[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


    AN OVERDUE CHECKUP PART II: EXAMINING THE ACA'S STATE INSURANCE 
                              MARKETPLACES

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 8, 2015

                               __________

                           Serial No. 114-107
                           
                           
                           
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                   COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                 Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota

                                 7_____

              Subcommittee on Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
DAVID B. McKINLEY, West Virginia     DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
LARRY BUCSHON, Indiana               JOHN A. YARMUTH, Kentucky
BILL FLORES, Texas                   YVETTE D. CLARKE, New York
SUSAN W. BROOKS, Indiana             JOSEPH P. KENNEDY, III, 
MARKWAYNE MULLIN, Oklahoma               Massachusetts
RICHARD HUDSON, North Carolina       GENE GREEN, Texas
CHRIS COLLINS, New York              PETER WELCH, Vermont
KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)

                                  (ii)
                             
                             
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................     5
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     7
    Prepared statement...........................................     7
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     9
    Prepared statement...........................................    10

                                Witness

Andy Slavitt, Acting Administrator, Centers for Medicare & 
  Medicaid Services, Department of Health and Human Services.....    11
    Prepared statement...........................................    14
    Answers to submitted questions...............................    60

                           Submitted Material

Subcommittee memorandum..........................................    52
Article of November 24, 2015, ``Rise in Early Cervical Cancer 
  Detection Is Linked to Affordable Care Act,'' by Sabrina 
  Tavernise, The New York Times, submitted by Ms. DeGette........    58
Report by the Government Accountability Office, ``State Health 
  Insurance Marketplaces: CMS Should Improve Oversight of State 
  Information Technology Projects,'' September 2015, \1\ 
  submitted by Ms. DeGette

----------
\1\ The information has been retained in committee files and also 
  is available at  http://docs.house.gov/meetings/IF/IF02/
  20151208/104256/HHRG-114-IF02-20151208-SD003.pdf.

 
    AN OVERDUE CHECKUP PART II: EXAMINING THE ACA'S STATE INSURANCE 
                              MARKETPLACES

                              ----------                              


                       TUESDAY, DECEMBER 8, 2015

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:02 a.m., in 
room 2322, Rayburn House Office Building, Hon. Tim Murphy 
(chairman of the subcommittee) presiding.
    Members present: Representatives Murphy, McKinley, Burgess, 
Blackburn, Griffith, Bucshon, Flores, Brooks, Mullin, Collins, 
Cramer, Upton (ex officio), DeGette, Castor, Tonko, Yarmuth, 
Clarke, Kennedy, Green, Welch, and Pallone (ex officio).
    Staff present: Jessica Donlon, Counsel, Oversight and 
Investigations; Emily Felder, Counsel, Oversight and 
Investigations; Brittany Havens, Legislative Associate, 
Oversight; Charles Ingebretson, Chief Counsel, Oversight and 
Investigations; Chris Santini, Policy Coordinator, Oversight 
and Investigations; Dylan Vorbach, Legislative Clerk; Christine 
Brennan, Democratic Press Secretary; Jeff Carroll, Democratic 
Staff Director; Ryan Gottschall, Democratic GAO Detailee; 
Christopher Knauer, Democratic Oversight Staff Director; Una 
Lee, Democratic Chief Oversight Counsel; and Elizabeth Letter, 
Democratic Professional Staff Member.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Good morning. This subcommittee will now 
convene, the Oversight and Investigations Subcommittee of 
Energy and Commerce. And this hearing today is to continue 
examination of the State health insurance marketplace 
established under the Affordable Care Act, the ACA.
    On September 29 the committee heard from a panel of 
witnesses representing six State exchanges. While attempting to 
paint a rosy picture, it is claimed that there are serious 
short-term and long-term problems with State exchanges. One of 
our main concerns we will address today is how Centers for 
Medicare and Medicaid Services, or CMS, is conducting oversight 
over the billions of taxpayer dollars invested in establishing 
the State exchanges. Today, we expect direct and honest answers 
from CMS Acting Administrator Andy Slavitt. And welcome back, 
sir.
    Today, CMS has handed up $5.51 billion to the States to 
help them establish insurance exchanges. Despite this whopping 
investment of taxpayer dollars, four States' exchanges have 
been turned entirely over to the Federal exchange, while 
countless others are struggling to become self-sustaining. As 
the Federal dollars run dry and enrollment numbers appear far 
below administration projections, all State exchanges face 
significant budget shortfalls.
    By law, State exchanges were supposed to be self-sustaining 
by January 1 of 2015, at which point Federal establishment 
grant money could not be used to operate the exchanges, not be 
used. Yet, CMS has been issuing no-cost extensions to State 
exchanges, allowing them to use the remainder of their Federal 
grants through 2015 and in some cases 2016 against intent and 
letter of the law. Federal funds still cannot be used for 
operational costs, but because of lax oversight and weak 
guidance, we don't know whether or not State exchanges have 
actually spent this Federal money appropriately. We intend to 
get clear answers today.
    In the over 5 years since the ACA was enacted, CMS has 
issued only two guidance documents to inform State exchanges on 
the permissible ways to spend Federal establishment funds. The 
first guidance, issued in March 2014, was less than a page. The 
second guidance came only after the HHS Office of Inspector 
General issued an alert to Acting Administrator Andy Slavitt 
highlighting with urgency that State exchanges maybe using 
grant funds for operational expenses, which is not allowed. In 
fact, the OIG had discovered, based on budget documents, the 
Washington Health Benefit Exchange might have used $10 million 
in the establishment grant funds to support operations such as 
printing, postage, and bank fees, again, not allowed.
    HHS OIG urged Acting Administrator Slavitt to develop and 
issue clear guidance to the State exchanges on the appropriate 
use of establishment grant funds. What followed was a vague 2-
page guidance document bereft of concrete examples. Based on 
these ``guidances,'' one wonders if CMS is encouraging the 
State exchanges to spend Federal dollars in any way possible 
against the stated purposes of the law to keep these State 
exchanges limping along.
    Through the committee's investigation, we have learned of 
instances where State exchanges may have used establishment 
grant dollars to cover operational costs or even transition 
costs when a State exchange shuts down and moves to the Federal 
platform. It hasn't been always easy to discern, however, 
because these funds have been co-mingled, and expenses and 
costs have been redefined. For example, rent, which is an 
operational cost by any definition, suddenly becomes business 
development costs. The system seems to be convoluted by design.
    In spite of, or perhaps because of, CMS's hands-off 
approach, the State exchanges are struggling to become self-
sustaining. They continue to face IT problems, lower-than-
expected enrollment numbers, and growing maintenance costs. And 
as the HHS OIG pointed out in its alert, State exchanges are 
facing uncertainties in revenue. Four State exchanges--Hawaii, 
Nevada, New Mexico, and Oregon--have already shut down their 
State exchanges, and these four States alone receive $733 
million in Federal establishment grants. The taxpayers' return 
on investment appears minimal at best.
    Further, there was little indication that CMS has attempted 
to recoup any of this money. It is our hope that Acting 
Administrator Slavitt commits to and lays out a blueprint for 
recouping these lost Federal dollars so that the American 
people are not footing the tab for yet another ACA failure.
    To better understand the challenges these State exchanges 
face to ensure more tax dollars aren't wasted, this committee 
has a number of questions. Why are State exchanges struggling 
to become self-sustaining, especially given the extraordinary 
taxpayer investment? Is it lack of CMS accountability or 
oversight? Is CMS encouraging fiscal restraint or instead 
taking a hands-off approach, which has allowed money to be 
spent uncontrollably, unwisely, and maybe even impermissibly? 
And where in exchange has decided to shut down has CMS sought 
to recoup any of the Federal grant dollars? Lastly, are the 
exchanges doomed to fail?
    In my estimation, CMS oversight has been woefully sloppy at 
best and willfully ignorant at worst, but with obvious spending 
abuses, costing taxpayers millions and counting from the 
States. We hope that CMS will be forthright in answering the 
committee's many outstanding questions on its failure in 
overseeing the ACA State exchanges, as well as provide Members 
a blueprint on how the administration will recoup lost taxpayer 
dollars moving forward. Right now, the situation is a mess, and 
taxpayers are on the losing side, and that is simply 
unacceptable.
    This hearing comes at a time when premiums for low-cost 
plans are on the rise, major insurers are publicly questioning 
their decisions to join the exchanges, co-ops are failing at an 
alarming rate, and State exchanges are expressing doubts about 
their ability to exist long term. Mounting evidence suggests 
that the ACA faces insurmountable problems in 2016, and today, 
we have an opportunity to ask CMS top official if and when the 
administration will finally address these concerns in a 
meaningful way.
    So I thank Acting Administrator Andy Slavitt for testifying 
today and look forward to hearing answers to our questions, not 
more questions.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    On September 29th, the committee heard from a panel of 
witnesses representing six State exchanges. While attempting to 
paint a rosy picture, it is clear there are serious short-term 
and long-term problems with State exchanges. One of our main 
concerns we will address today is how Centers for Medicare and 
Medicaid Services (CMS) is conducting oversight over the 
billions of taxpayer dollars invested in establishing the State 
exchanges. Today, we expect direct and honest answers from CMS 
Acting Administrator Andy Slavitt.
    To date, CMS has handed out $5.51 billion to the States to 
help them establish insurance exchanges. Despite this whopping 
investment of taxpayer dollars, four States exchanges have been 
turned entirely over to the Federal exchange while countless 
others are struggling to become self-sustaining. As the Federal 
dollars run dry and enrollment numbers appear far below 
administration projections, all State exchanges face 
significant budget shortfalls. By law, State exchanges were 
supposed to be self-sustaining by January 1, 2015, at which 
point, Federal establishment grant money could not be used to 
operate the exchanges. Yet CMS has been issuing No Cost 
Extensions to State exchanges, allowing them to use the 
remainder of their Federal grants through 2015 and, in some 
cases, 2016 against intent and letter of the law. Federal funds 
still cannot be used for operational costs. But because of lax 
oversight and weak guidance, we don't know whether or not State 
exchanges have actually spent this Federal money appropriately. 
We intend to get clear answers today.
    In the over 5 years since the ACA was enacted, CMS has 
issued only two guidance documents to inform State exchanges on 
permissible ways to spend Federal establishment funds. The 
first guidance, issued in March 2014, was less than a page. The 
second guidance came only after the HHS Office of Inspector 
General issued an alert to Acting Administrator Andy Slavitt 
highlighting with urgency that State exchanges may be using 
grant funds for operational expenses, which is not allowed. In 
fact, the OIG had discovered, based on budget documents, the 
Washington Health Benefit Exchange might have used $10 million 
in establishment grant funds to support operations, such as 
printing, postage, and bank fees. Again, not allowed. HHS OIG 
urged Acting Administrator Slavitt to develop and issue clear 
guidance to the State exchanges on the appropriate use of 
establishment grant funds. What followed was a vague two-page 
guidance document, bereft of concrete examples. Based on these 
``guidances'' one wonders if CMS is encouraging the State 
exchanges to spend Federal dollars in any way possible against 
the stated purposes of the law to keep these State exchanges 
limping along.
    Through the committee's investigation, we have learned of 
instances where State exchanges may have used establishment 
grant dollars to cover operational costs or even transition 
costs when a State exchange shuts down and moves to the Federal 
platform. It hasn't been always easy to discern, however, 
because these funds have been co-mingled and expenses and costs 
have been redefined. For example, rent--which is an operational 
cost by any definition--suddenly becomes ``business development 
costs.'' The system seems to be convoluted by design.
    In spite of--or perhaps because of--CMS' hands-off 
approach, the State exchanges are struggling to become self-
sustaining. They continue to face IT problems, lower than 
expected enrollment numbers, and growing maintenance costs. And 
as the HHS OIG pointed out in its alert, State exchanges are 
facing uncertainties in revenue. Four State exchanges--Hawaii, 
Nevada, New Mexico, and Oregon--have already shut down their 
State exchanges. These four states alone received $733 million 
in Federal establishment grants. The taxpayer's return on 
investment appears minimal at best. Further, there is little 
indication that CMS has attempted to recoup any of this money. 
It is our hope that Acting Administrator Slavitt commits to, 
and lays out, a blueprint for recouping these lost Federal 
dollars so that the American people are not footing the tab for 
yet another ACA failure.
    To better understand the challenges these State exchanges 
face and to ensure more tax dollars aren't wasted, this 
committee has a number of questions: Why are State exchanges 
struggling to become self-sustaining, especially given the 
extraordinary taxpayer investment? Is it a lack of CMS 
accountability or oversight? Is CMS encouraging fiscal 
restraint, or instead, taking a hands-off approach, which has 
allowed money to be spent uncontrollably, unwisely and maybe 
even impermissibly? And where an exchange has decided to shut 
down, has CMS sought to recoup any of the Federal grant 
dollars? Lastly, are the exchanges doomed to fail?
    In my estimation, CMS oversight has been woefully sloppy at 
best and willfully ignorant at worst with obvious spending 
abuses costing taxpayers billions and counting. We hope that 
CMS will be forthright in answering the committee's many 
outstanding questions on its failure in overseeing the ACA 
State exchanges as well as provide members a blueprint on how 
the administration will recoup lost taxpayer dollars moving 
forward. Right now, the situation is a mess and taxpayers are 
on the losing side and that is simply unacceptable.
    This hearing comes at a time when premiums for low-cost 
plans are on the rise, major insurers are publicly questioning 
their decisions to join the exchanges, CO-OPs are failing at an 
alarming rate, and State exchanges are expressing doubts about 
their ability to exist long-term.
    Mounting evidence suggests the ACA faces insurmountable 
problems in 2016. Today we have an opportunity to ask CMS's top 
official if and when the administration will finally address 
these concerns in a meaningful way.

    Mr. Murphy. I now recognize Ranking Member Ms. DeGette for 
5 minutes.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you very much, Mr. Chairman.
    While today we are having yet another hearing on the 
Affordable Care Act, as usual, Mr. Chairman, I am disappointed 
that here we are having another hearing focused on undermining 
the law rather than focusing our efforts on trying to make the 
law work better.
    And I know with respect to the topic of this hearing today, 
CMS is trying to implement efforts to make the law work better, 
and I think that we should be using our time today to see how 
we can partner to make that happen.
    Since the ACA was passed over 5 years ago, this committee 
has held dozens of oversight hearings on the law. Not one of 
them has been focused on ways to make the law work better. Not 
one of them has presented a balanced view of the law's 
benefits. But despite that, we have gotten a lot of good news 
out of these hearings about the number of Americans that the 
law is helping and about what the agencies are trying to do to 
improve coverage, despite some of the bumps in the road.
    But, you know, even more disturbingly to me, though, it has 
been really an uphill climb to try to implement this 
legislation because some of our colleagues, both here in 
Congress and around the country, have intentionally placed 
roadblocks to implementation that actually make it harder for 
their own constituents to access care.
    Some of the Governors, when the law was passed, refused to 
implement the Medicaid expansion, which would give healthcare 
coverage to millions of lower-income Americans. One Republican 
presidential candidate, who also happens to be a U.S. Senator, 
recently bragged that he killed Obamacare by limiting risk 
quarter payments.
    I have got two things to say in response to that. First, I 
think it is really disappointing that Members of Congress would 
brag about taking health care away from vulnerable Americans. 
Secondly, I think people are wrong on the facts. The Affordable 
Care Act is not going anywhere. Despite countless attempts to 
repeal, undermine, defund, and defame the law, the Affordable 
Care Act is making comprehensive health care a reality for 
American families. It is saving lives.
    Since passage of the law more than 5 years ago, an 
estimated 17.6 million Americans have gained health coverage 
through the ACA's various provisions. According to the recent 
CDC data, the uninsured rate has dropped to historic low of 9 
percent down from 16 percent in 2010.
    I just ran into my Colorado folks yesterday at the airport 
coming out here, and they told me, despite the failure of the 
Colorado co-op just a month or two ago, they are expecting, 
because of the revisions and innovations they are making 
Colorado, they may be up to 95 percent coverage in Colorado 
pretty soon. That is extraordinary for the health care of our 
constituents. And that is what we should be working to achieve.
    I have got an article from the New York Times entitled 
``Rise in Cervical Cancer Detection Is Linked to Affordable 
Healthcare,'' Mr. Chairman. According to researchers from the 
American Cancer Society, more women are receiving an early 
diagnosis of cervical cancer due to an increase in health 
insurance coverage under the ACA, and I would like to ask 
unanimous consent to put that in the record.
    Mr. Murphy. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Ms. DeGette. Early diagnosis of cervical cancer improves 
women's prospects for survival of the disease, and it also 
bolsters their hope to preserve fertility during treatment. And 
women with health insurance are far more likely to get a 
screening that can identify cervical cancer early.
    You know, I know that it is hard to make this specific 
about constituents. It is hard sometimes for my colleagues on 
the other side of the aisle to acknowledge that actual people 
are being helped by this law. But millions of Americans are 
benefitting from it, and a lot of people like me think we could 
be making it even better.
    The reason I am talking about this this morning is because 
on the House Floor we will be likely voting this week on a 
reconciliation bill to repeal key parts of the Affordable Care 
Act. This would be, by our calculation, the 62nd attempted to 
eliminate or repeal key provisions of the ACA. If enacted, 
virtually all of the historic gains in health coverage we have 
made in the last 5 years would be lost. This would be a tragedy 
for the American people and a gross failure of leadership.
    You know, we have done so much good this year in this 
subcommittee. We did bipartisan work on pandemic flu. We did 
bipartisan work on the Volkswagen investigation and many other 
things. I think this could be the committee where we had these 
hearings and then we sat down to think about how to improve 
rather than to undermine the Affordable Care Act. I hope that 
is what we will do in the next year, but frankly, I don't hold 
out a lot of hope.
    I yield back.
    Mr. Murphy. The gentlelady yields back. Before I introduce 
the next presenter, I want to welcome today--we have several 
members here from the National Democratic Institute in support 
of the House Democracy Partnership. This is a peer-to-peer 
exchange and co-chaired by Representative Peter Roskam and 
Representative David Price.
    And we have guests with us from Kenya and Peru. Welcome 
here. Just to let you know, this is a love fest among us. We 
all like each other. So take back to your country, sometimes we 
may argue, but in the end we still are in here for the same 
cause, so I hope this is valuable----
    Ms. DeGette. If the chairman will yield?
    Mr. Murphy. Yes.
    Ms. DeGette. We might disagree, but we disagree in a civil 
way.
    Mr. Murphy. Watch that seat.
    Ms. DeGette. That is going too far.
    Mr. Murphy. Thank you. I now recognize Mr. Upton for 5 
minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, I thank the good chairman.
    Today, we continue our oversight into the Obama State 
health insurance marketplaces. Hard-working taxpayers invested 
some $5.5 billion to establish these State exchanges, yet they 
still continue to struggle, as we know. Exchanges are 
struggling to sign up new customers, struggling to cover 
operational costs, struggling to fix ongoing IT systems 
problems, and ultimately struggling to become self-sustaining.
    We welcome the CMS Acting Administrator Mr. Slavitt today, 
and we appreciate his testimony on this very important issue.
    As the State exchanges struggle to survive, we seek to 
understand CMS' role in overseeing them. The Government's 
robust investment of Federal funds into State exchanges should 
be accompanied by equally robust accountability by these 
stewards of taxpayer dollars. Yet the committee's oversight has 
revealed that CMS took a hands-off approach to the State 
exchanges. For example, CMS rubber-stamped a no-cost extension 
request, issued permissive and vague guidelines, and welcomed 
failed State exchanges to the Federal platform with no 
questions asked. This is not acceptable.
    We want to hear directly how CMS plans to improve its 
oversight over the State exchanges to ensure that they are 
spending all grant dollars legally and wisely.
    We also must understand the long-term sustainability of the 
State exchanges, especially against the backdrop of rising 
premiums, failing co-ops, and insurance companies doubting 
their participation in the exchanges next year. The writing is 
on the wall that we very well could see yet another big 
taxpayer investment spiral down the drain.
    So it is critical that we all understand the short- and 
long-term challenges that State exchanges are facing, as well 
as what CMS is doing to help the exchanges confront the 
challenges. Regardless of one's views of the President's health 
law, the law and its implementation demand oversight. As we 
continue to see today, billions of dollars are certainly at 
stake.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Today we continue our oversight into the Obamacare State 
health insurance marketplaces. Hard-working taxpayers invested 
over $5.5 billion to establish these State exchanges, yet they 
still continue to struggle. The exchanges are struggling to 
sign up new customers, struggling to cover operational costs, 
struggling to fix ongoing IT systems problems, and ultimately, 
struggling to become self-sustaining.
    We welcome the Centers for Medicare and Medicaid Services' 
Acting Administrator Andy Slavitt today and appreciate his 
testimony on this important issue. As the State exchanges 
struggle to survive, we seek to understand CMS' role in 
overseeing them. The Government's robust investment of Federal 
funds into State exchanges should have been accompanied by 
equally robust accountability by these stewards of taxpayer 
dollars.
    Yet, the committee's oversight has revealed that CMS took a 
hands-off approach to the state exchanges. For example, CMS 
rubber-stamped No Cost Extension requests, issued permissive 
and vague guidance, and welcomed failed State exchanges to the 
Federal platform with no questions asked. This is unacceptable. 
We want to hear directly how CMS plans to improve its oversight 
over the State exchanges, to ensure that they are spending 
grant dollars legally and wisely.
    We also must understand the long-term sustainability of the 
State exchanges. Especially against the backdrop of rising 
premiums, failing co-ops, and insurance companies doubting 
their participation in the exchanges next year, the writing is 
on the wall that we very well could see yet another big 
taxpayer investment spiral down the drain. It is critical that 
we all understand the short- and long-term challenges that 
State exchanges are facing as well as what CMS is doing to help 
the exchanges confront these challenges.
    Regardless of one's view of the President's health law, the 
law and its implementation demand oversight. As we continue to 
see today, billions of dollars are at stake.

    Mr. Upton. And I yield the balance of my time to Vice Chair 
Blackburn.
    Mrs. Blackburn. And thank you, Mr. Chairman. Mr. Slavitt, 
welcome. We appreciate that you are here.
    You know, shopping on the Federal exchange was supposed to 
be as simple as shopping for insurance on Kayak or Esurance, 
and that absolutely has not happened. And what we continue to 
hear from our constituents is that this insurance, the 
Obamacare insurance product, is too expensive to use once they 
do get it because of the copays, the deductibles, and the 
premiums that are there. It is a very expensive product.
    We want to look at the GAO report from September. Today, we 
want to go through this with you. As both Chairman Upton and 
Chairman Murphy have said, it is very difficult for our 
constituents, and basically what it appears is that this has 
been a false promise that was given to people, that they would 
have healthcare access because they were going to have 
insurance, and that has not come about.
    So we are very concerned about the dollars that have been 
spent on these State exchanges. We are concerned about the 
quality of the product.
    And I yield the balance of my time to Dr. Burgess.
    Mr. Burgess. Well, thank you for yielding.
    Look, the administration has invested billions of dollars 
in an experiment, the experiment that did not include the 
necessary safeguards, and in fact ignored successful models in 
the private market. The health benefit exchanges are one such 
experiment. Billions of taxpayer dollars have been pumped into 
reinventing the wheel, and millions of Americans, myself 
included, have been forced to rely on exchanges to purchase 
healthcare coverage.
    My experience as a consumer on HealthCare.gov has been 
extremely frustrating, and my experience as a Member of 
Congress and a member of this committee and this subcommittee 
has been just as frustrating.
    I know there are those who want to accuse us of trying to 
undermine the law. That in fact is not the case. The law should 
work, and we as members of the subcommittee, we as members of 
this full committee, we as Members of Congress have a 
constitutional obligation for oversight as to how those Federal 
dollars are spent. It has been extremely difficult getting 
questions answered. It has been extremely difficult getting 
information. That needs to change.
    And I hope in this last year of the administration we 
perhaps can at least now admit to each other that there are 
serious problems with the law as it stands, and there are 
serious actions that we could take to fix those.
    Thank you, Mr. Chairman. I will yield back the time.
    Mr. Murphy. Thank you. The gentleman yields back.
    I now recognize the ranking member of the full committee, 
the gentleman from New Jersey, Mr. Pallone, for 5 minutes.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    We are here today for yet another hearing to attack the 
Affordable Care Act. Since the August recess, the majority of 
the subcommittee's hearings have been dedicated to undermining 
the law. The majority has called on the State exchanges and CMS 
to criticize them, and they have burdened them with massive 
document requests in the middle of the open enrollment.
    I do not mean to suggest that we should not be doing 
oversight of the implementation of the ACA, but what we are 
seeing from my Republican colleagues is not balanced oversight 
designed to improve the law. Instead, the majority's efforts 
are simply designed to hamper implementation and undermine the 
Affordable Care Act, regardless of the facts.
    Frankly, it is incredibly frustrating to sit here time and 
time again listening to my Republican colleagues lay into the 
administration's witnesses, criticize the efforts of their 
departments without any sense of perspective on the historic 
gains in coverage that have been achieved. I would have hope 
that by this point nearly 6 years after the passage of the law 
we could add a balanced perspective on where implementation of 
the law faces challenges, but just as importantly, where it is 
helping Americans lead better lives and become more productive 
citizens.
    We should be talking about ideas to advance the mission of 
the law to provide quality affordable care to all of our 
constituents or even make key fixes where appropriate. We 
should be holding hearings about ways to target the remaining 
uninsured.
    As CMS will testify today, the ACA is clearly making a huge 
difference in the lives of millions of Americans. It is making 
families stronger. It is making States stronger. It is making 
America stronger. The law has faced challenges, but we have had 
many more successes that you never hear about from my 
colleagues on the other side of the aisle. So I am just going 
to take a moment to ensure that we hear some of these successes 
in today's hearing.
    Because of the Affordable Care Act, 17.6 million uninsured 
people have gained coverage through the law's various coverage 
provisions. Since the start of this year's open enrollment 
period on November 1, 2 million Americans have selected plans 
through the federally facilitated exchange. More and more 
States are making the right decision on Medicaid expansion, 
which is benefiting the most vulnerable citizens, as well as 
saving billions of dollars. Preexisting conditions can no 
longer preclude individuals from gaining health insurance. 
Consumers do not have to worry about losing coverage if their 
employment changes. Reductions in the uninsured rate mean that 
doctors and hospitals provide less uncompensated care, which 
means fewer costs are being passed along to consumers and 
employers who pay premiums for health coverage.
    Instead of acknowledging any of these successes, my 
Republican colleagues insist on holding more hearings and 
debating more bills to undermine the law. And what is worse, 
they are actively trying to take health insurance away from 
those who now have it.
    This week, the House may be voting on a reconciliation bill 
to repeal key parts of the Affordable Care Act. This is the 
House Republicans' 62nd attempt to repeal or undermine key 
provisions of the law. The Republican bill eliminates subsidies 
for individuals purchasing coverage through the exchanges and 
eliminates the Medicaid expansion. According to the 
Congressional Budget Office, the GOP bill would increase the 
number of uninsured Americans by at least 22 million by 2018. 
The Republican bill would undo many of the historic gains in 
health coverage we have made in the past 5 years, while 
offering nothing to help those who will lose coverage or to 
make health care more affordable and available for all 
Americans.
    As for a viable Republican alternative to the Affordable 
Care Act, which Republicans have said they would offer for 
several years now, let me just say this: I will believe it when 
I see it because I haven't seen it.
    Let's actually work in a productive bipartisan way to make 
the Affordable Care Act work better instead of taking empty, 
meaningless votes to repeal it and take insurance coverage away 
from our constituents.
    And I yield back.
    [The prepared statement of Mr. Pallone follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    We are here today for yet another hearing to attack the 
Affordable Care Act. Since the August recess, the majority of 
this subcommittee's hearings have been dedicated to undermining 
the law. The majority has called in the State exchanges and CMS 
to criticize them, and they have burdened them with massive 
document requests in the middle of open enrollment.
    I do not mean to suggest that we should not be doing 
oversight of the implementation of the Affordable Care Act. But 
what we are seeing from my Republican colleagues is not 
balanced oversight designed to improve the law. Instead, the 
majority's efforts are simply designed to hamper implementation 
and undermine the Affordable Care Act regardless of the facts.
    Frankly, it's incredibly frustrating to sit here time and 
time again listening to my Republican colleagues lay into the 
administration witnesses and criticize the efforts of their 
departments without any sense of perspective on the historic 
gains in coverage that have been achieved.
    I would have hoped that by this point, nearly 6 years after 
the passage of the law, we could add a balanced perspective on 
where implementation of the law faces challenges, but just as 
importantly, where it is helping Americans lead better lives 
and become more productive citizens.
    We should be talking about ideas to advance the mission of 
the law, to provide quality, affordable care to all of our 
constituents, or even make key fixes where appropriate. We 
should be holding hearings about ways to target the remaining 
uninsured.
    As CMS will testify today, the ACA is clearly making a huge 
difference in the lives of millions of Americans. It is making 
families stronger. It is making States stronger. It is making 
America stronger. Yes, the law has faced challenges, but we 
have had many more successes that you never hear about from my 
colleagues on the other side of the aisle.
    So I will take a moment to ensure that we hear about some 
of them in today's hearing.
    Because of the Affordable Care Act, 17.6 million uninsured 
people have gained coverage through the law's various coverage 
provisions. Since the start of this year's open enrollment 
period on November 1, two million Americans have selected plans 
through the federally facilitated exchange. More and more 
States are making the right decision on Medicaid expansion, 
which is benefitting their most vulnerable citizens as well as 
saving billions of dollars.
    Pre-existing conditions can no longer preclude individuals 
from gaining health insurance. Consumers do not have to worry 
about losing coverage if their employment changes. Reductions 
in the uninsured rate mean that doctors and hospitals provides 
less uncompensated care, which means fewer costs are being 
passed along to consumers and employers who pay premiums for 
health coverage.
    Instead of acknowledging any of these successes, my 
Republican colleagues insist on holding more hearings and 
debating more bills to undermine the law. And what's worse, 
they are actively trying to take health insurance away from 
those who now have it.
    This week, the House will be voting on a reconciliation 
bill to repeal key parts of the Affordable Care Act. This is 
the House Republicans' 62nd attempt to repeal or undermine key 
provisions of the law.
    The bill eliminates subsidies for individuals purchasing 
coverage through the exchanges and eliminates the Medicaid 
expansion. According to the Congressional Budget Office, the 
bill would increase the number of uninsured Americans by at 
least 22 million by 2018.
    This bill would undo many of the historic gains in health 
coverage we've made in the past 5 years, while offering nothing 
to help those who will lose coverage, or to make healthcare 
more affordable and available for all Americans. As for a 
viable Republican alternative to the Affordable Care Act, which 
the Republicans have said they would offer for several years 
now, let me just say this--I'll believe it when I see it.
    Let us actually work in a productive, bipartisan way to 
make the Affordable Care Act work better instead of taking 
empty, meaningless votes to repeal it and take insurance 
coverage away from our constituents.
    I yield back.

    Mr. Murphy. I ask unanimous consent that Members with 
written opening statements be introduced into the record, and 
without objection, documents will be entered in the record.
    Mr. Slavitt, as you are aware, the committee is holding an 
investigative hearing, and when doing so, has the practice of 
taking testimony under oath. Do you have any objections to 
testifying under oath?
    Mr. Slavitt. I do not.
    Mr. Murphy. And the Chair then advises you that under the 
rules of the House and rules of the committee, you are entitled 
to be advised by counsel. Do you desired to be advised by 
counsel during the hearing today?
    Mr. Slavitt. I do not.
    Mr. Murphy. Thank you. In that case, would you please rise 
and raise your right hand? I will swear you in.
    [Witness sworn.]
    Mr. Murphy. Thank you. Let the record show that the witness 
has said yes.
    You are now under oath and subject to the penalties set 
forth in title 18, section 1001, of the United States Code. You 
may now give a 5-minute summary of your written statement.

 STATEMENT OF ANDY SLAVITT, ACTING ADMINISTRATOR, CENTERS FOR 
 MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN 
                            SERVICES

    Mr. Slavitt. Thank you. Chairman Murphy, Ranking Member 
DeGette, and members of the subcommittee, thank you for the 
invitation to discuss State-based health insurance 
marketplaces. I'm Andy Slavitt, the Acting Administrator of the 
Centers for Medicare & Medicaid Services.
    CMS is working hard for the American healthcare consumer 
and American taxpayer to provide access to affordable quality 
healthcare coverage. Marketplaces, whether offered through 
States or through Federally Facilitated Marketplaces, allow 
individuals and families access to information, tools, personal 
help, consumer protections, and an array of health plan options 
from private sector health plans.
    Setting up and managing State marketplaces is a significant 
task, and I would like to talk now about how we provide 
oversight and assistance to the marketplaces but also watch 
over the American taxpayers' dollars.
    In considering our oversight role, it is important to 
understand all the responsibilities of a State-based 
marketplace. States must establish the infrastructure to review 
and qualify health plan offerings, develop online and call 
center capabilities to provide eligibility and enrollment 
services, interface with State Medicaid systems, develop 
cybersecurity capabilities, outreach and education functions, 
and dozens of other activities.
    We've seen significant successes as States have innovated 
to meet the needs of their populations and are successfully 
serving their populations today, having insured millions of 
people.
    Every State has also had its share of challenges during the 
startup phase, including five who have had more significant IT 
challenges. And IT typically represents 30 to 50 percent of a 
State's development budget, given their other responsibilities.
    In discussing now our three key oversight priorities, I 
want to focus in particular on those situations where States 
have had more significant challenges. Our first priority is to 
be good stewards of the Federal taxpayers' dollars. This means 
returning unspent dollars to the Treasury and closing grants, 
collecting improperly spent dollars, and preventing more from 
going out the door. Over $200 million of the original grant 
awards have already been returned to the Federal Government, 
and we're now in the process of collecting and returning more. 
This also means no new money to fix IT problems was given or 
will be given to any of the five States or any other State that 
ran into difficulties. We should not pay twice for the same 
result.
     Second, our job is to manage every dollar tightly. I have 
always been a big believer in preventing problems so we can 
spend less time recovering from them. Every State-based 
marketplace has external funding sufficient to run their 
operations. Federal money may not be used for regular 
operations. We do a line-item review of the expenditures a 
State proposes to ensure compliance with the law and conduct 
audits to make sure there's a full accounting of all Federal 
dollars. Important to our approach, we maintain control of the 
purse strings, and 69 times this year we've denied use of 
Federal funds. We also make adjustments through readiness 
reviews, detailed reporting, regular audits, and site visits.
    Third, and perhaps most important, we assist the State in 
getting a return on their investment, as measured by the value 
they provide to their State. For all the challenges they've 
had, their ingenuity, their persistence, and their commitment 
to State residents has paid off for millions of Americans. As 
of June 30, State-based marketplaces provided coverage to 
approximately 2.9 million people, and private health plans have 
helped millions access Medicaid, and the uninsured rates in 
these States have declined an average of 47 percent since 2013 
to under 10 percent.
    Now, I've worked in health care in the private sector since 
the early 1990s and joined the Government only last year. Among 
other things, I founded a company that assisted people who were 
un- and under-insured, and we had a large-scale data and 
analytics and healthcare consulting organization touching 
virtually every part of the healthcare system.
    I can just tell you from my perspective what a significant 
advancement has been made for American families in a short time 
by giving people access to care and helping alleviate the 
financial worries that come from not being able to protect 
one's own family. Having done it many times, I can also tell 
you how difficult it is and how difficult it can be to launch 
and operate any new enterprise of this scale.
    In conclusion, I have the privilege of serving as Acting 
Administrator while we are celebrating the 50th anniversary of 
Medicare and Medicaid. The perspective this offers is that at 
this early stage of the marketplace there are millions still to 
educate and enroll, and State health leaders and the private 
sector are continuing to find the best, most efficient ways of 
meeting their needs of these populations.
    CMS's oversight responsibilities are also critical in this 
equation. CMS must not only be accountable for these 
responsibilities, but we must take every opportunity to find 
ways to improve how we do our job, including taking outside 
input so we can best fulfill our dual mission of providing 
access to affordable healthcare coverage for consumers and 
protecting the investment by taxpayers.
    We do appreciate this subcommittee's interest in this area, 
and I am happy to answer your questions.
    [The prepared statement of Mr. Slavitt follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Murphy. Thank you, Mr. Slavitt. I will now recognize 
myself for 5 minutes of questions.
    The HHS Office of Inspector General alert found that 
Washington State's exchange had budgeted 10 million Federal 
grant dollars for operational expenses, including printing, 
postage, and bank fees from July of this year through December 
31 of this year. These expenses are prohibited, but CMS had 
approved them in Washington's grant application.
    Now, I know you just said you screen these things, so how 
did CMS miss that Washington State exchange was spending 
Federal establishment dollars on operational costs?
    Mr. Slavitt. So I believe if I'm correct that the early 
alert stated that there was a potential that there may have 
been misspent funds, but I don't think the OIG made that 
conclusion. And we conducted an investigation and looked 
through all their funds. There were a few adjustments made, but 
we currently believe that the State of Washington, by and 
large, is spending its money and categorizing it properly. We 
do have one small collection that we are undertaking with the 
State of Washington, but that's in process.
    Mr. Murphy. But the OIG did say that that was occurring, so 
you are saying there was since then an adjustment that you have 
made in discussing with the OIG?
    Mr. Slavitt. There's been plenty of adjustments with the 
States. We have, just by background, hundreds of interactions 
with the States. We review all their line items, review their 
budgets monthly. So at any point in time they may have found 
that they thought something may have been classified 
improperly, and we take advantage of the work of the OIG and we 
go conduct further investigation ourselves. I don't think we 
believe that all of those 10 million were properly classified. 
I think we did find there was some, however.
    Mr. Murphy. Could you make sure you get us details of that, 
and would you have found these if the OIG had not pointed these 
out?
    Mr. Slavitt. I wouldn't represent that our team finds 
everything. I would say we have multiple pieces of the process, 
most important being prevention because, once the dollar goes 
out the door, you have to spend effort to collect it, so we 
spent a lot of effort preventing things from being 
misclassified.
    We do, however, find things and collect them, and I think 
OIG also finds things that we don't find. And when they do, we 
have a period of time that extends 3 years past when the grant 
periods end, which haven't even--the clock hadn't started 
ticking yet. So we will make sure we collect anything that gets 
uncovered.
    Mr. Murphy. With that, do you then post what your findings 
are in the OIG to say this is all in the inappropriate 
categories and notify States if you have spent money in these 
categories like you just reviewed the State of Washington so 
States know that you are going to ask them to return that 
money? Have you been posting that?
    Mr. Slavitt. Yes. States are all quite aware.
    Mr. Murphy. Would you make sure you share that with us in 
writing, too? That would be helpful.
    Mr. Slavitt. Yes.
    Mr. Murphy. Is it appropriate for State exchanges to 
transition HealthCare.gov after spending hundreds of millions 
of taxpayers' dollars on their own sites? And shouldn't there 
be other consequences for that? I mean they have failed but 
they spent all this money and then later said, gee, sorry it 
didn't work out. Does that seem appropriate?
    Mr. Slavitt. Well, I think it is important for us to 
recognize States have the right under the law to decide whether 
they want to be a State-based exchange, a Federal exchange, or 
to be a State-based exchange and use our platform. They have a 
right to change their mind for a variety of reasons, including 
technical or otherwise. So we think that's important.
    What is also important is that if we find that any money 
has either been misspent or we have granted money that we 
believe the State no longer needs, we control the purse strings 
and have the right to collect money back. And we've in fact 
done that. We have collected money from recently the State of 
Maryland in a similar situation.
     Mr. Murphy. But my concern is with regard to the States 
trying to get into the insurance business and it didn't work 
out for many States, but there is no real consequence if they 
were able to take the money, say, toss their hands up and say, 
well, it turns out it didn't work out. We will just go to the 
Federal exchange. And this is where my concern is, and many of 
us have a concern that under those circumstances, if there were 
no consequences, then that is hardly a lesson.
    So this is where I want to know, do you have any plan or 
intention to gather back, to recoup the Federal funds that have 
been provided to States to set up their exchanges only to then 
shift into HealthCare.gov?
    Mr. Slavitt. So there's the five States that I think have 
had the most significant IT challenges. Two of them maintained 
their role as State exchanges. Three of them are now using the 
Federal exchange platform but are still State-based exchanges. 
And each of those cases is slightly different. In one of those 
cases we have recovered money. In another case, the State is--
two of the other cases, I should say, the State is in the 
process of trying to recover money, of which we will they go 
after our Federal share. And in one of the other States we are 
in the process of also closing down and collecting some money.
    So it really varies by State, but I would think it's 
important to point out that even though States had challenges, 
they were by every measure able to enroll people, they had 
contingency plans, and eventually were able to set up a system 
that worked, which extends, as I said earlier, beyond 
technology----
    Mr. Murphy. I understand that, but it was after a lot of 
failure and a lot of wasted money. And I would like it if you 
could give something in writing of what your specific plan is 
with regard to recouping these Federal lost dollars. I yield 
now----
    Mr. Slavitt. Happy to do that.
    Mr. Murphy [continuing]. To Ms. DeGette for 5 minutes. 
Thank you.
    Ms. DeGette. Thank you, Mr. Chairman. Mr. Chairman, I am 
assuming that you are referring to this GAO report from 
September 2015 to Congress--
    Mr. Murphy. Yes.
    Ms. DeGette [continuing]. In these questions? I would ask 
unanimous consent to make that report a part of the record as 
well.
    Mr. Murphy. Yes.\1\
---------------------------------------------------------------------------
    \1\ The information has been retained in committee files and also 
is available at  http://docs.house.gov/meetings/IF/IF02/20151208/
104256/HHRG-114-IF02-20151208-SD003.pdf.
---------------------------------------------------------------------------
    Ms. DeGette. Thank you.
    So, Administrator Slavitt, I just wanted to ask you, have 
you also reviewed this GAO report----
    Mr. Slavitt. Yes, I have.
    Ms. DeGette [continuing]. That the chairman was asking you 
about? And one of the things that they said, it was their 
finding that CMS had established a framework for oversight but 
it wasn't always effectively executed. Did you see that 
finding?
    Mr. Slavitt. Yes, I did.
    Ms. DeGette. And what is CMS's response to that finding?
    Mr. Slavitt. Yes, I believe we concurred with that finding. 
You know, from our perspective we are overseeing a lot of 
grants, so engaging the OIG, which we have worked in 
partnership with, as well as reports from GAO, are very helpful 
to us, and we take action when we get those findings.
    Ms. DeGette. And so did you take action as a result of that 
concurrence?
    Mr. Slavitt. Yes. Yes, we have.
    Ms. DeGette. What did you do, briefly?
    Mr. Slavitt. We built a tool which allows and monitors all 
of the funding before it occurs, and so we were able to stop 
money from going out the door that shouldn't.
    Ms. DeGette. And I think this hooks onto the question the 
chairman was asking you. If you could supplement your responses 
by letting us know the policies that you have implemented, I 
think that would be great.
    Mr. Slavitt. Yes.
    Ms. DeGette. Now, can you tell me about CMS's interactions 
with SBM officials like weekly check-in calls and site visits?
    Mr. Slavitt. Yes. I think we have dozens if not hundreds of 
interactions. They relate, as you say, from weekly check-in 
calls to monthly financials to site visits to audits.
    [Audio malfunction in hearing room.]
    Ms. DeGette. There. Administrator, what types of reporting 
are required from CMS establishment grant recipients, and how 
are they used by CMS?
    Mr. Slavitt. So, you know, we conducted an OMB A-123 
financial audit. We have a smart program audit. There's an 
external security audit. The States have their own OIG and GAO 
audits, many State Legislature audits. So these numbers get 
pored over pretty aggressively.
    Ms. DeGette. And then how do you use them?
    Mr. Slavitt. Well, if we find that money's been improperly 
classified either as a cost allocation or an operating expense 
when it wasn't, we go collect it.
    Ms. DeGette. And what types of independent assessments and 
audits are required?
    Mr. Slavitt. Well, there's the OMB audit, there are the OIG 
and GAO audits, there are State audits. There is a large 
variety of audits that follow these monies.
    Ms. DeGette. And so sometimes, I think you said before, 
States do misclassify or misuse the grants. So what steps does 
CMS take then to bring the State back into compliance?
    Mr. Slavitt. So to give you an example, we have found that, 
in the case of Arkansas, roughly $1 million and we notified 
them and we're in the process of collecting that. There's three 
other States that have amounts of money that we thought were 
misclassified. But I'd also emphasize, Congresswoman, we do a 
lot more to prevent these from happening----
    Ms. DeGette. Well, that was my next question, yes.
    Mr. Slavitt. OK.
    Ms. DeGette. Go ahead.
    Mr. Slavitt. Yes. I mean, I think 69 times this year we 
have caught in a request something that was to be used for 
generally an operating purpose that we didn't believe was an 
operating purpose. We believed for a development purpose, we 
believed it was an actual operating purpose and we denied the 
funding to begin with. And I think the committee----
    Ms. DeGette. In reviewing the original application?
    Mr. Slavitt. In reviewing the original request.
    Ms. DeGette. And what types of review or evaluation does 
CMS conduct on no-cost extension requests?
    Mr. Slavitt. Pretty extensive requests, you know. And if 
someone's going to get a no-cost extension, it really needs to 
be to fulfill what's part of their work plan that they have set 
up and that they just need more time to establish. I think we 
all know that these things are taking a little more time to 
implement than people originally thought.
    Ms. DeGette. Now, I just want to shift my questioning for a 
second to talk about some of the things the ACA is doing. The 
most recent data from the CDC and Census Bureau found that the 
uninsured rate has fallen to 9 percent from 16 percent in 2010. 
I am wondering is this a new historic low in the uninsured 
rate?
    Mr. Slavitt. I believe it is.
    Ms. DeGette. Do you believe that the Medicaid expansion has 
played a significant role in these reductions?
    Mr. Slavitt. It has.
    Ms. DeGette. Why do you say that?
    Mr. Slavitt. Because we see millions of people in the 
States that have expanded Medicaid who now have access to 
coverage largely for the first time in many cases.
    Ms. DeGette. They didn't have insurance before?
    Mr. Slavitt. Didn't have insurance before.
    Ms. DeGette. And for these vulnerable citizens, can you 
talk about how the Medicaid expansion has impacted them?
    Mr. Slavitt. Yes, certainly. I think, very briefly, 
Congresswoman, when you see families get access to health care 
for the first time, it changes their participation in the 
community in many profound ways, but it keeps them healthier. 
And I think that also reduces costs for the long term.
    Ms. DeGette. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Murphy. I now recognize Mrs. Blackburn for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    Mr. Slavitt, let's go to page 86 of the GAO report and take 
a look at that if you don't mind.
    Mr. Slavitt. I don't have it in front of me but I'm--if 
someone could provide to me----
    Mrs. Blackburn. OK.
    Mr. Slavitt [continuing]. I'm happy to----
    Mrs. Blackburn. All right. Well, on page 86 what you find 
is the grants that have gone out, and the pool of money, which 
was $4.5 billion, and you have sent about $1.3 billion out the 
door. So what we want to know is where is the balance of money? 
Where is it currently sitting?
    Mr. Slavitt. Yes.
    Mrs. Blackburn. Do you have a proper accounting of that?
    Mr. Slavitt. Yes, we do. In fact, we can provide you with 
an accounting of every dollar that's been spent, every dollar 
that hasn't been spent but we still have control of, and we're 
in the process in many cases of pulling that money back.
    Mrs. Blackburn. OK. Then do provide us----
    Mr. Slavitt. We will.
    Mrs. Blackburn [continuing]. With that accounting because 
we will need to see that. And, you know, if there is money that 
you are--let's go to the Arkansas situation.
    Mr. Slavitt. OK.
    Mrs. Blackburn. I know you had said there was $1 million 
there for unallowable. So tying back into what the chairman was 
asking you, when you have a situation, do you give them a plan 
of action and a timeline for returning that money----
    Mr. Slavitt. Yes.
    Mrs. Blackburn [continuing]. To the Treasury? OK.
    Mr. Slavitt. Sometimes there's a little negotiation at 
first, but then we do that, yes.
    Mrs. Blackburn. OK. It seems interesting there would be 
negotiation if they used it for something that was not allowed.
    Mr. Slavitt. Well, I think really this is all a matter of 
us explaining to them why we believed it was unallowable, their 
reviewing it, reviewing with their lawyers. It takes--
    Mrs. Blackburn. OK.
    Mr. Slavitt [continuing]. A little bit of time and then----
    Mrs. Blackburn. All right. How many other States have 
utilized funds for unallowables?
    Mr. Slavitt. For unallowables, I can think of at least 
three that we're in the process of----
    Mrs. Blackburn. OK.
    Mr. Slavitt [continuing]. We're in the process of working--
--
    Mrs. Blackburn. And you plan to get all of that money back?
    Mr. Slavitt. We do.
    Mrs. Blackburn. OK. Excellent. That sounds good. Also in 
the GAO report one of the things that is of concern to me is 
they say none, zero, nobody, not one of these exchanges are 
meeting the desired operational outcomes in all functional 
categories envisioned by CMS. So at this stage of the process, 
doesn't this demonstrate that the systems are incomplete and 
incapable of functioning properly?
    Mr. Slavitt. What I can tell you today is that all of the 
exchanges are functioning--serving the members in their States, 
in their communities. And all of them have run into their share 
of challenges. None of this was easy, some of them bigger 
challenges than others, but there have been some that are very 
successful, and I think the experimentation model of States 
doing this on their own has had some merit.
    Mrs. Blackburn. OK. Then how do you answer the GAO's 
assessment that none are meeting the desired functional 
outcomes?
    Mr. Slavitt. I think at any given point in time there have 
been challenges, been things that have been delayed, have been 
contingency plans. And so these----
    Mrs. Blackburn. But nobody is meeting the desired outcomes. 
We continue to get complaints about these exchanges. We hear 
from people that--you know, the dissatisfaction is rampant. It 
costs too much, it is too expensive to use, the exchanges don't 
work, and then you get a GAO report that says nobody is hitting 
the metrics. So why do you continue to put money in on this if 
they are not meeting the functional outcomes, the desired 
outcomes? Why are you continuing to put money into this?
    Mr. Slavitt. So I understand the question, and it's an 
important question, of course. You know, 2.9 million people 
have been covered. I think that's the primary job of these 
exchanges. I think they are reaching the needs of populations 
that have never been covered before, and I think they're rising 
to those challenges----
    Mrs. Blackburn. So we have spent 4.5--or could spend $4.5 
billion to get access to 2.9 million people?
    Mr. Slavitt. You know----
    Mrs. Blackburn. That is what you are saying?
    Mr. Slavitt. I'm saying the States have reduced their 
uninsured rate, the States that have State-based marketplaces, 
to under 10 percent, and they're still in the establishment 
phase. It's still early on. They're still working at building. 
And if we believe that there's money that's been either 
improperly spent or is money that's been part of a grant is no 
longer needed, we have every ability to collect that money and 
we'll bring it back. And so I think my----
    Mrs. Blackburn. So if you are in the private sector and you 
were 5 years into a rollout and you still weren't functional, 
would you give yourself an A or an F?
    Mr. Slavitt. You know, I wouldn't agree with the 
characterization that they're not functional at this point.
    Mrs. Blackburn. Well, the GAO says they are not. So then 
you are disagreeing with the GAO report?
    Mr. Slavitt. I would say that at this point in time the 
States are all functional. Are they perfect and----
    Mrs. Blackburn. OK. So you disagree. Then if the GAO says 
not any of them have hit the desired operational outcomes in 
all functional categories, Mr. Slavitt, that means it isn't 
working.
    Mr. Slavitt. Well, let me take a look at the language they 
use and let me get back to you on the representation of their 
report.
    Mrs. Blackburn. Well, I would think that you would have 
known that answer, if you are functional or not, before you 
came to us. I yield back.
    Mr. Murphy. The gentlelady yields back. I now recognize Mr. 
Pallone for 5 minutes.
    Mr. Pallone. Thank you, Mr. Chairman.
    Despite countless attempts by the Republicans to repeal and 
undermine and defund the Affordable Care Act, it is making 
affordable, comprehensive health coverage a reality for 
American families. According to recent CDC data, the uninsured 
rate has dropped to a historic low of 9 percent down from 16 
percent in 2010, and for the first time, more than 90 percent 
of all Americans have health insurance.
    So I want to ask Administrator Slavitt, can you put this in 
historic perspective? How significant is this drop in the 
uninsured rate? And can you comment on how the different 
coverage provisions of the ACA have operated to result in these 
gains in insurance coverage?
    Mr. Slavitt. Well, since at least I've been in health care 
in the early 1990s there's really been very little progress up 
until 2013 in seeing the uninsured rate improve. So these 
strike me as fairly significant improvements. I think they've 
come both from Medicaid expansion, as well as the offering of 
qualified health plans through the exchange.
    Mr. Pallone. And you have said, of course, that these gains 
really are historic, and I want to thank you for all your 
contributions to making health insurance more affordable and 
available to millions of Americans.
    But looking to the future, it is my understanding that this 
open enrollment season that we are in and future seasons are 
going to be more challenging because the most motivated 
individuals have already signed up and the remaining 
individuals who are eligible are harder to reach. Is that 
correct?
    Mr. Slavitt. I think that's a fair characterization.
    Mr. Pallone. And according to some experts, many of the 
remaining uninsured are actually still unaware or confused 
about how Federal subsidies are available to help them purchase 
insurance. So I just wanted to ask you a couple questions about 
that. How is CMS recalibrating its outreach and enrollment 
strategy in order to communicate with these harder-to-reach 
populations?
    Mr. Slavitt. You know, I think everybody in the marketplace 
needs to figure out how to continue to simplify not only the 
messages but also how health care works and how health 
insurance works so that people can understand which doctors are 
in which networks, which drugs are in which formularies, how 
things like deductibles work, building tools for those things. 
These are very, very important challenges and opportunities for 
all of us.
    Mr. Pallone. And then am I correct in stating that nearly 
80 percent of the uninsured who are eligible for marketplace 
coverage may be eligible for tax credits to purchase subsidized 
insurance in 2016?
    Mr. Slavitt. That's correct.
    Mr. Pallone. So I mean these people are all--I mean, there 
are obvious advantages if they are made aware. What is CMS 
doing to communicate so that they understand that they may be 
eligible for the subsidies? I don't know if you answered that, 
but I would like to know more specifically if you could.
    Mr. Slavitt. So I think, for us, it's really a function of, 
exactly as you said, Congressman, making sure people are aware 
that there are subsidies, that there are plenty of choices 
available for under $100 and premiums for most people, under 
$75 for many people, and continuing to take that message to 
where people live and where they work in their communities. I 
have to remind myself all the time that these are people, many 
of whom have not had health insurance for a long time, and so 
they're not as connected to the process as people who've been 
engaged so far.
    Mr. Pallone. You know, my own experience, when you began 
the open enrollment I guess was, what, in the early part of 
November? Is that when it began?
    Mr. Slavitt. November 1.
    Mr. Pallone. And we had a couple of events at, you know, 
the centers that were being set up, and there was a lot of, you 
know, outreach that was done not so much in the traditional 
way, you know, with ads or, you know, media-type things but 
more, you know, just with people going around, you know, with 
flyers and, you know, knocking on doors and that type of thing. 
And we did get a lot of people actually show up, you know, even 
that first day.
    And, you know, it is hard. I mean a lot of times you have 
to, you know, figure out exactly where your placement center 
is, you know, operate on weekends, you know, do things that are 
not easy to be honest just to get people.
    And I just think that, you know, I know that a very good 
job is being done right now, you know, during this period to 
try to get to the people, but it is hard. You know, even when I 
talk to people one-on-one I explain to them that, you know, 
they can get help with their premium, they are kind of shocked 
by it, which to me, you know, is surprising 6 years after, you 
know, we voted on this that, you know, people still don't 
understand that they can get help with their premium. But that 
is the reality.
    Mr. Slavitt. And this is one of the successes of State-
based marketplaces because they understand their local 
populations better than anyone could here in Washington, DC, 
and I think they do a nice job of that.
    Mr. Pallone. Thank you.
    Mr. Murphy. I thank you and now recognize Mr. McKinley for 
5 minutes.
    Mr. McKinley. Thank you, Mr. Chairman. And thank you for 
appearing before us, Mr. Slavitt.
    Several comments, one, I think in your opening remarks you 
touched on some of your mission statement of providing 
oversight and assistance, but what was missing, I thought, and 
maybe because of my hearing loss I might have missed something, 
but I didn't hear about accountability, trying to give some 
guidance to the people not only on your own staff but those 
affected parties with it. And the chairman talked a little bit 
about accountability. And I know coming from the private 
sector, there is accountability.
    Just a quick grab this morning of things here with a person 
that, because he had committed fraud, he is going to spend 30 
months in prison. Here was another one that paid $7 million in 
restitution to NIH. Here is another individual who is going to 
serve 27 months for $335,000 in fraudulent documentation. And 
here is another person who is going to spend 364 days in a 
county jail for $31,900 in inappropriate expenditures.
    So what I am wondering about here a little bit is what are 
we doing? Are we just checking the box that you are providing 
guidance, or are you holding people accountable either in your 
department or at the effective--like Arkansas? Is anyone going 
to be held accountable?
    Mr. Slavitt. We are accountable for making sure that the 
Federal tax dollars are getting spent properly, and we're 
accountable and have been collecting Federal tax dollars when 
they have been misused or not--they're not----
    Mr. McKinley. OK. Could you tell me, has anyone lost their 
job?
    Mr. Slavitt. In the State?
    Mr. McKinley. In the State or in your own department if you 
caught--they have given inappropriate advice. These people all 
have gone to prison as a result of doing something wrong.
    Mr. Slavitt. I can't speak to what's happening in the 
States, but I would tell you that just because a State 
misclassified information doesn't necessarily mean that they 
did it with intent. And each case, as you know, it's case by 
case.
    Mr. McKinley. Well, I keep looking for a good analogy and a 
quick term, and I guess you seem to be like a policeman or a 
State trooper along the road trying to keep people and guide 
and keep them under control, but when they speed, they are 
ticketed; they are fined. I am just wondering what you are 
doing----
    Mr. Slavitt. All----
    Mr. McKinley [continuing]. Your accountability for that. If 
they abuse it, then they should be paying for it.
    Mr. Slavitt. Well, we're certainly willing to make all of 
these things a matter of public record, as we have.
    Mr. McKinley. But you don't have anyone who has been held 
accountable for anything going on?
    Mr. Slavitt. I'm sure there's been people throughout 
exchanges who've lost their jobs----
    Mr. McKinley. Can you share that back with me, names of 
any--just give me a handful of names because surely during this 
process, as convoluted as it has been, that someone should be 
held accountable for it.
    And just in closing, you had mentioned about the 
affordability. I would--with all due respect, I have a little 
problem because in West Virginia we only have one exchange 
representing the majority of the State, and their costs are 
going to be increasing 19.7 percent if their rate is approved. 
That is not affordable. What should be done? What can we do in 
West Virginia, almost a 20 percent hike in premiums?
    Mr. Slavitt. Yes, so I believe West Virginia has seen its 
uninsured rate move from 17.6 percent down to 8.3 percent. I 
think we are----
    Mr. McKinley. No, that is not the question. My question is 
about affordability.
    Mr. Slavitt. Yes. I'll----
    Mr. McKinley. That is part of the title here of this bill, 
is the Affordable Care Act, but under the entitlement, they 
can't afford it.
    Mr. Slavitt. Sure. I'll be happy to get back with you on 
specifics around the State of West Virginia. What I can tell 
you is for the majority of the residents, they still have 
opportunities to get covered for less than $100 a month. No 
doubt we take affordability seriously and there is a lot of 
work to do there, and I'm happy to visit with you about the 
State specifically.
    Mr. McKinley. I would love to hear it, and I just want to, 
again--going to close again with just----
    Mr. Slavitt. Of course.
    Mr. McKinley [continuing]. I want accountability. And that 
is what we started with. Who is going to be responsible for 
what is happening out here all in Federal Government? That may 
be just in yours right now is over this Affordable Care Act? 
Who is being held accountable? I look forward to talking to 
you.
    Mr. Slavitt. OK.
    Mr. McKinley. Thank you. I yield back my time.
    Mr. Murphy. Mr. McKinley, when you referred to the 
affordability, are you referring to the premiums----
    Mr. McKinley. Yes.
    Mr. Murphy [continuing]. Deductibles----
    Mr. McKinley. Just----
    Mr. Murphy [continuing]. Who pays all the----
    Mr. McKinley. I am talking about the premiums themselves 
were 19.7 percent increase.
    Mr. Murphy. I understand, but I think there is also concern 
for the deductible, so if you could also get that information, 
that would be helpful.
    Mr. Slavitt. OK.
    Mr. Murphy. I now recognize from Florida, Ms. Castor, 
recognized for 5 minutes.
    Ms. Castor. Thank you, Mr. Chairman. And good morning, Mr. 
Slavitt.
    Mr. Slavitt. Good morning.
    Ms. Castor. Survey after survey published by Government and 
nongovernment sources over the past year all confirm that the 
percentage of uninsured Americans has declined substantially 
due to both the Affordable Care Act exchanges and marketplaces 
and also due to the expansion of Medicaid in many States. In 
fact, the census data from September found that the uninsured 
rate dropped in each and every State, and this is a wonderful 
accomplishment. It was one of the overriding goals to ensure 
that our neighbors have that very basic fundamental access to 
affordable health care.
    Although all States saw reduction in the uninsured rate, 
States that setup their own State-based marketplaces and 
expanded Medicaid saw the greatest gains. For example, 
according to the census data--and Mr. Yarmuth will like this--
from 2013 to 2014 Kentucky showed an over 40-percent drop in 
the uninsured rate. Oregon's rate dropped 34 percent, and 
Minnesota's rate dropped 28 percent. And further declines in 
uninsured rates are likely to continue into the next year.
    Now, Florida, my home State, doesn't have a State-based 
marketplace, but we are going gangbusters on the number of my 
neighbors now that have access to an affordable plan. And it 
was announced just last week that, as my neighbors enroll and 
renew coverage, we are approaching over half-a-million so far 
just over the past 4 weeks. That is out of the 2 million all 
across the country that are renewing in the Federal 
marketplaces.
    And if you all are looking for a holiday gift for a loved 
one, for your son or daughter or niece or nephew, be sure to 
get them enrolled by December 15 because then they can start 
their coverage on January 1.
    We are very fortunate in the Tampa Bay area the average 
cost of our standard exchange insurance plan is actually 
dropping this year, and so it is very helpful to have that 
competition. In areas where we have that competition, the costs 
of plans are actually going down.
    But back to the State-based exchanges, Administrator 
Slavitt, what did these declines in the uninsured rate tell us 
about the State-based marketplaces? Do you think that they are 
succeeding overall?
    Mr. Slavitt. Yes, Congresswoman, I think they are. I think 
the State-based market places are on average doing even better 
than the Federal marketplace reductions in the uninsured.
    Ms. Castor. And do you have a sense of how many people have 
enrolled in coverage through the State-based marketplaces so 
far?
    Mr. Slavitt. As of June 30, I think the number was roughly 
2.9 million people.
    Ms. Castor. And what role have the premium support played 
in that, and who receives the premium support? Who is it 
available to?
    Mr. Slavitt. Sure. So the cost-sharing reductions and the 
tax credits that are available through the Affordable Care Act 
really are allowing people to afford their coverage for the 
first time in many of these places. So it's been a big impact.
    Ms. Castor. And what we found in Florida is, you know, it 
is kind of complicated for folks who have never had the ability 
to afford health care before. The navigators are playing a very 
important role because they will sit down with you and go 
through all of the options and what makes sense for you or your 
family. And you have seen this same thing across the country?
    Mr. Slavitt. Absolutely. Absolutely. I was just at a 
community center and saw the exact same thing.
    Ms. Castor. And what more can we do to continue to lower 
the uninsured rates even further?
    Mr. Slavitt. So we are willing to work with any State that 
hasn't yet expanded Medicaid that has an interest in having a 
conversation about----
    Ms. Castor. Yes, that is my State. Boy, we have thousands 
and thousands of my neighbors, and it has just been--Governor 
Scott has been so intransigent while it shows that it would 
lower costs. The chamber, businesses, hospitals are behind it. 
OK, you are willing to work, but what happens when you run into 
this brick wall of unreasonableness and unwillingness to expand 
Medicaid?
    Mr. Slavitt. Exactly. Well, we're willing to work with any 
State. We know the States have their own sets of local 
circumstances and concerns, and we're willing to entertain them 
on their terms. We are open for business for States that are 
interested.
    Ms. Castor. I know you are still willing to talk to 
Florida. I hope we can put the coalition together again to do 
it. And even though we have those challenges in certain States 
on Medicaid and there are going to be glitches and audit 
reports that are not so favorable in some ways, it is still 
important to remember the purpose of these exchanges and the 
grants that support them is to provide affordable health 
coverage. And it is great to see that the Affordable Care Act 
is providing that lifeline to affordable coverage and consumer 
protections and the State and Federal exchanges are achieving 
those goals. So thank you very much.
    Mr. Murphy. The gentlelady yields back. I now recognize Dr. 
Burgess for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman.
    Mr. Slavitt, I am going to depart a little bit from the 
stated purpose of the hearing. It is so rare that we get the 
CMS Administrator in here. I think it's been 2 or 3 years, so 
there are some things that I feel like I need to ask you since 
I have the opportunity to do so.
    But first, I just want to offer to colleagues on the other 
side of the dias complaints that no one on the Republican side 
is trying to improve anything in health care, I have a bill out 
there, have had for some time, H.R. 1196, which would allow the 
bronze- and silver-level plans to be each considered as an HSA-
compatible plan by definition.
    One of the mainstays of the Affordable Care Act is you have 
got high-deductible, high-cost insurance. In the old days when 
I had an HSA I bought for a lower premium, I had a higher 
deductible and I could put some of that money away to use for 
that high deductible. We have made it very, very difficult for 
people who have these high deductible policies, but again, I 
encourage people on the other side of the dais to look at H.R. 
1196. If you can suggest improvements to it, perhaps we have 
something to talk about.
    But the basis is that every bronze or silver plan would be, 
by definition, HSA-compatible. You wouldn't have to look, you 
wouldn't have to fight, you wouldn't have to try to find one 
that was HSA-compatible. They all are or they all would be.
    And then the other thing is really pretty straightforward. 
Currently, I have a health savings account. I am capped at 
$3,400 a year that I can contribute, but my deductible is 
$6,000 on a bronze plan and the PPO, so why not make those two 
amounts equal? And if the deductible is $6,000 in a bronze- or 
silver-level plan, let that be the cap on the amount that could 
be put away into the health savings account.
    Now, as I sit here and I listen to discussion on both sides 
of the dais, you know, I feel like I am stuck in a Dickens 
novel. It is the best of times, it is the worst of times. So, I 
mean, I think a fair observation is that the Affordable Care 
Act has never had, never had even a plurality of positivity. It 
is about a 52 to 53 percent negative right now when you look at 
the polling numbers. You have to ask yourself you are giving 
something away, why aren't people liking it more? And the 
answer is because even though you are giving something away, it 
is still really expensive to live under the Affordable Care 
Act.
    Now, my personal experience, I rejected the special deal 
for a Member of Congress and I just took a bronze plan, and the 
HealthCare.gov, one of the most miserable experiences that I 
have ever been through with trying to get signed up for the 
darn thing, but look, I have got an insurance premium that is 
higher than I have ever paid in my life. I have a deductible 
that, quite honestly, leaves me, at least in my consideration, 
functionally uninsured. People have asked me, well, is your 
doctor even on the list of providers you even go to? I don't 
know because I am not going to look because I am not going to 
go to the doctor. If I can't fix it myself, then, OK, that is 
that, but I am not going to spend $6,000 on an office call or 
an ER visit. And most people actually fall into that category.
    So once again, even though you have people with insurance, 
you have people who are financing a lot of their day-to-day 
healthcare needs out of cash flow, which is exactly the way it 
was before. The only difference was you could in fact buy an 
affordable policy before. Now, you simply cannot. And oh, by 
the way, we are going to fine you if you don't do that.
    I also have a question about some of the implementation on 
the Affordable Care Act, and I apologize for doing this to you 
without warning you before, but section 1311(h), subsection 
(B), which deals with--of course, this is talking about the 
exchanges, (h) deals with quality improvement, enhancing 
patient safety. It talks about (A) a hospital with greater than 
50 beds, the next paragraph is (B) a healthcare provider. And 
here, our healthcare provider can work in the exchange only if 
a provider implements such mechanisms to improve healthcare 
quality as the Secretary, by regulation, may require. And the 
start date for that was January of this year.
    So I guess my question to you is have the rules been 
written on 1311(h) when my provider friends ask me where is 
this in the rulemaking process? Has that in fact happened? Are 
people going to be excluded from the exchanges because they 
don't meet the Secretary's definition of quality? And has the 
Secretary defined quality? And are those definitions likely to 
change?
    Mr. Slavitt. Yes. Thanks. So I think your question is 
relative to how we're implementing the quality provisions in 
the Affordable Care Act relative to exchanges. I could spend 
more time with you either here or in another setting kind of 
taking you through the quality steps. We're introducing a whole 
series of quality reporting measures that are going to be 
coming with the exchange shortly. If I think I understand 
your----
    Mr. Burgess. Have you excluded a provider based on quality?
    Mr. Slavitt. Yes. I'm not sure I understand your question 
correctly. I want to make sure that I study that particular 
subsection. You know, we do reviews, and I think we do reviews 
based on the network adequacy. I'm not sure that we've yet 
excluded any provider for quality purpose at this point, but I 
will get back to you.
    Mr. Burgess. Thank you.
    Mr. Slavitt. Thank you.
    Mr. Murphy. Thank you. I now recognize Mr. Tonko for 5 
minutes.
    Mr. Tonko. Thank you, Mr. Chairman. Welcome, Administrator.
    Administrator Slavitt, as you mentioned in your opening 
testimony, we need to keep in perspective that the Affordable 
Care Act is working, and it is working best in States that have 
embraced the law and taken advantage of the tools that the 
Affordable Care Act provides.
    When States take ownership of the law and its benefits, the 
residents of that State see better outcomes. Let me use as an 
example my home State of New York. We expanded Medicaid. We set 
up our own exchange, the New York State of Health. And this 
year, we are one of the first States to utilize the basic 
health plan option known in New York as the Essential Plan. The 
Essential Plan will help people toward the lower end of the 
income spectrum but above the Medicaid eligibility line to gain 
access to quality health insurance for as little as $20 per 
month.
    Because New York has taken a proactive approach to 
healthcare reform, the citizens in our State have reaped the 
benefits. More than 2 million New Yorkers have enrolled in 
coverage because of the Affordable Care Act.
    Certainly, with that in mind and across the board States 
have pursued the State-based marketplace models. And they are 
serving as laboratories for innovation, testing new models for 
enrollment, insurance market oversight, and consumer 
protection. And they are tailoring the ACA to their own given 
citizens.
    With that in mind, Administrator, California has been a 
leader in the active purchaser model. Can you explain what this 
is and how this has helped cover California ensure access to 
high-quality affordable health insurance coverage?
    Mr. Slavitt. Yes, thank you for the question. Yes, I think 
this is an example of a State innovation where California has 
really been, as the description says, actively involved in 
defining the benefit offerings for the residents of their 
State, and I think quite successfully given--I think both the 
number of people that have been covered but also the management 
of the rate of costs has been, I think, quite good, and they've 
done a very nice job.
    Mr. Tonko. Now, are other States taking similar approaches 
that you know of----
    Mr. Slavitt. Yes.
    Mr. Tonko [continuing]. To certify, you know, qualified 
health plans?
    Mr. Slavitt. I believe there are several others, yes.
    Mr. Tonko. OK. Any number that you have in mind of how many 
States?
    Mr. Slavitt. Yes, let me get back to you on the exact 
number----
    Mr. Tonko. OK. Thank you. And what other steps are the SBMs 
taking to improve the quality of care to transform the 
healthcare delivery system?
    Mr. Slavitt. So I got back from a tour of several States, 
and, you know, they're each doing unique, innovative things. 
Some are health fairs, some are, you know, reaching out into 
communities where they've got specific needs. But again, I 
think this is a benefit of the model of a State operating their 
own exchanges. It gives them more control to be able to tailor 
things to the needs of their population.
    Mr. Tonko. And as we move forward, does CMS plan to 
encourage States to set up and operate their own exchanges? 
What Federal support will exist out there, will remain for our 
other States to plan to continue to operate their own 
exchanges?
    Mr. Slavitt. Well, of course, there is no more new grant 
funding, and of course the law provides every State the 
flexibility to make their own decision, but we will of course 
support any State that wants to set up a State-based 
marketplace. And, you know, today, if a State wants to do this, 
they get the benefit of all the best practices and lessons 
learned that the States that originally did it didn't have 
access to.
    Mr. Tonko. Right. Do you hear from residents of these given 
States that have not expanded Medicaid, Medicaid for example or 
establish their own exchanges? Do you hear from any of the 
consumers?
    Mr. Slavitt. We do. We do frequently.
    Mr. Tonko. And what is that dialogue like? Is it one of 
concern, frustration?
    Mr. Slavitt. You know, I think anybody who doesn't have 
coverage has to manage their own personal family situation very 
differently than the rest of us do. You know, they don't do 
things typically like let their kids play a sport in school 
because they might get hurt or injured. So there's a whole set 
of things that, you know, in the insecurity of people's lives 
that, you know, those of us that have insurance don't have to 
deal with every day.
    Mr. Tonko. OK. Well, I certainly appreciate the work that 
you are doing. I know that it takes a lot of focus and 
concerted effort to move us and to transition us to a new era 
of healthcare delivery, and we thank you for the work that you 
are doing at the agency.
    With that, Mr. Chair, I yield back.
    Mr. Murphy. The gentleman yields back.
    I now recognize the gentleman from Texas, Mr. Flores, for 5 
minutes.
    Mr. Flores. Thank you, Mr. Chairman. I thank the witness 
for joining us today.
    The ACA required the State-based exchanges be self-
sustaining on or after January 1 of 2015, at which point, 
according to CMS, States could no longer use grant funds to 
cover maintenance and operating costs. And yes, as you heard 
earlier today, according to the GAO report, the greatest 
challenges that States with State-based marketplaces are 1) 
inadequate staff and 2) inadequate funding.
    And you answered a question earlier, and in that question 
you said this: You said State-based exchanges are doing better 
than Federal exchanges. So given that the GAO report says that 
the State-based exchanges are having problems, that doesn't 
foretell good news for the Federal exchange.
    Continuing, according to the GAO, none of the State-based 
exchanges were fully operational on all the required functional 
categories as of February 2015. You heard that from Mrs. 
Blackburn's question. Four State-based exchanges have already 
transitioned to the Federally Facilitated Marketplace because 
they failed to be self-sustaining. So my question is this: How 
many more State exchanges do you expect to fail and make the 
transition to the Federal exchange?
    Mr. Slavitt. I believe what I said earlier was that States 
have been even more successful at reducing the uninsured rate. 
The national average has been about 45 percent. States that 
have State-based exchanges have done about 47 percent. So I 
think both are successful, States even more so. All the States 
have----
    Mr. Flores. OK. Let's go to my question.
    Mr. Slavitt. OK.
    Mr. Flores. So do you expect more State exchanges to fail 
and make the transition to the Federal exchange?
    Mr. Slavitt. So all the States have access to a source of 
their own funding either through an assessment that they have 
on the health insurers in their State or----
    Mr. Flores. So are you saying no State exchanges are going 
to fail?
    Mr. Slavitt. I'm saying all States currently have sources 
of funding now. Because it's a dynamic world, we do an 
evaluation at least twice a year----
    Mr. Flores. OK. Based on those evaluations, how many State 
exchanges do you expect to be unsustainable and to fail and 
move to the Federal system?
    Mr. Slavitt. Well, I can't predict who's going to come into 
the Federal exchange in large part because there's a lot of 
factors, including----
    Mr. Flores. OK.
    Mr. Slavitt [continuing]. Their own decision about whether 
or not they want to----
    Mr. Flores. So let me continue. Given this trend, do you 
think the self-sustainability is and always has been a serious 
situation facing these exchanges, the State exchanges?
    Mr. Slavitt. So, as I said, as of today, all of the States 
are sustainable. Whether they will be in the future, I'm not 
willing to predict. But----
    Mr. Flores. OK.
    Mr. Slavitt [continuing]. As of today they are.
    Mr. Flores. Well, I don't think the--the underlying 
economics of the ACA have not changed since its inception. Now, 
was there any work that CMS did that could have predicted that 
these State exchanges would fail? I mean, did you know in 
advance that any of the State exchanges would fail because of 
sustainability?
    Mr. Slavitt. So a lot of this comes before my time, but I 
wouldn't----
    Mr. Flores. OK.
    Mr. Slavitt [continuing]. Classify a challenge as a 
failure. I think every State has had challenges, but every 
State today is successfully enrolling individuals in their 
State, and every State has sources of funds sufficient to run 
their operations. So I would measure that as a success.
    Mr. Flores. When CMS awarded $5.5 million in Federal 
marketplace grants for States to set up State-based exchanges, 
how could it have expected States like Hawaii or Nevada to 
sustain their own exchanges?
    Mr. Slavitt. So, again, these are decisions that were made 
before my time, so I can't speak to what was being thought of 
at the time. I can tell you that it's an ongoing process for 
States to make that evaluation, and as I think you're aware, 
the States of Nevada and Hawaii have decided it would be more 
efficient for them to operate maintaining the State-based 
exchange----
    Mr. Flores. Well----
    Mr. Slavitt [continuing]. But use our platform.
    Mr. Flores. It would be more efficient because they are 
broken, they couldn't afford to sustain themselves.
    You have had us ask questions in the past how much has been 
recovered. I would ask for granularity on that from which 
States and how much each States still owes that they have not 
repaid back the Federal Government.
    And the last question is this: How will you ensure the 
States have not used and will not use grant funds for operating 
expenses after January 1 of 2015?
    Mr. Slavitt. So, yes, I will provide that information that 
you requested.
    And we do this through several steps. Most importantly is 
to prevent them from spending the money improperly in the first 
place. And I think, as I said, this year, 2015, on 69 occasions 
we have rejected a State's request to spend the money 
improperly. Now, if it turns out that they have for some 
reason, we conduct an audit and we go back and then we go 
through a collection process, as I've said. The first several 
States that we've begun the collection process for have begun 
to refund money, and we take that very seriously.
    Mr. Flores. OK. Thank you. I yield back the balance of my 
time.
    Mr. Murphy. The gentleman yields back. I now recognize 
another gentleman from Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. Mr. Slavitt, thank you 
for being here and thanks to CMS for working with us on 
something other than the GAO report.
    Blue Cross Blue Shield recently announced that they would 
no longer be offering a PPO plan in the national exchange in 
Texas and also the individual market. This would mean there are 
no PPO plans on the individual and exchanges policies. As a 
result, specialty hospitals like M.D. Anderson in Houston and 
Texas Children's Hospital will be out of network on individual 
plans for that. Group plans are not under the same decision, so 
they will still--they have PPOs.
    Blue Cross and Blue Cross Blue Shield Texas pulled the PPO 
plans citing that it is no longer financially feasible, that 
they cannot raise rates for PPOs without raising the rates for 
all the plans. This problem is not just limited to the Texas 
example because we are a national exchange and not a State 
exchange but, as reported, it is an issue in other exchanges 
across the country.
    What can CMS do to address the issue of network adequacy 
that ensure that plans with premier and specialty hospital in 
network are available to consumers in the original market?
    Mr. Slavitt. Thank you for the question.
    So we have just released a proposed rule around network 
adequacy. The National Association of Insurance Commissioners 
has also done some work in this area. But let me also say that 
this is an early stage of a market, and consumers are in the 
process of communicating, through what plans they choose, what 
things they're willing to pay for and what things they value 
and what things they don't.
    And the health plans, I think, are in the process of trying 
to figure out how to create offerings that are affordable and 
meet the needs of individuals. So I do need to recognize this 
is still in year 3 of an early set of offerings, and I think if 
consumers suggest that they will want certain things in their 
networks, then my suspicion is that the health plans in those 
States will begin to make those things available.
    Mr. Green. OK. Well, the Houston market, if you don't have 
Texas Children's or M.D. Anderson or a major full-purpose 
hospital that is in our medical center, you know, that is going 
to limit their opportunities for even using, whether it is 
under the Affordable Care Act or the individual market that I 
know we don't have an impact on. From your perspective, are 
there any actions that Congress can take to address this issue?
    Mr. Slavitt. You know, I think all of us should continue to 
listen to residents and make sure that we adjust and adapt, 
whatever our regulations are or however we are, you know, 
viewing this in the context of making sure that people are 
getting their basic sets of needs met. And we make sure that 
there's sufficient network adequacy and we do a review prior to 
allowing the State to go onto the exchange. And if we hear of 
problems, we'd like your office to let us know of specific 
instances.
    Mr. Green. OK. We will be glad to.
    Let me talk a little bit about the open enrollment for 
2016. November 1 marked the beginning while open enrollment 
continues to the end of January. I mentioned about hearing how 
things are going. I realize you may not be able to speak to the 
Federal marketplace in terms of early data, but how are things 
going with the current open enrollment period, and how many 
folks are shopping for and signing up for some of the plans?
    Mr. Slavitt. So as of November 28, I think we've had 3.5 
million applications this year during the open enrollment 
season, and there have been about 2 million plan selections, of 
which I believe 1.3 million have been to renew coverage and 
700,000 have been to get new coverage. And of course we are now 
just beginning what has been a very big ramp-up period between 
now and December 15. People tend to be deadline-driven, and 
this week we are seeing that acceleration that we expect to 
continue on through the middle of December.
    Mr. Green. Having done events in our district in an urban 
area in Houston, both with the original sign-up and the second 
time, you are right, we all procrastinate. What types of 
indications are you receiving from the States on their 
enrollment? Any information on how enrollment is going in 
States that have their own plans?
    Mr. Slavitt. I've seen some preliminary data. It looks to 
be pretty close to on track to what they expected so far.
    Mr. Green. OK. I understand several State-based 
marketplaces, as well as HealthCare.gov, are offering enhanced 
shop-and-compare tools that enable consumers to make smarter 
choices regarding their coverage option. Administrator, could 
you elaborate on these efforts and what type of tools are State 
marketplaces offering consumers, and why are such innovations 
important?
    Mr. Slavitt. Sure. You know, I think this allows me to 
speak to the question that was raised earlier about 
deductibles, and I think one thing that's very important for 
consumers to know is 80 percent of consumers--I believe is the 
right number--have access to plans that offer services like 
primary care visits and prescription drugs outside of the 
deductible. In other words, they don't need to meet their 
deductible before they hit them.
    And the tools that you're describing allow people to 
understand whether or not a physician is in their network, 
whether or not a drug is covered in a specific plan, and of 
course how to make the tradeoffs sometimes that exist between 
coinsurance and premium levels, which I think is a complicated 
thing for people. So State-based exchanges, as well as the 
Federal exchange, all have those types of tools. And I 
shouldn't say all, many of them, and certainly the Federal 
marketplace, have those tools available.
    Mr. Green. OK. Thank you. Thank you, Mr. Chairman.
    Mr. Murphy. Thank you. I now recognize the gentleman from 
Oklahoma, Mr. Mullin. You are recognized for 5 minutes.
    Mr. Mullin. Thank you, Mr. Chairman. And, sir, thanks for 
being here today. I know that sometimes that seat must get 
uncomfortable. But there are real questions and real concerns, 
and I don't want people to get caught up thinking that this is 
a partisan issue because really this is about taxpayer dollars, 
and what has been going on with it, and if they are being 
misused.
    You know, if we remember back, this was supposed to be 
budget-neutral, and that hasn't taken place, and so now the 
American taxpayers are on the hook for it. And what has 
happened with the dollars? Where are they going? What is the 
accountability process? So I kind of want to maybe go down a 
different path with you. My understanding is that States 
operate on the Federal exchange receive a 3.5 percent user fee 
for the platform. Is that correct?
    Mr. Slavitt. The health plans have a user fee, not the 
States.
    Mr. Mullin. The States--or the health plan does?
    Mr. Slavitt. Yes.
    Mr. Mullin. So what happens to the 3.5 percent user fee? 
Where does that go?
    Mr. Slavitt. The 3.5 percent user fee goes to fund State 
exchange operations.
    Mr. Mullin. So who pays that? Does the State pay that or 
does the----
    Mr. Slavitt. The health insurance company.
    Mr. Mullin. The company does?
    Mr. Slavitt. Yes.
    Mr. Mullin. So the user, the insurer pays it?
    Mr. Slavitt. Insurer, yes.
    Mr. Mullin. All right. So it gets passed down to them. If a 
State closes its marketplace and transitions into the 
HealthCare.gov, is it required to charge the 3.5 percent?
    Mr. Slavitt. If a State continues to operate as a State-
based marketplace----
    Mr. Mullin. Right.
    Mr. Slavitt [continuing]. But uses the Federal platform, we 
just have a rule that was proposed last month, that's proposed 
so it's still open for comment period, on what the fee would 
be, and the fee that's proposed is 3 percent for the use of the 
Federal----
    Mr. Mullin. The States that are currently on it, though, do 
they pay it? Does the insurers that participate in the fee 
States such as Oklahoma----
    Mr. Slavitt. It's proposed--I'm sorry, the States that 
are----
    Mr. Mullin. Well, we have some States that have obviously 
closed down and they have gone now, if I am not mistaken here, 
they have gone into the marketplace or they transition out of 
the marketplace into HealthCare.gov. Are they currently having 
to pay the 3.5 percent to participate in HealthCare.gov----
    Mr. Slavitt. I don't----
    Mr. Mullin [continuing]. Such other States that were 
already in it?
    Mr. Slavitt. Again, the States don't make the payments----
    Mr. Mullin. OK.
    Mr. Slavitt [continuing]. The plans do.
    Mr. Mullin. The plans do, but they are operating inside the 
State.
    Mr. Slavitt. The plans that--yes. And the proposed rule is 
for 2017. It would begin in January 2017.
    Mr. Mullin. So Oregon, Nevada, and Hawaii that recently 
came out----
    Mr. Slavitt. Yes.
    Mr. Mullin [continuing]. Their users inside the State, the 
insurers inside the State, are they required to pay the 3.5 
percent?
    Mr. Slavitt. No, they make a payment to the State.
    Mr. Mullin. OK. The current individuals----
    Mr. Slavitt. Right.
    Mr. Mullin [continuing]. The current States that are in it, 
are they paying the 3.5 percent?
    Mr. Slavitt. The three you just mentioned?
    Mr. Mullin. No, they just came into it.
    Mr. Slavitt. Right.
    Mr. Mullin. The current States that are already operating 
inside the HealthCare.gov.
    Mr. Slavitt. Yes.
    Mr. Mullin. They are paying it but the States that are 
coming out aren't?
    Mr. Slavitt. Yes.
    Mr. Mullin. OK. Why?
    Mr. Slavitt. Well, the law didn't contemplate a splitting 
of duties. One of the things that----
    Mr. Mullin. Well, the law didn't contemplate a lot of 
things. I mean, it didn't anticipate a lot of this. We get 
that. But if one State is--the users inside the State is 
required to pay for it and the other one isn't, then where is 
the offset coming from?
    Mr. Slavitt. So the first thing we had to do is determine 
how much is the appropriate amount to pay, given that the State 
maintains a lot of responsibilities. Remember, IT is just 30 to 
50 percent on average of all of the responsibilities relative 
to a State budget. So once that's done, we are now setting the 
fee for 2017, contemplating the fact that they have had that 
year that you've described. So we'll set it to make sure that 
we've essentially evened up the tables.
    Mr. Mullin. But the first year they've been waived?
    Mr. Slavitt. The first year they've been waived but the 
second-year fee contemplates the fact that they didn't pay for 
1 year.
    Mr. Mullin. So the next year they are going to go to 7 
percent?
    Mr. Slavitt. No, it's not 7 percent.
    Mr. Mullin. Well, so if you are making up for the loss 
year, then where does it come from?
    Mr. Slavitt. The States have their own--another set of 
duties. So the calculation is not as simple as 3.5 percent. The 
calculation is based upon what portion of the service that 
they're going to get from the Federal Government----
    Mr. Mullin. There are a lot of complications inside this 
bill, and we understand that.
    Mr. Slavitt. Yes.
    Mr. Mullin. There is a lot of figuring that we can't get 
to. I am literally trying to figure it out. If they are trying 
to make up for--simple math is if you waived it this year and 
they are trying to make up for it next year, then a 3.5 percent 
and adding an additional year to make up for it would be 7 
percent.
    Mr. Slavitt. Tell you what, that's not how the math works 
and I'm happy to go sit down with you and walk you through 
how----
    Mr. Mullin. Well, obviously, because I am confused in it, 
too. And I am really not trying to be difficult. I am just 
trying to figure out is Oklahoma making up for the lost fee? If 
they are missing it, the States already on it, are we having to 
pay for--the taxpayers inside Oklahoma, are they having to pay 
for the poor exchanges that were already set up and the 
failures of the taxpayers that they have already paid, on top 
of what they have having to----
    Mr. Slavitt. You know, I completely understand the 
question. It's a very fair question. I'll be happy to sit down 
and walk you through the math. The thing I want to just make 
sure is clear is that the States that are using the Federal 
exchange are still running call centers and 1095(a) collections 
and many, many other activities. So it's not as simple as just 
taking the whole fee and moving it.
    Mr. Mullin. And I will yield back in just one second. If 
you can set down with me, please put it on paper because I 
would like to share it with the committee because I think all 
of us need to figure this out.
    Mr. Slavitt. Yes, and as I mentioned, this is part of a 
proposed rule, so there are certain legal restrictions we have 
in terms of this, but I'm happy to do that.
    Mr. Mullin. Thank you.
    Mr. Slavitt. Thank you.
    Mr. Murphy. The gentleman's time is expired. I now 
recognize Mr. Yarmuth of Kentucky for 5 minutes.
    Mr. Yarmuth. Thank you very much, Mr. Chairman. And thanks 
to you, Administrator Slavitt, for being here and your work on 
this issue.
    As far as I am concerned, this is a very timely hearing 
because as we are sitting here, the inaugural events are 
underway for our new Kentucky Governor Matt Bevin, and he and I 
have very different perspectives on the Affordable Care Act in 
Kentucky. He has proposed as one of his campaign priorities to 
dismantle our State-based exchange, which is called Kynect.
    And I am very proud to represent Louisville and proud of 
the work of our outgoing Governor Steve Beshear in implementing 
the Affordable Care Act. With the expansion of Medicaid in our 
State and the successful launch of Kynect, we have seen more 
than 500,000 Kentuckians gain access to quality, affordable 
health care, and the uninsured rate in the Commonwealth has 
dropped by more than half, and in my district, by 81 percent--
--
    Mr. Slavitt. Wow.
    Mr. Yarmuth [continuing]. Which is pretty astounding. In my 
opinion, obviously, rolling back these successes would be 
shortsighted. It would jeopardize the health of a half-million 
Kentuckians, waste millions of taxpayer dollars, cost us jobs, 
hurt us economically.
    And I would like to ask you, Administrator, a few questions 
about what it would mean to undermine our successful exchange 
Kynect? I believe I am correct that about $280 million was 
spent in setting up Kentucky's exchange. Is that correct?
    Mr. Slavitt. Yes, the ballpark.
    Mr. Yarmuth. Pretty substantial investment. And is it true 
that if we were to dismantle Kynect and move into the Federal 
exchange that Kentucky taxpayers would have to pay about $23 
million?
    Mr. Slavitt. I've seen secondhand a similar number, but 
it's true that there'd be some expense to the State.
    Mr. Yarmuth. Yes. So millions of dollars would be spent to 
shut down what most healthcare policy experts consider to be a 
hugely successful exchange. As a matter of fact, one Republican 
State Senator Ralph Alvarado, who is also a physician, has 
proposed marketing our exchange to other States because it has 
been so successful. Would you, on behalf of CMS, consider 
Kentucky's exchange a success?
    Mr. Slavitt. I would congratulate Kentucky and the State 
and everyone involved that Kentucky's been a terrific success.
    Mr. Yarmuth. Now, segueing on Congressman Mullin's 
questioning, we know now that the Federal exchange would be--it 
would be a 3 percent roughly charge, which would be passed down 
to consumers in Kentucky. It is 1 percent. That is what 
insurance company plans pay in Kentucky. So clearly, if we 
moved to the Federal exchange, consumers would have to pay more 
for their policies, all apples and apples, is that correct?
    Mr. Slavitt. I think that's correct.
    Mr. Yarmuth. And would it be reasonable to assume--again 
reasonable to assume that they would be passed on----
    Mr. Slavitt. I think that's reasonable.
    Mr. Yarmuth [continuing]. Those costs. So shutting down 
Kynect will either raise health insurance premiums or drive 
insurers out of the market, cost taxpayers more than $20 
million, eliminating hundreds of jobs, and harming the Kentucky 
economy. Administrator, is there any way that you can think of 
that Kentucky consumers would benefit from shutting down the 
Kynect, our State-based exchange, and moving to the Federal 
exchange?
    Mr. Slavitt. Well, of course, by law these are State 
decisions, and we're willing to cooperate and support the State 
in any way we can. But it feels like Kentucky has done such a 
great job and it's been so successful that it feels like it's 
going to be a good course for consumers to stay where we are.
    Mr. Yarmuth. But knowing what you know about it, is there 
any way which consumers would benefit from that kind of switch?
    Mr. Slavitt. Not that I'm aware.
    Mr. Yarmuth. Thank you for that. Just before I close, one 
of the things that I think is important to recognize is that 
while some premiums have still gone up, why we still have 
issues with deductibles, and I am very glad that you gave that 
explanation in the last session about the reality of 
deductibles, that what we really need to focus on is figuring 
out how to deal with the high costs of health care. And we have 
seen incident after incident of pharmaceutical costs 
skyrocketing by several hundred percent or even 1,000 percent, 
and that's really something that Congress has not done a very 
good job in addressing. Would you say that is accurate? I know 
CMS tries to address much of that, but isn't that still the 
biggest problem we face in health care?
    Mr. Slavitt. It is one of the critical issues that we all 
have to address.
    Mr. Yarmuth. Right. I thank you for that and I yield back.
    Mr. Murphy. Thank you. The gentleman yields back. I now 
recognize Mrs. Brooks for 5 minutes.
    Mrs. Brooks. Thank you, Mr. Chairman.
    I have been very surprised actually that the other side of 
the aisle seems to have focused on the uninsured rate, Medicaid 
expansion, other things that really haven't been relevant, I 
don't think, to the oversight of today's hearing. I think it is 
our duty to provide that oversight because billions of dollars 
have been spent and are at stake. And I am very concerned about 
ensuring that our taxpayer dollars are spent effectively and 
efficiently, as I know you are, Administrator Slavitt.
    And I am concerned because you have indicated that the 
States--in Congressman Flores' testimony you indicated that the 
States have their own funding at some point, that the States 
have their own source of funding, and so I am curious if you 
would expand on those States with the exchanges, when the 
Federal dollars run out, what is the source of funding you are 
referring to?
    Mr. Slavitt. Sure. Thank you for the question.
    So most of the States, all but I think two, have some type 
of assessment that they assess the health plans that operate in 
the marketplace. In some cases it's a percentage, in some cases 
it's a percentage plus a flat fee, and in some cases it's based 
on how many members are enrolled. There are a few States that 
fund it directly out of their State budget as well.
    Mrs. Brooks. And because there are all of these different 
mechanisms and different ways States have decided to fund it, 
what confidence do you have that the different methods they 
have all chosen will be adequate so that the States will not be 
coming back to the Federal Government for more funding?
    Mr. Slavitt. Well, I have enough confidence that I need to 
make sure we check twice a year because things change with 
State budgets, things change with the membership, things change 
with enrollments, and sometimes we have to have difficult 
conversations with States to say to them, look, we don't think 
this looks like a very good future. Can you help explain to us 
why this makes sense? And in some cases there's a little bit of 
tough love, which results in some of the changes in the course 
that you've seen.
    Mrs. Brooks. Can you give us idea how many tough love 
discussions are you having?
    Mr. Slavitt. Well, an example of a tough love conversation 
might be Hawaii, which has been in--and it was in the process 
last year--of trying to decide what was the best course for 
themselves. And we had conversations where we made up numbers 
for them, and I think that made their decision to come to the 
Federal exchange.
    Mrs. Brooks. But how many States are you actually having 
discussions with about self-sustaining going forward in the 
future?
    Mr. Slavitt. So we're having discussions with all of the 
States. I wouldn't tell you we're concerned about all of the 
States but I would tell you that, you know, as a general rule, 
the smaller the State is, the greater the amount of effort we 
need to focus on them to make sure that they have a plan that's 
sustaining them.
    Mrs. Brooks. So do you have a chart that shows how many are 
you are confident they have got it, we are not going to have 
any problems with them? We are concerned or we are really very, 
very concerned that they are not going to make it? And how many 
people are in those different buckets?
    Mr. Slavitt. Ma'am, you----
    Mrs. Brooks. Or States----
    Mr. Slavitt. Congresswoman, you must know me well. I have 
hundreds of chart. And----
    Mrs. Brooks. I could tell.
    Mr. Slavitt. Yes. So, you know, I think I'd say that at 
this point in time we are confident that all the States are 
sustainable for the period of time that they need to be 
sustainable for.
    Mrs. Brooks. How long is that?
    Mr. Slavitt. Well, as I say, we look at least every 6 
months because of budget cycles, because of membership cycles, 
because of costs, because of other factors, and all I can tell 
you is that at any point in time if we believe a State is 
nearing the point when we think they may not be sustainable, we 
talk to them.
    I'll give you another example. We talked to Rhode Island, 
which is obviously a smaller State, and this was last year or 
earlier in the year, and told them they needed to increase 
their sources of funding. And they did that. But they did that 
because we had this kind of dialogue with them. So we try to 
get out in front of the problem and prevent it from becoming a 
problem along with the States, and the States have the same 
interests.
    Mrs. Brooks. Well, I appreciate that. And I am very 
concerned about the sustainability, particularly if we are only 
doing them in 6-month increments.
    In my brief time remaining, UnitedHealth has recently 
announced that it may leave the exchanges for next year. Could 
you please comment upon your thoughts about this announcement, 
what that might do to the exchanges and impact the 
sustainability of State exchanges if UnitedHealth, which is in 
my district, pulls out from all of these different exchanges 
because it has been a bad--``it was a bad decision for us'' per 
UnitedHealth?
    Mr. Slavitt. So, tell you what, I won't comment on any one 
specific health plan. I think the majority of health plans that 
have made statements in the last few weeks have been very 
positive about their involvement in the exchanges. I think the 
vast majority of people in this country have access to at least 
three plan choices. There are literally hundreds of insurers 
with thousands of plans, and at any given time there's going to 
be people entering the market and people exiting the market. 
Some will have good strategies, some will have not-so-good 
strategies. That's just how marketplaces will work as we 
interact with the private sector.
    Mrs. Brooks. OK. Thank you. I yield back.
    Mr. Murphy. The gentlelady yields back. I now recognize the 
gentleman from New York, Mr. Collins, for 5 minutes.
    Mr. Collins. Thank you, Mr. Chairman.
    Mr. Slavitt, in late September HHS ordered that the New 
York State co-op set up by the Affordable Care Act--Health 
Republic--to shut down. This past year, Health Republic insured 
about 20 percent of the individuals on the New York State 
health insurance exchange. So far, Health Republic's failure 
has cost taxpayers over $265 million and 155,000 New Yorkers 
were kicked off their current insurance plan last week.
    While other insurers in the marketplace picked up the 
displaced beneficiaries and honored the deductibles, there 
remains heavy concerns about Health Republic's outstanding 
liabilities to providers. Doctors have been calling my office 
complaining that their checks from Health Republic are 
bouncing. And I have seen estimates that hospitals in the State 
are owed at least $160 million.
    So into the questions, I understand that CMS reviewed 
Health Republic's financial filings and conferred with State 
regulators and co-op leaders during the setup and operation. I 
am assuming that is a correct statement?
    Mr. Slavitt. That's correct, Congressman.
    Mr. Collins. So I am curious, can you walk me through the 
decision-making process. Our concerns are why was the co-op 
Health Republic, with the largest taxpayer losses in the 
country, allowed to continue as long as it did, which was up 
until a week ago?
    Mr. Slavitt. So I would say we grew concerned about the 
financial situation of the co-ops with each consecutive 
financial report that they submitted, conducted our own audit, 
sent up our own people, and worked very closely with the 
Department of Insurance in the State.
    You know, I will tell you that in situations like this the 
most important thing from my perspective--and you mentioned 
it--is making sure we get as smooth a transition as possible 
for all of this--for all of the co-op consumers. So having a 
transition on December 1 all seamlessly--plans that honor the 
deductible was important and I think was great work from the 
Department of Insurance and the State. And I think that was 
very important.
    Your other points relative to--the ultimate collection of 
payments, I think, is more a matter of State policy regarding 
State guarantee funds and other potential avenues and tools. We 
stand ready to assist both consumers and that State in any way 
we possibly can.
    Mr. Collins. So, a simple question: Will the providers, for 
instance, 160 million of the hospitals and many doctors where 
the checks are bouncing, are they going to be paid with 100 
percent assurance?
    Mr. Slavitt. Again, that's a question that's better 
directed at the State because that's based on State policy.
    Mr. Collins. So the answer is no, they may not get paid?
    Mr. Slavitt. Again, you'd have to ask the State, but we'd 
be glad to cooperate in any way we can.
    Mr. Collins. I guess I live in a world if the answer is not 
yes, it must be no?
    Mr. Slavitt. The answer is I'm not going to speak for the 
State----
    Mr. Collins. OK. Well----
    Mr. Slavitt [continuing]. With all due respect.
    Mr. Collins [continuing]. I will take the lack of an 
affirmative as--if I am a doctor, I am going to start worrying 
come Christmas on my bounced checks because we don't have any 
assurance from you certainly at the Federal level they are 
going to be paid, and I think we all know how New York State 
does things.
    So now, you spoke to a smooth transition and that 
importance. Well, I will disagree with you on one thing. I 
believe taxpayer money is more important than a smooth 
transition when it comes to $265 million in losses adding to 
our debt.
    So it goes back to 2014, Health Republic lost $35 million. 
It is inconceivable to me what then happened. They were loaned 
an additional $91 million. I mean, I suppose is that like 
doubling down on a stock that loses all its value so you go buy 
more? I don't know other than your smooth transition how we 
squandered another $91 million, didn't ask any of the right 
questions, just said here is another $91 million, and sure 
enough, it is flushed. So can you speak to that $91 million 
after you knew they lost $35 million?
    Mr. Slavitt. Sure. The way that we have set up co-ops is 
the vast majority of the funding is needed to even set up the 
co-op in the first place to have enough capital to write 
members. And of course nobody knew how many members they were 
going to write because this is the new year of open enrollment.
    Mr. Collins. Sure. You know what, they were owed more than 
expected. Everyone else is complaining when they write----
    Mr. Slavitt. Right.
    Mr. Collins [continuing]. Less than expected, oh my God, oh 
my God. Health Republic signed up more than expected.
    Mr. Slavitt. They did. They did. And, of course, the first 
time you have an understanding of the ability to match claims 
to the premiums they've collected isn't for some time because 
of the way claims come in and because of the way the financials 
work. So it really wasn't until the middle of 2015 that we 
really started to have data that would give us reason to be 
significantly concerned about the State and about their ability 
to play claims given the----
    Mr. Collins. My time is expired but I can tell you the 
private sector we start worrying when someone says I just lost 
$35 million. That is when I have them starting to report 
hourly, daily, weekly----
    Mr. Slavitt. Yes.
    Mr. Collins [continuing]. Not just, hey, every quarter, 
``How did you do this quarter?'' ``Oh, we only lost $30 
million.''
    Mr. Slavitt. That's not a fair characterization of how we 
worked with the co-op.
    Mr. Collins. Well, it sure sounds like it to me. You lost 
another $91 million. I yield back.
    Mr. Murphy. The gentleman yields back.
    Mr. Slavitt, just a follow-up for Mrs. Brooks' question, 
and you had said you had some charts or things that relate to 
the State. Can you make sure you share this with this, too? I 
would love to see what--not all your charts. Apparently, you 
make charts of everything----
    Mrs. Brooks. Just the relevant ones.
    Mr. Murphy. The relevant ones to compare in the States. 
That would be helpful.
    Mr. Slavitt. Will do.
    I now recognize the gentleman from Indiana, Dr. Bucshon, 
for 5 minutes.
    Mr. Bucshon. Thank you, Mr. Chairman.
    I was a cardiovascular surgeon prior to coming to Congress, 
and I just want to say that, you know, I want everyone in our 
country to have access to quality, affordable health care.
    And that said, I feel compelled to comment on the uninsured 
rate and that coverage doesn't necessarily equal access. And I 
think that is a point that maybe people that aren't in health 
care don't necessarily get, in fairness. And I am not implying 
you but others that made comments because the Medicaid program, 
for example, traditional Medicaid is a program that doesn't 
reimburse providers at a level that many will accept, and even 
though people may have Medicaid, it doesn't necessarily access 
them to anything more than the emergency room, which they had 
access to when they didn't have Medicaid. And the data shows 
that that is the truth.
    In Indiana we are using Healthy Indiana Plan 2.0 to cover 
those citizens--and this is something that I support because it 
is a State-based way to manage Medicaid dollars more 
effectively and efficiently in my opinion, and it is HSA-based, 
which you have heard some comments about HSAs in the past, 
which does encourage more proper utilization of the healthcare 
system by the person who has the coverage because they actually 
have some of their own financial resources at risk if they 
don't.
    My question will be about the plans offered under the 
exchanges. I mean most of my questions have been answered about 
the technical aspects of what is happening with these plans, 
but, I mean, many, including yourself, have commented about 
$100 premiums. What percentage of people that are on the 
exchanges approximately are subsidized people? What percentage 
of people--or maybe the better question is that are getting 
coverage through the exchange don't get a subsidy?
    Mr. Slavitt. About 20 percent.
    Mr. Bucshon. So 20 percent don't get a subsidy?
    Mr. Slavitt. That's about right.
    Mr. Bucshon. And so the premiums for those folks, do you 
know what those are? I mean, what is the level of subsidy on 
average, for example, for a person on the exchange that is 
getting a subsidy?
    Mr. Slavitt. That's a tough question to answer. It depends 
on if they're silver, gold, bronze, and so forth, and the 
income levels and a variety of factors.
    Mr. Bucshon. OK. Because my constituents are complaining 
about the deductibles also. And again, the devil is in the 
details, right? If you pay $100 for a premium and you are being 
subsidized, most likely you are being subsidized thousands of 
dollars for your premium or maybe hundreds of dollars. But your 
deductible is $6,000 to $10,000.
    I would argue that better plans than that were available 
before the Affordable Care Act. You could do that on the 
individual and small group marketplace almost before the 
Affordable Care Act and do better with that lower deductible, 
better premiums. So I just don't see where, you know, we have 
created a huge advantage. The only thing we have done, as was 
pointed out, is we have mandated that people buy coverage.
    So the question in my view is is if someone has a 
deductible--say you are a family of four and, you know, say 
only one parent is working, whether that is the man or the 
woman and they are a schoolteacher and they have a $10,000 
deductible for their family when they have maybe an annual 
income of $55,000, $60,000 a year, is that good health 
coverage?
    Mr. Slavitt. Well, you and I have both been in health care 
a long time.
    Mr. Bucshon. Yes.
    Mr. Slavitt. My reflection would be prior to the Affordable 
Care Act health plans had--if you could get it, meaning you 
didn't have a preexisting condition and you had no regulated 
out-of-pocket maximum, you had higher rates of increase, and 
you could be dropped at any time. Now, you have free programs 
and services----
    Mr. Bucshon. Well, those are things--yes, that is true----
    Mr. Slavitt [continuing]. And 80 percent of folks----
    Mr. Bucshon. That is not the cost.
    Mr. Slavitt [continuing]. Have coverage outside of the 
deductible, and there's a whole array of options and services 
today. So by my estimation and by the people that we interact 
with who are getting coverage, you know, their lives are better 
today, notwithstanding your points about we have an 
affordability crisis in this country and we have--and not 
everybody can afford all the services that they need. Those are 
very legitimate concerns and we share them.
    Mr. Bucshon. Fair enough. What I was trying to point out 
with my deductible question is you could have gotten a policy 
with these type of deductibles and these type of premiums 
before the Affordable Care Act without massive subsidies from 
the Federal taxpayers subsidizing the premium to keep the 
premium low. And I think that is a fair statement. Of course, 
you know, there are always exceptions to every rule.
    But, again, the other concern I have with the exchange is--
my time is up. I will make this brief comment and then I will 
yield--is what I am hearing from hospitals and providers, the 
number one area of accounts receivable that they are starting 
to see is from insured individuals because they can't meet 
their deductibles. They can't pay that. So we have created a 
different problem.
    I yield back.
    Mr. Murphy. Thank you. The gentleman yields back.
    I now recognize the gentleman from North Dakota, Mr. 
Cramer, for 5 minutes.
    Mr. Cramer. Thank you, Mr. Chairman. Thank you, Mr. 
Administrator, for being here and for your incredible access. I 
have appreciated that, as has my staff.
    And I am going to shift gears a fair bit since I have this 
opportunity. And it might not surprise you that I want to ask 
you about a discussion we had previously that has since 
resulted in my dropping some legislation, and that is that last 
March when CMS released an interim final rule that gave 
authority to insurers that are offering plans on the exchange 
to denying nonprofit charities the opportunity to provide 
premium assistance. And since patients with rare diseases and 
catastrophic illnesses are oftentimes the utilizers of this 
kind of charity, this rule has really had the effect of pushing 
individuals with preexisting conditions of the health plans 
that they purchased in an exchange. So that really means fewer 
insured Americans and more patients with complex conditions in 
the Federal safety net.
    Now, obviously, under the ACA the law provides Federal 
subsidies for health insurance, as we are discussing. Why then 
did the administration offer a rule to prevent Americans from 
doing the same amount of charity that the Government does now?
    And, you know, since the release of the interim final rule, 
I think there is something like 30 or 31 States that have 
announced a prohibition. This seems to be completely 
counterproductive to the goals of the ACA. That is why I 
dropped the bill. It has already gotten very broad support. I 
could name names and you would go wow, that is a big swath. And 
most of us are between that swath.
    So can you tell me something that would give me some 
encouragement that may not require the law or that you are 
going to support the law change?
    Mr. Slavitt. Well, we share the same goal of trying to get 
everybody covered, and I appreciate your efforts in this area 
as well. Because we have an interim proposed rule, I am limited 
in what I can comment on the rule, but we do appreciate your 
input.
    Mr. Cramer. With that, I think we will just keep pushing 
for cosponsors of the bill and try and make it a law because it 
really is broadly supported both in Congress and certainly in 
the public.
    So with that, I have nothing further and would yield back. 
Thank you.
    Mr. Slavitt. Thank you.
    Mr. Murphy. The gentleman yields back. Well, thank you.
    In that case, Mr. Slavitt, I just want to note that in 
November 24 the committee sent a letter to CMS regarding the 
failure of 12 out of 23 co-ops or nonprofit insurers set up 
through the ACA. These 23 co-ops were funded by Government-
backed loans to the tune of $2 billion. CMS's response to the 
co-op letter is due today so I don't know if you have that in 
your briefcase. We would love to see that letter today. And you 
will be complying with that request then?
    Mr. Slavitt. We are working on your letter, absolutely. We 
have got a few of them to do, but we are--it is a high 
priority.
    Mr. Murphy. Thank you very much.
    Mr. Slavitt. We'll answer all your questions.
    Mr. Murphy. We appreciate it because we would like to, as 
you would, get some answers to this so we need to pursue that. 
And we will receive the other documents we requested. You have 
already stated that, so thank you.
    In conclusion, I want to thank you for coming today and the 
Members who have participated in today's hearing. I remind 
Members they have 10 business days to submit other questions 
for the record, and I ask also, Mr. Slavitt, you agree to 
respond promptly to those questions.
    And with that, this subcommittee is adjourned.
    [Whereupon, at 11:53 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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