job. I talk
to people----
Senator Roberts. Do you have time to do that at all?
Mr. Schultz. No.
Senator Roberts. I did not think so.
Mr. Schultz. No.
Senator Roberts. Could you send a deputy? We have a lot of
deputies out there.
Mr. Schultz. We could.
Senator Roberts. I am not going to do this in January for
you, but maybe in the spring.
Mr. Schultz. Well, maybe it would be good.
Senator Roberts. I think that would be a good thing. I
might stand a little part away from you. No, I would stand
right by your side. We will see all the hospital
administrators, doctors, nurses, and everybody else, all these
forms and regulations they have to put up with. It will be an
interesting exercise.
Mr. Schultz. Senator Roberts----
Senator Roberts. I have done it twice myself.
Mr. Schultz. I would, of course, do that with you if you
would like me to. I do want to say that we have a lot of
outreach to all the States, and there has been a lot of
interaction with many officials and others in the States that
is informal, outside the rule-making process.
Senator Roberts. We could do it pretty quickly, and we
could get you a good balance, and I think it would be very
helpful. I am not going to put you on the spot on that. I know
you have a ton of things to do, and so do we. But I think it
would be a good thing if we did that.
Mr. Schultz. I think it would too.
The Chairman. Thank you. Thank you, Senator, very much.
Senator Wyden?
Senator Wyden. Thank you very much, Mr. Chairman. First,
with respect to our retiring colleagues--Mr. Chairman, I think
you would remember this--I hope some of them will in effect do
a Conrad. As you know, Senator Conrad retired once because he
said the budget was in balance. Then there was a death, and he
came back. We were lucky he came back. We have a terrific group
of colleagues. Maybe we can persuade some of them to do a
Conrad.
The Chairman. Is one of the conditions that the budget has
to be in balance?
Senator Wyden. Yes.
The Chairman. I think you are in for a long wait.
[Laughter.]
Senator Wyden. Well, I want them back sooner than that.
The Chairman. Okay. We all do.
Senator Wyden. I want to say a good word about Russ
Sullivan. He has such a wealth of knowledge. Mr. Chairman, as
you know, we spent years talking about Build America Bonds. I
do not think there was anybody on the planet, other than Russ
Sullivan, who mastered that subject, along with scores of other
technical ones.
The fact that he has all this technical knowledge, while he
cares for this huge group of children, I think tells you a lot
about what kind of heart Russ Sullivan has. I often see him, as
you do, Mr. Chairman, with those kids in the corridor because
Russ is taking them on a family outing. To have that kind of
heart for people while you stay here and handle all these
technical issues says a lot about a person, and we are very
grateful for your service.
Mr. Chairman, we have two outstanding public officials. I
have one question for each of them.
The first one, for you, Mr. Meade, deals with
electioneering by tax-exempt social welfare organizations. As
you know, in the wake of the Supreme Court's decision, there
has been a proliferation of these entities organized under
section 501(c)(4) of the code. It just looks like they are
doing pure politics. I do not want to talk about Democrats or
Republicans, I just want to talk about what seems to me is an
abuse of the tax exemption.
During the 2012 election cycle, an estimated $400 million
went into secret contributions that were associated with these
501(c) organizations. In July of 2012, a letter was sent
responding to a request from the Campaign Legal Center and
Democracy 21 to change the rules.
The IRS Exempt Organizations Division Director stated that
the IRS is aware of the interest in the issue and noted that
the agency will consider proposed changes in this area as we
work with the IRS Office of General Counsel. As I understand
it, you have involvement with them in terms of the reporting.
The reason I am asking the question is, in November of
2012, the IRS released its priority guidance plan. It contained
317 projects that are priorities for allocation of resources.
Nowhere in the list of agency priorities was there any mention
of the need to revise and clarify the rules dealing with
political activities by section 501(c)(4) organizations. When
you are confirmed, will you try to get this issue on the
priority list for that agency?
Mr. Meade. Thank you, Senator, for that question. In terms
of any particular issue about any particular 501(c)(4), that is
a question of enforcement for IRS, and we stay away from those
questions.
Senator Wyden. I understand.
Mr. Meade. But in terms of the policy question, I know it
is something that the Office of Tax Policy and IRS are looking
at, and I would be happy to look at that issue, to talk to the
Chief Counsel of the IRS, who is, as you know, a Senate-
confirmed official, and talk about that question and about
making that a priority for the----
Senator Wyden. Do you personally think it ought to be a
priority? I do not want you to have to speak for anybody else.
Do you personally think it ought to be a priority?
Mr. Meade. Senator, I have not studied the question. I hear
your interest in the issue and the fact that you think it is a
priority. What I want to do is take a look at it and talk to
the officials within Treasury, talk to the officials within the
Chief Counsel's Office, and analyze the issue. So I do not know
enough to know whether it should be a top priority or not, but
I definitely hear your concern, and I will take that concern
back to Treasury.
Senator Wyden. Well, I understand why you want to talk to
people in the Department. I hope you will come away and say it
ought to be a priority. This ought to be a priority for good
government. These abuses are completely out of hand, and you
know that I am not bringing any kind of partisan tinge in this
group and that. I think this is an abuse of what is really a
tax exemption that is supposed to go to social welfare
organizations.
A question for you, Mr. Schultz. I have watched your
outstanding work since the days when we were back on the Health
Subcommittee over in the House and I had a full head of hair
and rugged good looks and all. My question is a legal one. That
is, we have been working very hard to try to get the hospice
program off the ground, where, for the first time in America,
the vulnerable would be eligible for curative services as well
as hospice services.
The Congress wrote this so that it would be budget-neutral.
We have been having a lot of challenges at CMS, trying to get
them to accept the intent of Congress. They say hospice
providers would have to pay for curative treatment out of their
own pockets. That was never the intent of Congress.
Will you work with us so that we can get the congressional
intent here nailed down and, for the first time, say to the
vulnerable in America--again, this was supported by people all
across the political spectrum. They said, when you need
hospice--Senator Hatch, Senator Grassley, and others have
worked on these issues for years--you should not have to give
up hope. That was the intent of Congress. Will you commit to
working with us?
Mr. Schultz. Thank you, Senator Wyden. I know this is a
very important program, and I will certainly work with you and
do what I can. As you know, I am not the decision-maker on
this.
Senator Wyden. Understood.
Mr. Schultz. So I am happy to work with you on it.
Senator Wyden. Well, thank you. The reason I ask is, not
only have I watched you in the past approach these issues
professionally and fairly, but it has become a legal issue with
respect to the intent of Congress.
Thank you for the time, Mr. Chairman.
The Chairman. Thank you, Senator, very much.
Senator Grassley?
Senator Grassley. Well, thank you, Mr. Chairman, for
holding this hearing. I would like to put in the record a
statement that I would have about our four colleagues retiring.
The Chairman. Without objection.
[The prepared statement of Senator Grassley appears in the
appendix.]
Senator Grassley. Mr. Schultz, I have many unanswered
questions and document requests, as you have heard from other
members. I have received no response to my December 6, 2011
letter on eliminating the age requirement for Plan B. I have
received none of the documents that Chairman Issa and I
requested regarding monitoring of FDA employees; no response to
a letter Chairman Upton and I sent on the oversight of Federal
exchange grants to States.
I received no response to my September 10, 2000 letter
regarding Keokuk. I hope you know that, as my other colleagues
have said, this is unacceptable. Until I receive answers to my
letters and document requests, I am hesitant to move forward on
these nominations.
Question number one. I have some remarks preliminary to it.
For the past 5 months, Chairman Issa and I have been
investigating the FDA regarding its spying activities against
whistle-blowers. The FDA intentionally spied on confidential
communications with Congress and the Office of Special Counsel
and the whistle-blowers' private attorneys.
We have completed four voluntary transcribed interviews
with key FDA individuals who participated in the spying. Three
out of the four employees declined to answer when asked about
anything related to personnel action. They said they were told
by the agency not to answer such questions, citing the Privacy
Act. Obviously you know that Congress is exempt from the
Privacy Act.
I understand that you were involved in the discussions
about prepping the FDA employees before their interviews. I
also understand that, during conversation with my staff, you
could not recall whether or not you advised the FDA employees
not to answer questions regarding personnel management.
Given the clear exemption in the Privacy Act for
disclosures to Congress, I assume you agree that the FDA
employees are free to answer questions about personnel action
during congressional investigations. Is that true?
Mr. Schultz. Yes. Thank you, Senator Grassley. I was not
involved in the conversations, but I have gone back and looked
at the Privacy Act and so on. We will not instruct employees or
their attorneys not to answer your questions. We certainly
agree that there is an exemption for Congress from the Privacy
Act. There are debates about whether it applies to committees,
chairmen, individual members, and so on. But in this particular
situation that you are talking about, we believe that at most
the risk would be very small, and we will certainly not
instruct the employees not to respond.
Senator Grassley. You have answered my second question. Let
me state it anyway, and you do not have to speak further to it.
Well, let me make a statement. I think you have assured me in
what you just said that, in the future, you will ensure that
witnesses know that they are free to make disclosures to
Congress that might otherwise be prohibited by the Privacy Act.
For Mr. Meade: on November 1st, Senator Thune and I wrote
Secretary Geithner a letter in his capacity as chair of the
Committee on Foreign Investment in the United States regarding
bankruptcy stimulus recipient A123. We asked seven questions.
The response we received did not answer a single question.
When you reviewed this reply letter, did you find any legal
bases for refusing to answer our questions, and, if so, what
were they? Finally, does the Treasury still take the position
that it does not have to respond fully to the letter?
Mr. Meade. Thank you, Senator Grassley, for that question.
I did not review that letter before it went out. I know in
general, with the CFIUS, there are certain statutory
prohibitions where Treasury is permitted to share information
with Congress at some point but not at other points under the
statute passed by Congress. I would be happy to look at that
particular instance and give you whatever information I can,
and if not, provide the legal basis for that.
But what I can say is, I think oversight is critically
important and providing prompt responses to members of Congress
is critically important.
Senator Grassley. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Senator Thune?
Senator Thune. Thank you, Mr. Chairman.
I want to thank our panelists today for your willingness to
be here and to continue to serve. I also want to acknowledge
the departing members of this committee, Mr. Chairman, that
have been already mentioned. Obviously a lot of firepower, a
lot of skill and knowledge on the issues that this committee
deals with will be lost when we lose Senators Snowe, Kyl,
Bingaman, and Conrad, all people who have tremendous amounts of
expertise. Hopefully we will be able to muddle along without
them, but we certainly appreciate their great service and all
they have contributed to this committee and to our country.
Let me ask a question, if I might, to Mr. Meade first. This
question has to do with sort of where we are with regard to the
fiscal cliff. We are now less than 2 weeks away from seeing tax
rates rise across the board, that is assuming that Congress and
the administration cannot come to an agreement on the fiscal
cliff.
So my question has to do with the paycheck withholding
levels for 2013. First, how much latitude do you believe the
Treasury Department has under the statute when setting
withholding rates? Second--and again, knock on wood, hope this
does not happen--should we go over the cliff without an
agreement, how would Treasury make a decision with regard to
the withholding tables?
Mr. Meade. Thank you for that question, Senator Thune, a
very important question that obviously the country is thinking
about at this time. The Secretary's discretion on this score is
limited. The law says that the Secretary needs to set
withholding tables consistent with the tax laws set by
Congress.
The Secretary does not have the authority to unilaterally
set the tax rates, he needs to reflect the rates set by
Congress. Hopefully, though, a deal will be reached such that
this will be unnecessary, but the bottom line is the
Secretary's withholding tables--any tables that he issues--need
to reflect the laws set by Congress.
Senator Thune. So, if there is a scenario where, in the
near term, it looks like there might be an agreement but that
has not been struck or at least has not been voted on by the
end of the year, but there is sort of a framework, or at least
it looks like there is going to be some closure, your view is
that the Treasury Department does not have authority even on a
near-term basis, an interim basis, to maintain the withholding
tables the way that they are?
Mr. Meade. So, Senator Thune, that is a slightly different
question in terms of the particulars of that kind of
hypothetical. As a lawyer, I want to be very careful giving
answers to hypothetical questions. As your question reflects,
there could be many different components of such a hypothetical
about what the particulars look like.
The Secretary does have some discretion, but that
discretion is limited. At the end of the day, what his
authority is is to reflect the law set by Congress.
Senator Thune. Thank you.
Let me ask Mr. Schultz a question, if I might. This one has
to do with the passage of the health care law. There was a
particular provision in there that I was concerned about and
was trying to keep from having added to the law. That is the
CLASS Act, which is a new long-term care entitlement program
that was created by the Affordable Care Act.
Last year on October 14, 2011, Secretary Sebelius announced
that, based on actuarial legal analysis, the CLASS program is
both legally and fiscally unsustainable. The report went on to
conclude that they cannot predict that the CLASS program will
be able to ``honor its commitments to individuals who had
already enrolled or entered beneficiary status in the program
or avoid leaving them worse off.''
So the question is, do you agree with the analysis
contained in this report that the CLASS Act is unsustainable?
If you do not agree with that, why? Then second, if you do
agree with this report, then would you support the efforts that
I and others are making to repeal that program?
Mr. Schultz. Thanks for that question, Senator Thune. We
worked very hard to try to find a way to implement the act
because Congress passed it, but looking at the legal
constraints--including that it had to be sustainable for 75
years, there were certain guaranteed benefits, certain groups
that had very reduced rates--the Secretary concluded that she
could not go forward with a program that people would buy under
the requirements that Congress imposed. Yes, I do support that
conclusion.
We put the legal analysis out there so Congress could see
it. Whether it should be repealed or not, I think is a decision
for Congress. We have not been sued on it. I do not think we
would be. I think what we did is very sustainable. So, I would
leave it to Congress as to whether to repeal it or not.
Senator Thune. All right. But in terms of taking a position
supporting efforts by Congress to repeal it based upon the
conclusions that you all have drawn--that it is not sustainable
in its current form--would the administration be able to
support legislation that would repeal it?
Mr. Schultz. I would have to leave that to others in the
administration to speak to. I am merely a nominee at this
point.
Senator Thune. On October 17th, HHS received a letter
regarding concerns that some of my colleagues and I had, and
still have, regarding the Final Rule for the stage 2 of
``meaningful use'' for the adoption of electronic health
records.
To date, we have about $10 billion that has been paid out
in incentives to health care providers to implement a useful
EHR system, and we still have several unanswered questions and
concerns about the direction of this program. When might we
anticipate a response on that letter, if it is something you
are familiar with?
Mr. Schultz. I am not familiar with it, but I will
certainly go back and raise this and do what I can to get a
response.
Senator Thune. That would be great. That was a couple of
months ago now. Hopefully we are going to get a response on
that, so, if you could check that out, that would be great.
Mr. Schultz. I would be happy to. Thank you, Senator.
Senator Thune. I see my time has expired, Mr. Chairman.
Thank you.
The Chairman. It has.
Senator Grassley?
Senator Grassley. Yes. Mr. Meade, on October 2nd, Senator
Kirk and I wrote Secretary Geithner a letter about manipulation
of LIBOR. The manipulation has led to billions of dollars in
losses to the Federal Government. My concern is that the
Treasury Department is not fully committed to informing
Congress about the scope of the problem. I understand that, as
acting General Counsel, you are familiar with the letter and
the response.
My letter asked five questions. The reply we received,
almost 2 months later, did not answer any of them. Here is one
example. We asked whether Secretary Geithner considered the
litigation risks of not reporting his knowledge of LIBOR
manipulation to U.S. enforcement authorities. The letter you
reviewed did not answer this question. Why did the reply that
we received not answer this question?
Mr. Meade. Thank you, Senator Grassley, for the question. I
am familiar with that letter. My understanding is, in follow-
ups with your staff after the response, we answered that
question and the other questions.
The questions asked I believe for the most part, or maybe
exclusively, for answers about the Secretary during his time at
the New York Fed. We, I believe, now have answered those
questions to the satisfaction of your staff. We think the LIBOR
issue is very important. I think we are pleased that the
actions of the CFTC and others that began in 2008 have led to
very strong enforcement actions which we are beginning to see
the fruit of today.
Senator Grassley. Yes.
Also, Mr. Meade, I ask this question as a champion of
whistle-
blowers and for changes in whistle-blowers legislation, but,
particularly in this case, tax whistle-blowers. I am concerned
that some within the IRS and Treasury continue to be
unsupportive of
whistle-blowers. My concern results from recent regulations
proposed by Treasury that unnecessarily put roadblocks in the
way of
whistle-blowers. What was your role in preparing those
regulations?
Mr. Meade. Senator Grassley, I personally did not play a
role in crafting those regulations. I would say two things.
First, these are proposed regulations. They are regulations
that set out the proposed definitions of a variety of statutory
terms, as well as give a comprehensive view of a whistle-
blower's experience with the IRS. These are proposed
regulations. We look forward to input from stakeholders, from
you, from members of the whistle-blower bar, to make sure that
we are reaching the right conclusion under the law.
But I want to say, personally, I am committed to the
whistle-
blower program. I have heard others in Treasury talk about
their commitment to the whistle-blowers program. But I can
commit to you that, if confirmed, I will carry that commitment
through in my role as General Counsel.
Senator Grassley. All right. You answered my next question.
I will follow it up with this, that I do plan to propose
regulations and expect a thorough response. I expect you to
help in facilitating a quick response to my concerns. So, you
answered your concern about protecting whistle-blowers, but
would you commit to getting me a response when I submit my
comments on those regulations?
Mr. Meade. I would be happy to work with you and help
prepare a response, or at least review a response and make sure
that you are getting a proper response.
Senator Grassley. All right.
Then my last question is for you, Mr. Schultz, and then I
will be done. The FDA says that spying on its employees was
justified because they were warned by a security banner on
their FDA computer that it was being monitored. However, the
wording of that banner changed during the course of the spying.
When asked why the banner was changed, all four employees
interviewed could not recall. Why was the wording of the banner
changed, and was the language changed in the summer of 2010 to
justify spying activities that had already taken place?
Mr. Schultz. I am not aware. I have not seen the two
banners. I could get you a written response to that, but I do
not know why the banner was changed. I certainly was not
involved in that.
Senator Grassley. I will let you give me a written
response.
Could you tell me, was the change reviewed by your office?
Mr. Schultz. I do not know.
Senator Grassley. All right.
Mr. Schultz. It certainly was not reviewed by me.
Senator Grassley. All right. Then you have answered my last
question as well, so I will look for your response in writing.
I thank both of you for being kind enough to answer my
questions, but I will thank you more if I get regular
responses, in time.
Thank you.
The Chairman. Thank you, Senator, very much.
Thank you both very much. This committee looks forward to a
very vigorous and constructive relationship with both of you
and with your departments, and we wish you both well in the new
year.
Thank you very much.
Mr. Schultz. Thank you very much, Senator Baucus.
Mr. Meade. Thank you, Mr. Chairman.
The Chairman. The committee is adjourned.
[Whereupon, at 4:04 p.m., the hearing was concluded.]
A P P E N D I X
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