tv Key Capitol Hill Hearings CSPAN August 3, 2015 9:00pm-11:01pm EDT
might be observed outside the country where they are likely doing business? i think the short answer is do they they? there's no clear answer to that. that factor is enough that make big businesses responsible are not going to touch it. >> when you talk about extra toratorial defense, that's a loser from point go. if you don't have proper legal authority it's a disaster mainly because in ground circumstance you're dealing with a personal threat to your life. the way the law is written it has to fit that criteria. this, you could never make that legal argument here number one and number two when you decide you're going to breach territorial jurisdiction and go after someone, you have opened up a can of worms which is well beyond the scope of your threat. that's where i think we have to -- our policy is not there. we don't even in this united
states have a good offensive policy. i think it was admiral rogers not that long ago within the last few months said just as much as that, that we don't have a good cyber offensive policy. we talked about it ed a inad infinitum in classified settings for the entire 10 years i was on the intelligence community. we could never get consensus to move to the next place what that cyber offensive is. as a personal note i saw the administration say they will make china pay for the consequence of the opm hack. i can't wait. i cannot wait to see what the heck that thing is. candidly, i'm not too excited about what's going to be. we haven't crossed that threshold to bring everybody in this room to deal with this problem. long answer to your question i don't believe they can go extra territorial to what they perceive is a threat at that point. >> thank you so much.
all right. we want to get you out in a relatively timely fashion. if we can ask y'all to reclaim or your seat or somebody else's. while we're getting our seats before i turn it over to the panelists for this discussion, i want to read a very short paragraph. there is an intellectual no man's land where military and political problems meet. we have no tradition of systematic study in this area and thus few intensely prepared
experts. the military profession has traditionally depreciated the importance of strategy where politics are important as compared to tactics. now we are faced with novel and baffleing problems to which we try the adapt certain ready made strategic ideas from the past. if we examine the origin and development of these ideas we may be better able to judge whether they actually fit this present and future. this was written in 1959 by bernard brodie in this is treaty and strategy in the mission age. i recommend to it all. his calls for new ideas in scholarship to deal with the atomic age helped the u.s. create the doctrine and capabilities that guided us for the last half century at least. i would add to brodie's assessment is there an interested elect intellectual no man's land where military and political problems meet and have no discussion in this area.
within our monograph and in our earlier seminars, i have turned to earlier work i and others did on the nuclear kill chain and thought about its applicability to this evolveing threat of cyber and economic warfare and vast differences namely the hurdle for development and acquisition and use. also what i call in one of the previous panels somewhat referenced it, could we be in a war and not notice metric. i think it would be hard to ignore the use of a nuclear weapon. as we heard in our last panel we are fully engaged in a cyber economic war. the kill chain of needed capability so to speak may have to be thought about differently. nonetheless, it's basic element elements, intelligence and warning, te der rents, detection, frisk, intradiction, battle management, consequent management and battle and recovery serve as useful way for our current capability as
doctrines and technologyies we need going forward. at this point i want to welcome our amazingly talented individuals to talk about the nexus of policy and technological developments. the first is executive director of the defense of foundation democracyies where he leads on nonproliferation and expert on sanctions and testified before congress and advised the u.s. administration, congress and numerous foreign governments on iran and sanctions issues. he heads the foundation fdd center on sanctions and elicit finance and co-author of more than a dozen studies of economic sanctions against iran. mark, off to you. >> great. >> sam thank you very much. i hope you will keep me to my five minutes, maybe give me a nudge if i'm over five minutes. i will try to make my remarks first. i want to thank sam for involve meg in this project.
a fascinateing project with amazing people to be involved with. ken, thank you for hosting this and allowing fdd to co-host this and mike and-- mark and michael. and thanks to the young woman who co-authored this, annie, who co-hosted this in new york and the next generation of economic warriors. juan knows her very well and samantha knows her very well. it's satisfying to the three of us when we're playing golf in our retirement someone like annie will be continueing the fight. we talk a little bit about the paper we wrote together. i want to put this in context. the paper is called cyber swift warfare. we call it swift warfare because the case study we dealt with is the swift financial messageing global system. if i want to wire money to juan my swift citibank has swift code
codes and chase manhattan has swift codes and the way our two financial institution talks to each other so i can wire money to juan which i do often. [ laughter ] no, no, absolutely. the key looking at swift was swift really was the high point of the u.s. government's economic warfare campaign against iran. it reminds me there was a point in time we were actually engaged in economic warfare against iran. this is coming at a particularly troubleing moment for me having spend a lot of time working on iran to see the u.s. government dismantle the entire sanctions infrastructure we put in place to pursue this nuclear deal but that's a topic for another panel. as saveddavid sanger explained in the u.s. times, the treasury department where juan worked and his leadership and levy and david cohen and now adam zhu
bin, the u.s. treasury was described as president obama's favorite combatant command. for good reason it was economic warfare against the iranian regime and was a decade of measures that began under president bush, the destination of key iranian banks and revolutionary guard entities and culminated in the passage of sanctions legislation by congress, congressman rogers certainly played a key role in that. it was fascinateing because it -- as these sanctions escalated you saw over time a dramatic impact on iranian economy and iranian decision making. some of the key events along the way in concluded u.s. treasury departments and tractor-trailer acttractor-trailer -- patriot act 311 there was a jurisdiction of primary money laundering concern and legislation passed by senator ss that legislatively designated
the central bank of iran as the key polar of that money laundering concern. in 2012 congress over the objections of the administration and the europeans actually passed legislation threatening sanctions against the board of directors of swift and that legislation encouraged the europeans and eventually swift to expel dozens of iranian banks from the swift system. it was unprecedented the first time in swift's history there was dewholesale of a country's financial system and made it impossible for the iranians through the formal system to move money and finance trade and repatriate their foreign exchange earnings. it was certainly a tool of very effective coercion but something our adversaryies learned from. i note when it comes to swift we see calls from the u.s. congress, british government in fact from pro palestinian
organizations to use swift again as this ultimate instrument of economic coercion. last year, pro palestinian organizations asked swift to deswift israeli banks in the dispute territories. the british governments asked swift to deswift russian banks. that led to a response from the head of one of russia's largest banks who said that deswifting of this bank would be an act of economic war. we've seen our adversaryies try to take our playbook on iran and use it in other ways. in russia russians are using economic warfare against our allies in central europe and eastern europe. there, they're using energy warfare. the dependence our european allies have on russian natural gas for example. a whole series of measures both offensive measures against
russia because of annexation of crimea and eastern ukraine but retaliatory measures against our allies and the united states leading to a need for defensive measure measures. if you move to the asia pacific region, china use economic and political warfare against taijuan for years to persuade the international community taijuan should not be recognized as an independent state. chinese cut off export of rare earth minerals a couple months when there was a dispute with the japanese. those rare earth minerals were important to key industries of the japanese economy and there have been significant territorial disputes between china and japan and other countries and chinese have match matched their naval maneuvers with economic coercion. what you're seeing essentially is our adversaryies learning from us, the power of economic warfare and economic coercion as
a dominant instrument of state craft. now, the united states and certainly our allies in the middle east and asia and europe are lucky. the united states still remain this dominant global financial super power. 81%, i think it is, of global transactions are done in the u.s. dollar. 60% of foreign exchange reserves held in this u.s. dollar. 45% of global financial transactions done in the u.s. dollar. because of the u.s. dollar's dominant position we still yield tremendous power. make no mistake that is changeing and change ing some fundamental way ways. the russians and chinese are createing an alternative to the swift financial messageing system. it's unlikely to attract the support swift has today with 10,500 financial institutions using the swift system. over time it may erode the
global dominant position of swift. the chinese have a combination credit card interact card which is available in 100 plus countries around the world. it has a market position it represents 45% of the total number of cards in global circulation. 25 to 30% of this total transaction value extraordinary and because of the russians, it's d linked from new york. when we're imposeing sanctions from russian banks, the chinese moves in after mastercard and visa moved out and offered this card to russian banks to offer an interact card and global credit card dealing from new york and therefore not susceptible to our sanctions. chinese set up the asia investment bank an alternative bank for infrastructure finance financing which has attracted significant global support including most u.s. allies. as a final example and there are
many others. the chinese have gone to the imf and asked something called the sdr, special drawing rights, essentially represent a global asset, on for exchange asset, that asset is linked to a basket of currencyies including the u.s. dollar and chinese yuan. the chinese have been pressuring the imf to actually change the allocation, percentage allocation in that basket so the yuan is more highly lyly represented. these are four examples how over time chinese are trying to erode our global dominance. we may be witnessesing creation of reduceing the u.s. dollar. let me end on this. annie and i conducted a lot of interviews with folks in the u.s. government, former treasury and state officials people in europe and asia because what we really wanted to find out what
kind of defensive measures were we actually taking? we have been very good on offense. how good have we been on the defense? we discovered in the u.s. there hasn't been as much thinking about defense of economic warfare, how do we create an economic defense of shields to protect the u.s. and allies from use of offensive weapons by iranian iranians, russians, chinese and others against our closest allies. the monograph came out with specific recommendations, but specific recommendations within the u.s. government and institutional changes within the inner agency office of policy plan planning. the state has one and our recommendation the treasury department has an office of policy plan ingning where they're thinking about these kinds of defense measures and have the time unlike the friends at treasury drinking through a fire hose everyday to think through the specific measures we can put
in place to defend the united states and our allies. number two standing up to economic warfare. there are folks who have a lot of strong planning on the economic side, understand markets, understand financial markets. but the idea of having people at the nsc who understand sanctions and elicit finance and use of economic warfare would be useful. >> three was establishing doctrine on the use of economic warfare. we have doctrine froms the use of nuclear age and missile defense and certainly a new cyber doctrine folks have spoken about. doctrine would be very useful. how should we be using this offensively and defensive. it may be a controversial recommendation, the idea of setting occupy an economic warfare command. we actually have commands in the u.s. government most at the pentagon. this idea would be an economic warfare command that would draw
the best and brightest and necessary resources across the inter interagency. our recommendation was located itlocated -- locate it at treasury. those four on doctrine and institutional changes to protect our allies against the use of economic coercion. i'll finally end with this. israel has been an interesting example because the boycott investment sanctions movement against israel suggests we are seeing the canary in the coal mine. here is a small liberal democracy ally of this united states where all of a sudden economic warfare is being used against israel in order to achieve political objectives of those who oppose israel's position in the territories. whatever position you take on the territories or position on these regional disputes my assessment and my conclusion is we should be protecting our allies with cyber defenses, ballistic missile defenses
military defenses and economic warfare defenses regardless of our assessment who's right with respect to the regional dispute. this is the canary in this coal mine. as terrorism came to our shores economic problems will come to our shores and we have to think of changes to create economic defensive shields. >> that's great. the only thing i would take issue with is economic warfare has reached our shores. i think they would agree they really do delve down if we're going to be serious about that let's be serious. what does that mean in terms of organizational changes that may be necessary in the u.s. government. but our next two speakers focus on where really the rubber meets the road in terms of the technologyies that are going to be needed, how we think about that. ultimate ultimately, you know, you will have to be able to back up our words of deterrence with our
technology technologies. the first speaker is dr. michael shed a program manager in the information office at darpa for those who may not know is the defense advanced research project agency. his focus is on quantitative and crypto cryptographic techniques for big data and software. previously he was a research scientist at sisc and scientific consultant at booz allen hamilton and holds a phd in chemistry from princeton. michael. >> first of all, thanks, sam. i think i speak for mark, too when i saiy those who work on the technology side of the house found this to be a very useful and fun exercise for this to be a broader context our work lives. as a preparatory remark all my opinions i express today are my own since i am still with u.s.
government and not fdd. i will start on a slightly down beat note. today, you can barely turn on your news browser without seeing a fresh story about another american firm of espionage or intellectual property theft. there does not seem to be a clear path out of this bad ec librium. the purpose of my article is to help provide some new thinking out of the state by taking an historical perspective on economic espionage as a timeless instrument of competition between nation states. number two a scientific perspective on technologies to help us flip the transcript on economic spyies and i prksp pirates undermining our national economic strength. to begin we have history to help us here. the notion of interested electoral property actually evolved over centuries as enshrinement of economic reward
to inventors of economic ideas. the united states economy is particularly sensitive in the climate such rewards are protect protected. in a 2012 report by the u.s. patent and trademark office. 75 of 330 industries are categorized as it incentive and account for 18% of all employment in this u.s. in 2010. according to the 2013 report by the commission of theft of intellectual property the u.s. loses over 300$300 billion a year in ip theft. if ip were to receive the same protection overseas it does here the american economy would add millions of jobs and encourage significant investment and economic growth. unfortunately not all countries in the world are serious about protecting this law. one of the great ironies of history is this united states has been here before in this problem although on the other side of the problem. in the immediate aftermath of
america's warfare of independence from the uk we weapon had privately conducted but efficiently lyly tolerated ip theft against british industry to super charge the american manufacturing economy. the prirbbritish response was vigorous. they impose expert machines and designs and restrictions on immigration and even acts of arson on british factories with stolen ip. i know there have been talks of hackback hackbacks. the idea of hackback is not terribly new actually, it's been tried. arson aside the british strategy would not look unfamiliar to today. by any reasonable accounting the british policy completely failed to stop the diffusion of the sensitive manufacturing ip into the factories of its unfriendly trans transoceanic rival that went on to eclipse the uk thaz
manufacturing leader. all of this must sound distress distressingly lyly familiar today and in 2014, it is america playing defense. to simplify the struggles i will focus on the software industry not only because they're the largest by export rally but new ideas period nent to that industry that might inspire new thinking for other industry's protection as well. to give a partial illustration what our software struggles with. 19% of the software sold in the u.s. is pirate. in china, as one other example 77% of the software transacted is pirate. beyond the simple crime of making and running unauthorized pirated copies there is a deeper and more insidious theft policy by prying into the code source of software to extract the code ware and rhythm of ideas to
extract research and development dollars. how do we stop this? we develop a model for thinking a new model for thinking about how to protect our ip based not only on law and diplomacy but technology and economics as well. that may change the dynamic between attacker and defender in this ip conflict. the status quo in defending our nation's ip interests in general tilts towards the diplomatic and legal remedies favored by the british. as we have seen through historical experience there are fundamental limitations to this kind of approach. it is useful to pull back a step and thatted theink about the problem. it is economic as well as criminal problem and we have seen through historical experience laws and diplomacy are limited in their ability to deter criminals from this kind of crime. so the question is can we use technology and economics to
deter economic decision-makers from decideing to steal as opposed to not steal. can we raise the technical costs of stealing to such high levels it no longer becomes worthwhile to do so. the good news is that the answer is yes, but there are major caveat caveats. today, commercial software is effectively defensiveless by being wrong with reverse engineers because the state-of-the-art defending such theft largely consists of junk code and essentially giving the attacker more code to read and understand. this security through obscurity approach can almost always be defeated. in daryn day with standard software tools and almost standardly regarded ineffectual by software security experts. good news here is a recent mathematical break through by a scientist has opened up the door to making new kinds of software that can bafling lingle even the best
resource engineers in such a way that unwrapping its inner secrets is equivalent to compute computing a mathematical problem woo whose solution requires a super computer anding agore rhythms known today. this is exciteing because this is the kind of technologyical break through that could be the emphasis where we have a future of rights protected not by laws or nations but laws of mathematics. here, there are huge caveats, realizeing such technologyies not only for software but other products, will likely require radically new scientific ideas that will take years if not decades of sustained work and effort. if they are successful it could pursue economic leadership far 82 the future. one of the issues we have in the cyber threat today is victims are caught in a pathological
dynamic they have sometimes an interest in concealing their own victimhood. we talked about this in the context of cyber threat sharing. one of the other interesting things emerged in economic research the past 30 years is secure multi field computation. this began something of an economic problem a little more than 30 years ago called the millionaire's problem two millionaires want to see which has more money but don't want to reveal exactly how much money they have. i don't know how millionaires think but it's a neat problem. [ laughter ] >> this might seem like a contrived problem but from a crypto cryptographic and mathematical perspective it's not trivial at all. cryp cryptography built around this that morphed into smpt today. given that was a trite problem 30 years ago, what this has evolved into 30 years later is a very valuable and practical technology in a very well
problem. in space today there are dozens if not scores of space bearing nations with satellites going at very high speeds and every agency and country has an interest not having the satellites collide. you're giveing away either sensitive security information or national security information. how do you share information about your satellites without giveing away those kinds of secrets? where the research has gone is from that very condition drived millionaire's -- contrived millionaire's problem 30 years ago to something that could help the national space agencies and companies and share their information without revealing private information. this is obviously exciteing because these are not trivial problems. for the math geeks these are 200 degree integrals over space and time for objects going at nearly relevant.
speeds, a heart problem and computation alley very difficult. it's just software after 30 decades of investment that gets us closer to that problem. it's not hard to see how this maps to shareing problems within the cyber threat world and has a very important privacy component, too. to conclude it's very fitting the ingenuity of the american economic system that created many value world changeing ideas could be at the end of the idea a sources of defenses to protect those very ideas. thank you. >> thank you, michael. doesn't it make you feel he's in the government protecting us? >> makes us feel good. >> he's protecting us. the modern day of the millionaire's problem is figure out how much money does donald trump actually have. that's where it's evolved to. finally, mark tucker is the founder and ceo of temperal
defense systems and founding board member of cyber insurance company of america. at tds he leads a team of experienced white hat hackers and technologists leading to safe guard computeing devices and networks in the cyber war era. >> that was a mouthful, thank you, samantha and thank you for inviteing me. i think this is a great way to look at the problem because this problem is a complex problem and really not quite understood. when you marry those two terms of cyber war with economic cyber war it brings multiple notions of cross pollin nextex to find the problem. i think we're still at the point we need to quantify and basically understand the problems' dynamics. when i heard a few things in the previous panel i was diametrically opposed, right?
but i was down there and couldn't talk. i've held some of those things and i understand why the comment comments were made. the comments were made because of these trends and economic things happening and understand the essence what's going on here is what forums like this are about. when you look at cyber economic warfare, what is it? it's war, it's not crime. there's a difference between having a war environment and a criminal environment. crimes happen in war. i think it's very safe to say if we get some actionable assumptions and say, okay maybe it's not proveable 100% but a preponderance of evidence, it means this assumption is pretty good and we can start making action plans around it. ultimate ultimately, america needs a cyber action plan. we have the department of cyber command now. we have multiple departments of
everything. but the core of the problem i think is still a little bit elusive. i think a few things in the first panel were perfect and spot on. let's say actionable assumption cyber war is here and upon us bp when did cyber crime become cyber war? what inflection point in time did that happen? that was the shot haerd ai rownd theard around the world and when cyber world was the turning point of criminal gangs and activities happening to something that became became -- physical damage was caused and caused geopolitical outcomes because of it. that one thing was like shot heard around the world we can assume cyber war is here. what is this dynamic of cyber war look like? it looks like a low intensity content in war terms to me. it doesn't look like the power
balance between the nuclear war era where everybody built up these huge offenses and nobody struck. why? because proliferation has already occurred. that dynamic doesn't exist in cyber because there's too many actors and people. it takes one individual. that would be equivalent if we think about trying to do a nuclear power arms race build-up of offense of cyber weapons it won't work because we can't control it. too many points of attack heading through. you can say cyber war is here to stay a long time. there will be interesting things that happen. the playing field is basically, if i could compare a few examples where low intensity conflict is occurring, we look at -- we look at iraq in 2004 when all of a sudden america comes in we take the country over i was there by the way so
the ground truth i had then is equal to the ground truth i have now on the problem so i've seen it from all different levels. what when i was first there, there was a bomb here and there and it went off and it was scary. in essence there was a power void saddam was gone and nobody knew what to do. the criminal gang started to move first. there was a little bit of activity happening. what happens when those types of low intensity conflicts evolve there's coordination and then there's six bombs going off at the same time and frequency going off. when we look at the threat horizon over a 20 year period basically we're seeing a negative threat for 20 years, negative trend occurring. when most of that occurred -- think of it as cyber crime era -- now in the cyber war era we've seen the curve steepen.
in essence, what's happening, you look at the battlefield and the battlefield is interesting because it's all around all of us and it's global. the frequency of attack is occur occurring and battlefield soften softened. we see attacks on the transportation systems and these economic pieces we haven't seen anything yet. this is the normal course of a low intensity conflict. the next stage is coordination. when coordination occurs people will get worried and scared and plan is completely required. what we should be doing is learning from these types of zungs discussion points to get ahead of the curve and make this plan. if we say we're in the cyber war era, looks like low intensity conflict and have a power void because nobody is controlling what's going on maybe we need
the come up with some assumption assumptions how we got here. why is security so bad? you can borrow economic principles to understand that. it's pretty easy. the question was asked is why don't the manufacturers share in the liability? because bill gates' dad was an attorney and very smart attorney. every time you load software hit an okay button and basically take the liability and shift it over to you or company, you do that. it makes total sense we have so many security holes because the economic incentive is not with the manufacturer of these products products. a part of what steve was talking about, while i disagree with him, i understand how he got to those notions. you can't fix the problems so all we have is offense. we can fix the problem. the defensive problem is fix
fixable. like any problem, we have to be able to quantify it. we can't measure the problem and don't know whether it's improve improving or getting worse. we don't know how to compare one technology against another technology. what is this security of this industry? what is the baseline? we don't have any of those metrics right now. one of the technologies that maybe won't shift liability back to the manufacturers, and people know purchaseing habits and learns one operateing system scores a 3 and the other a 4 in security. it allows economic principles to take the security responsibility and allow the consumers and purchaseing managers to buy more secure stuff. once we know how to measure it and that technology is in existence now we can say, all
right, we will change the evolution air iry path ry-- evolutionary path of technology because it's not good to say i have a firewall and antivirus and intrusion detection system. what will happen is you will say your security is a 3. you may have all those things but those things aren't basically raise inging your level of security and raiseing the technology called qsm one of our company's products we worked on at george nay son university to help solve is to change the shift inging liability landscape and allow the security level to do back into technology. we look at these problems, there's an okay button. that okay button sure did a lot. yes, it did. a lot of things did a lot to technology. moore's law, for example every two years a chip gets twice as fast.
there hasn't been any interesting pro- fowncedfound observation observational laws even, right? if we have this 20 year negative trend threats keep going higher and higher now at an increasing point, we can get ahead of that by two years we have the ability to measure technology security and we start to use america's creativity and production force and harness the country's resources on a technology basis for full security we can come up with the ravage law and say if america says two years ahead on security, then we're basically going to hit an inflection point that trend starts to go down. as long as we stay two years ahead we're heading in the right trajectory for defensive security. in this american cyber action plan, kay 85% of resources are
some number. 85% is defense and the rest offense offense. we have to am could you please with those majors and metrics and coordinate as a country to utilize our resources to win. we're america, we own the technology market still. we way not own the manufacturing base, they're still our ideas. why do you think they're stealing our ip? we're ahead. lets use the things america can take to market and our vulnerability is the fact we're connected, right? that's also our greatest strength. if we harness what put us here and look at it in a different way, i think we can make an improvement on the defensive side and offensive side, we start thinking of a problem like low intenseity conflict, we can beat cyber insurgencyies basically what is happening.
we have a banking industry surge to take the fight back to them and create those deterrent portions. it's not going to be police type of effort because there's no law laws being enforced and ability to basically bring someone to justice is very difficult. it will look like a low intensity conflict cyber war environment. anyway, my time is up. thank you. >> thank you mark. before we do to the questions, i wanted to mention when we started this project, we really wanted to create a larger group of people that are interested in this topic that take different pieces of the research on to move it forward. we never wanted interest to be that this is the be all and end all. there's a lot to go forward on this. one of the things i think this panel and the last one really show cased are the needed kind of places where policy and new
technologyies come to bear. i was hudson -- hudson institute's co-founder, herman kahn wrote the six desirable characteristics of a deterrent. a deterrent to be successful must be frightening, inexorable persuasive, cheap, non-accident-prone and controllable. if we even start with those six things and you can imagine having the policymakers war fighters technologists around a table saying here's the problem how do we create a deterrent that rests with sound policy, docktrine and the technologyies to be able to do what kahne recommend recommended, i think we would really move this conversation ahead. my trajection -- 83yeah. wait one second.
>> fdd center on sanctions and elicit finance. great thought provokeing panels. there was something said on the first panel that provoked a question i think is appropriate for you all which was the reference to us losing the space race. president kennedy decades ago set the goal in terms of the goalpost goalposts. the undercurrent was our competition with the soviet union and tremendous threat that was there. over that decade he really galvanized the country galvanized with this goal inspireing and very positive. if we were to look at the cyber war, cyber race what would be the goal or goalposts? is there a way to galvanize this next generation of young people and others within our society to target a specific goal so we could win the cyber race which
we're losing. >> do you want to take this first? >> that's an annualalogy often drawn. it's problematic. with a space race, there's clearly defined goalest boasts as to progress, sending a man to the moon and device to mars. the problem -- defined goalpost goalposts. there are the kind of cyber problems that exist on machines in networks and as chairman rogers mentioned to previous panel, anthropological problems. one of the things that tends to be a distracter on the cyber debate is overemphasis on technology inventions. there is a human invention. all security problems are human problems. looking at statistics of the type of compromises that occurs
somebody opens an e-mail or detach detachment, all hel breaks. we don't design software and networks for machines, we design them for ourselves. where we could possibly direct one area of research actually is to say that we should stop play playing the human because we are human. we should be able to open up a link or attachment or go to a site without trembling in mortal fear it will compromise the entire enterprise. whereas i think there's going to be a much more diffuse kind of agenda for the cyber problem i think there are some problems could still be very ambitiously stated, the problems of a space race, too, that's one and i'm sure there are others. >> i would add to this, maybe too simplistic. whulg youed
when it comes to cyber the notion of winning we're cautious about. we don't actually want to win in cyber, we want to survive. in historical terms we invent the cannonball. we don't want to win using the cannonball, we want to survive if the other side gets one. invent missiles. you don't want to win, create missile defense shields in case the other side develops bigger missiles than we have. there seems to be hesitation when it comes to cyber. i sense it in the language. the goal should be we will win this cyber war and any country that launches a cyber attack against us will be met with fear fearsome retaliation. i don't know what we will do against chinese because of opm. no idea. i don't hear in the rhetoric of the president a commitment to actually win. i think we need to send a message, we're the united states of america and whether you hit
us us with cannon balls or miss missiles or cyber attacks our goal is to win the in cyber war as we 1 i think in missiles and won in cannon balls. it's a commitment at that level before we get into exactly how we do it on a technical level and how we reorient the u.s. government on an institutional level in order to do so. >> mark. >> i also think there's measurable goalposts along the way. for example when we hit this turning point in the 20 year trend ticks down what is going to actually happen? if we say what will happen on the pla side or china side, unit 61398, all of a sudden, all the millions of agents they're watch watching on their screens and monitoring, go dark. that's actionable. when that happens you know what
we will see? we will see that unit freak out. we will see them go back in the drawing board and working day and out and send min 81s out to reappoint new types of agents and we have to stay two years ahead. if we can stay two years ahead the effects are dramatic. what we've done is stayed complacent and let all these agents and things and supply chain infections permeate everything. we're saying all right when the turning point hits how will you know? that unit the biggest unit in the world right now back sickly one unit against us, their agents go dark. we will see actions because of it. i think we can measure the number of occur and amount of money stolen from a bank or credit card. i think we can come up with measurable are we winning metric
metrics. >> here's just a quick addition to that. here here's an indication how you're losing. i was read through the iran deal the other day and everyday it's a new surprise. myyikes moment of last week is i discovered that united states and our allies, we commit to protecting the iranian nuclear program against sabotage. okay? so in effect what we're saying is we're going to predict the iranian regime's nuclear program against the ability of the united states, israel, other allies to use cyber offensive weapons against iran's nuclear program. regardless of what happens with that nuclear program in, ten years, 15 years time it will be of industrial scale with near zero breakout and sneakout. they'll have an icbm and powerful economy and even then we'll commit to defend their nuclear program against cyber sabotage. so that's not the shot to the moon. that's not a commitment to winning. we're going to hard enthe
adversaries cyber defenses. >> sir? >> my name is rich willhelm. i ran all of our business with the intelligence agencies. but 20 years ago i had a job similar to yours on vice president gore's staff, samantha, where we did round one of all of this. there is so much farther ahead now. but i'm struck by one thing. yes, we are much farther ahead. we understand the threat a lot better much there's a lot more technology out there. but i'm struck by how little progress we've made in solving the central policy issues that will be required to actually move ahead. and, you know my thinking over the years, i think has matured some what and it seems to me that we're essentially trying to solve the problem where boundaries don't count on a
legal policy an organization and bureaucratic framework where boundaries really do count. and i'm not just talking about geographic boundaries. i'm talking about the difference between private and public sector responsibilities between domestic and foreign you know, if you look at the intelligence community. and we need some new framework. what -- this is a question really for you, mark. you talked about -- i mean the government response has been to create new organizations but not fundamentally alter the existing boundaries that exist in law of our existing agencies. what do you think a likelihood is that we can solve that problem over the long run and that there is a new paradigm that will emerge so that -- so
that the interfaces between the various agencies operate a hell of a lot more smoothly than they do right now? >> right. thank you for that question and for your service on these issues. i would say that i'm somewhat optimistic. i have seen it from the outside on the offensive side. i think we've done a pretty good job. a lot of credit to juan and the folks at the office of terrorism and financial terrorism and treasury. who ever heard of tfi or ofac 15 years ago? i haven't. i'm sure lots of folks in this room hadn't. but what juan and his colleagues did at tfi is they took institutions agencies in the u.s. treasury department and they turned them on offense. i think that a really remarkable job not just leveraging government but leveraging markets. the real secret sauce of our
financial coercion on offense was not what we did to governments. it's what companies and financial institutions in changing their risk/reward assessment with respect to doing business with rogue regimes or terrorist organizations and giving them a choice. can you do business with our 17 trillion economy or iran's $3 auto billion economy. if you do business with their $350 billion economy you're going to be doing business with the revolutionary guards and a number of very bad actors who are engaged in a range of heelicit financial activity. they played a significant role. i would say it's been a very successful program. i'm obviously very skeptical about whether we actually use those incredible resources and achievements towards right diplomatic ends. but tend of the day, we certainly hone the instruments and our paper tries to look at friday the other point of view.
now with those instruments honed on offense and other countries and adversaries using the same powers how can we reorient the government to start thinking about putting a defensive economic shield? we started to make moves on the side where we have cyber command. i'm learning about the deficiency wez got in that area. but from an economic warfare perspective, the folks at tfi don't have the time to actually think through defensive shields. which is why an office of policy planning is useful. it will be useful to have that director at nsc. i think all the powers to work in an interagency level to actually think through on the cyber side and on the traditional economic warfare side, how do we defend the united states? and i'll end with this. here's a good news story to me. state of south carolina just passed legislation. and the legislation simply says that any country that actually uses economic warfare against one of our allies will be denied
federal -- state grants from south carolina and that the state pension fund of south carolina will have to divest from any companies engaged in economic warfare. that's interesting. that's at the state level. it's the state of south carolina. it's effectively saying you use economic warfare against the united states or our allies don't come do business in the state of south carolina. and you're starting to see the spread across the country. illinois just did something similar and other states contemplating. this could be created at the federal level through executive orders, legislation and creating a defensive economic architecture lead by manufacture the same people who have been so successful on offense. >> that's great. and take one last question. and just so that you political scientists or ir theorists don't think that there is a place for you in this robust debate and
moving forward and just a place for economists and technologyists technologyists, we need a better understanding of how the different adversaries view their strategy towards us. right? there is absolutely no reason to think that what is in -- what the russians are doing or how they're organizing is in any way similar to what the chinese are doing or the iranians are doing or north koreans are doing. so an understanding of those states is a must in this piece and one telling point on this is that in the weeks before the sony hack, the north koreans were speaking out at every opportunity they had screaming that the movie that sony -- that sony was going to release, the interview, was a threat to north korea. right? so the north korean watchers,
you know knew that the north koreans may possibly be gearing up to take action, retaliatory action. of course, when the sony hack hit, they were the first ones to say, you know look over at pyongyang. all right. all right question sir? >> dr. shea used the phrase crypto graphically sound. it reminded one that there are parts of the u.s. government that are using cryptographically sound practices. and any technology that you have, the guy will get in a year or two afterwards. what you show is possible. any comments? >> i should preface all this by saying today i'm speaking as an individual and not as a representative of either my
agency, department or the u.s. government at large. but i think i should also preface or append to my earlier comments that i'm essentially talking about things that still live very much in the research space. and so obviously krip lyly cryptography means a lot of different things. secure multipart confrontation, so on and so forth. and so when i say use terms like security and this cryptograph context, the word should be provable security. in a sense that we can quantify how much security we're getting given certain settings. i think that is a more accurate way to characterize that. >> well that's wonderful. i think with that i'm going to wrap up unless you have one last statement? okay. all right.
>> the senate homeland security and governmental affairs hearing is holding a hearing on the prison system and the challenges it faces. the witnesses will include justice department inspector general michael horowicz and federal bureau of prisons director charles samuels. that's live at 10:00 a.m. eastern on c-span. and here on c-span3, we'll have a hearing that looks at foster care issues with advocates and state government officials. that's being held by the senate finance committee. live coverage beginning at 10:00 a.m. eastern. next, a look at how medicare is working 50 years after being signed into law by president lyndon johnson. this is from washington journal. it's an hour.
>> in july medicare marked its 50th anniversary. here to discuss that, gale wolinski. served from 1990 to 1992. and dr. robert barrenson. served from 2000 to 2001. thank you both for being here. i want to show viewers and you what the president lyndon johnson had to say 5 years ago when he signed this legislation into law. take a look. >> there are more than 18 million americans over age of 65. most of them have low income. most of them are threatened by illness and medical expenses that they cannot afford. until this new law, mr. president, every citizen will be able in his productive years when he's earned to ensure sim hefl against illness in his old age. this insurance will help pay for care in hospitals and nursing
homes or in the home. and under a separate plan it will help meet the fees of the doctors. now here's how the plan will effect you. during your working years the people of america you will contribute to the social security program a total amount each pay day for hospital insurance protection. for example, the average worker in 1966 will contribute about$1966 will contribute about 1.auto per month. the employer will contribute about a similar amount. and this will provide the funds paid up to 90 days of hospital care for each illness plus diagnosic care and up to 100 home health visits after you're 65. and beginning in 1967 you'll also be covered for up to 100 days of care in a nursing home
after a period of hospital care. under a separate plan the congress originated itself in his own good judgement, you may be covered for medical and surgical fees bl you're in our out of the hospital. you'll pay $3 per month after you're 65. your government will contribute an equal amount. the benefit under the law are varied and broad as the marvelous modern medicine itself. >> president lyndon johnson on july 30th 1965, signing into law medicare. here to discuss two former administrators of the program, gale wolinski. is medicare working like explained there by president johnson? >> in general, yes. medicare was designed to meet a very important need for the older population of america. that is to make sure they have access to insurance coverage and
physicians, something that was a challenge to most seniors even those that were not low income have a good deal getting insurance. of course, it changed a lot. coverage broadened. we have a5 5 million people on medicare now. almost 10 million of whom are disabled and under 65. so broad than way. preventative services are now many of them are covered. prescription drug coverage was added. >> part d. >> part d. in 2003 through legislation and the financing, of course has changed significantly. but the need that medicare was designed to respond to making sure that seniors would have access to care has indeed been there. >> i agree with gayle. i'll add a couple other item. one is that health care delivery has changed dramatically since
lyndon johnson gave that speech in those days. most people got their care in hospitals by physicians. over the years, there's been a great need for a whole bunch of new sources of care, new kinds of providers, skilled nursing facilities, hospice. all of that is added to medicare. it creates a challenge to reorient the program. i think the program met the challenges. evolved a lot over the last 30 years with new payment models new delivery and the current focus is to address quality. quality has not been as good as it should be. and u.s. health care generally and medicare specifically. and the program was taking some steps to try to address that. >> well, we want our viewers to weigh in on this conversation. this is how we divided the lines. if you're a medicare beneficiary beneficiary -- let me ask both
of you this. how you would fix it? well, you asked the first question did it meet the directive that the president johnson laid out? yes in terms of providing pretty ready access. as health care is evolving significantly they reference some of the focus not just on quality, very posh important issue, but on value. i'm a economist, i worry about that as well. the delivery system has changed a lot. medicare has been a bit slow in that area. it's somewhat joining the movement in terms of trying to promote value and better quality. physicians are expressing a frustration of a less than they had been because the law was passed in april. it is not perfect but it solved
a very frustrating problem for many physicians which is not knowing what would happen to their fees. every january with threats of reductions as high as 31% although they never happened. but even more dysfunctional in the sense that it didn't reward those clinicians who were providing higher quality, better value care a big movement in general to give patients more knowledge and to let them be more active participants in their own health care. medicare solved the initial problem. it was designed to solve. but there is so much more that we need to do to make sure that the program improves and of course most importantly, is around for our children and grandchildren. that will be a whole other discussion. >> what changes would you make? >> first i think we need to establish that something is happening.
as producing much better results. we're not sure what that s there is per capita spending and medicare has essentially been flat or going up about the rate of the gdp. it's unprecedented in the history of medicare. it's always been said that actual was wrong. we're spending much less than predicted. and i think we'll probably wind up talking this morning about whether this is sustainable or not. but something good has been going on. i also have -- there have been recent studies demonstrating and decreased mortality of medicare beneficiaries. decreased hospitalization rates. so there's actually been progress and i guess my point would be that it's evolved over years. there's been reforms. we're not a point where we have to take some kind of dramatic part for restructuring. i think we can continue to
evolve. i guess the final point i'd make here is that we now have options from medicare beneficiaries that include getting their care from private insurance companies. and 30% of medicare beneficiaries currently take that option. so we have more choice in this program than we used to. and i think that is a very positive impact. it keeps everybody on their toes because we're moving toward a xpetive process. >> is that because the government government negotiate's that rate? >> i think in specific places can you point to medicare as the leader of change and certain payments. how we pay hospitals something called diagnosis-related groups. instead of paying for service for each individual item, actually pays the whole hospitalization. and some other areas, hospice
and others, medicare has been in the lead. i guess the more general point is i think the whole delivery system is changing. medicare in some cases has led and in some cases has followed. i think we're increasingly understanding that medicare and other actors in the health system have to be collaborating on trying to move in the right direction. >> do you have thoughts on that? >> you ask specifically is this happening because the government negotiates or administer's crisis? the answer is no. i can say that with some certainty because it was happening in the private sector even earlier. now i agree with a number of things that bob just said which is there is some areas where medicare traditionally led and other areas where the private sector led and both of them have roles in which they can take the
lead. but we need to understand that what has been going on in medicare has been going on in the private sector and started even earlier. i think that bob anticipated one of the points that i want to make which is we don't know why we've seen this dramatic slowdown. there's no question some of it has to do with a very heavy recession that we are just starting to come out of. 2015 is the first year that anybody might say we are seeing something that feels like a real recovery. >> people saw the doctor less because they didn't have as much money? >> well it's part of that. it's part they had less money that they were uncertain. they had a big hit in their wealth.
the insurance is more stable burt the wealth is hit because the place that's took the biggest hit were housing values. and 401 ks. that affects something that us economists called permanent income. not just the annual income that we receive. that has an impact on how you spend. there's a the love change that's being tried right now. again, actively in the private sector and the under 6 aand the public. accountable care organizations have been going on the private sector since 2007 or 2008. just started in medicare officially in 2011. the question of whether the changes that we're siegel be sustained and what happens when we're in a real robust economy and economic growth which thank goodness we appear to be going into, is something we just don't know. we're going to have to watch. we are seeing already some indication this year of a bump
up in spending in health care. >> all right. we have calls waiting for us. we'll get to them. ann in dallas, texas. medicare beneficiary. go ahead ann. >> yes. good morning. i'm 74 years old. and it's been a wonderful program for me. i've had multiple strokes and i'm low income. and i have the qmb which the federal government and state of texas, they pay my part b. and then the wraparound and it's just been a wonderful program. and it upset me when i heard jeb bush say he wanted to do away with it. for people like me i've had to go to the hospital twice in the last nine years since i've had the program. and i have a great doctor. and living on $900 a month, even my part d, my pay like $2 for my
prescriptions. and i don't know what i would do without it. so it's really blessed me. >> okay. i'm going to jump in. doctor, what do you make of what you heard there from ann? she really likes her doctors. paying $2 for her prescription drugs. >> that's a good story. and i think it does bring up the issue of whether the program is broken and needs to be fundamentally restructured or whether it's working pretty well and needs to be tweaked at the margins. i believe candidate bush has been one of those republicans saying the program is broken and needs to be overhauls. and i'm with the caller who thinks it is actually working pretty well. >> okay. i'm going to give eric this next call. eric a doctor in tive lson, new york. you're on the air. good morning. >> good morning. i am a primary care doctor in
upstate new york. i acknowledge full well that medicare has done many, many good things for people over the years. i take care of people all day on medicare. however, what's going on now under the auspices of quality is really a disaster. it's called meaningful use. and anyone who does it knows that it's neither meaningful or useful. it's computers and checking boxes and driving us crazy. it's killing us. pleads please comment on. this anyone involved in this program is clearly not paying attention to the fact that it's a disaster. >> the meaningful use provisions had to do with piece of legislation passed 2009 that was meant to encourage physicians to adopt the use of electronic medical records which is a very important part of trying to make sure that information is readily available on people when they
change where they receive care if they're in emergencies elsewhere. to avoid having repetition of testors information lost in terms of transmission. now, has it worked as well as it should have? sounds like it is as a physician, not. i don't know what kind of system he bought. there was a lot of opportunities to choose the kind of system that would work well for individual physicians. my main concern about the promotion of the use of electronic medical records is different from this physician's and that is we don't do anything to really assure inoperableility between the electronic medical systems he might use versus what is in use at the community hospital where he lives or if the patient goes to manhattan or is spending the winter in florida to make sure that the
physician that his patients might see might be able to have the records pulled up electronically. so i'm concerned about the specifics. but we do need to move off of the paper charts that were being used. there was a lot of down side including not being able to trans mitt information. i hope he is sharing with his medical society what exactly it is about meaningful use that is making his life more difficult as a primary care physician. that isn't what we want to see. >> i'm with the doctor. i actually have written about the over -- we got this term called value based purchasing. the idea that we can pick a few measures quantitative measures and penalize doctors. that government is going to sort of move base on the incentives doctors into better behavior. i think it's misconceived and is backfiring because doctors are reacting the way this physician
did. it's not just meaningful use. there is something called the value based payment modifier. the physician follows a reporting system. these are quality measures that purport to be able to assess the quality or the value actually of a physician. the behavioral economists tell us that it's probably a mistake to go in this direction. for professionals would have complicated edd jobs and doing lots of different things to pick a handful of measures and then reward them and penalize them may get better performance on those particular measures. they're overall motivation is the term used is compromised. there's no evidence that this approach works for teachers or for other segments of the economy. but in health care this is a bipartisan endorsement.
it just passed the congress that we're going to move in a big way towards value based payment for doctors based on a handful of quality measures. i think it's wrong and should be reconsidered. >> all right. sally is waiting in olympia washington on medicare. good morning you to. >> good morning. yes, what i have to say is i was a recent medicare patient. i'm well of that age. i had excellent care. i recovered from something that my doctor was even surprised about. but one thing i would like to pass along to people is the alternative practitioners. we have to pay attention to them, too. we are up -- it's up to us to heal our bodies through proper food proper exercise, knowing that we are in charge of our own healing. it's not up to anybody else. i don't want to spend those extra dollars.
i'd rather spend my money on something else. >> all right. sally, we'll take alternative medicine. is that allowed under medicare? >> some of it is. and it depends on the kind of the delivery system you choose. bob mentioned earlier that almost a third of people on medicare choose to receive their care through private plans rather than traditional medicare. many of those include alternative providers as part of a plan. of course you can and i understand the caller's comments. we need to be responsible for our own health. we know we need to exercise and eat properly and drink alcohol in moderation if at all. and that we are also responsible for our bodies. this is not something that we just can farm out to the
physicians or hospitals or nurses and think that will resolve all of our medical issues. >> next call for you. mimi in california. go aed had. >> good morning. my question actually has two parts. because first of all traditional medicare, in my opinion, gives -- would give me much more choice because i can decide, you know, which providers i go. to but the problem is the 20% co-pay. and all it takes is one, you know major illness or an accident and that 20% co-pay can create a real financial burden on a retiree like myself. and then the second part of that
is given that we pay so much out of pocket for our services, how is it that other countries think to pay so much less and have such better outcomes? that's also my question. >> okay. >> well, i will take the first one first. one of the problems medicare has is it doesn't cover catastrophic costs. it never has. people have century unlimited financial liability for anybody who can, they either purchase or receive supplemental insurance to fill those gaps. and those gaps often cover those co-payments. so almost 90% of medicare beneficiaries do have some form of supplemental coverage for just that 20% co-pay. the cholera parentally doesn't. and that's one of the problems. low income individuals but above the medicaid level often can't
afford supplemental coverage and then are exposed to those kinds of expenses. it is one of the advantages one of the appeals let's say of medicare advantage plans is that they do provide catastrophic coverage and put an annual limit on what somebody can pay. so some of us have suggested that the basic benefit structure needs to be overhauled. on the question of why don't we do as well as other countries, that's a complicated one. i wish i had a simple answer for it. we have -- well, i'm not even going to jump into that right now. >> all right. you were taking notes gayle. >> the point that bob mentioned in the woman mentioned are really issues that most seniors need to understand. first, almost everyone has something besides medicare. 90% of the population. retiree coverage medicaid, or they choose the private sector alternative, medicare advantage.
yes, the woman is correct. you give up some choice in order to get more benefits. but it is a much better economic deal if you are feeling pinched. it's why many of the people who have chosen medicare advantage are low to middle income. not poor enough to qualify for medicaid but not with enough income to live comfortably by their own medigap. but, yes that is the tradeoff people make. and they get to make it every year. so that they don't need to make this decision once and feel like they're locked in. as bob said, the question about how do other countries do it is a big topic. either at the end of this session or in another session can you explore it. >> okay. we'll go to anita in plant city florida. also on medicare. hi, there aneat yachlt welcome to the conversation. >> caller: hi. hi. i'm 74 years old.
and i have lived in florida since 2011. i had never heard of medicare advantage. i couldn't believe it when i first heard about it. but i selected it. and my question to you is i might as well tell you up front i'm an old retired nurse. so therefore, we have a tendency to look at things a little differently. but as i go to doctors here in florida which is not very often because i take care of my own health, i see senior citizens wanting their bodies to become a buy onic body being healed by a doctor who's making money off of things that i think is unrealistic at 90 years of age. and, therefore, it concerns me whether or not we are addressing
properly taking care of and what's our real goal? what is quality? what's our real goal? >> all right. anita. >> i thank the caller. she put her finger on one of the issues. and that's the reason we are having all this conversation right now about value based payment and we have payment systems. in fact here most countries do. physicals reward them for doing more. and doesn't reward them for keeping people healthy. so we are trying with -- in a whole bunch of demonstrations that were set up in the affordable care act to develop new payment models, new delivery approach that's would be for physicians and hospitals and others who participate in that delivery system for keeping people healthy so they don't need to come in for all sorts of high-tech tests and procedures.
we're really at the beginning of that. and that's one of the good things about this slowdown on spending. we actually can take the time to figure out how to do this right. but she's right that there's a basic fundamental problem when you reward somebody for doing too much. they will do too much. and physicians even physicians sort of succumb to those incentives. we can do a much better job, actually, of fixing some of the distortions and the payment levels within the medicare b schedule. that really exaggerates the negative impact by overrewarding tests and procedures and not paying enough for time spent with patients to talk about wellness. >> we're talking about medicare. the program today, the future of it. 50 years ago on july 30th 1965 president johnson signed the program into law. what are your thoughts on it? divide the lines on medicare
beneficiaries, doctors in all others will continue -- we'll continue getting your thots on it this morning. here's a tweet from one of our viewers. what year is medicare projected to run out of surplus? and there's this poll that was recently taken millennial attitudes towards social security, 60% of millennials agree with this statement. i expect social security to go bankrupt before i retire. talking about social security and medicare. what do people think about medicare as well? well, the treasury secretary jack lu recently was discussing the release of the annual rors reports on social security and medicare. here's what he had to say. >> social security and medicare are the most successful social insurance programs in the history of our nation. every year they keep millions of older americans out of poverty and give americans 6 a5 and older, access to affordable health
care. they fulfill a solemn promise that's been made from one general ragts to next and they embody the fairness and opportunity that are fundamental to our nation's success. today's reports confirm that both social security and medicare are secure today and will remain secure in the years to come. consistent with previous years, today's reports also show that these programs are facing challenges that need to be addressed. the short term projections in this year's report for social security and medicare are a little changes from last year while a long term projections are significantly improved. when considered on a combined basis, social security's retirement and disability programs have dedicated funds sufficient to cover benefits for nearly two decades one year longer than projected last year. after that time sh as what truest la year, it's projected that tax income will be sufficient to finance about three quarters of the schedule benefits. in addition, as we expected beginning in late 2016 social
security's disability program will have dedicated funds to cover 80% of scheduled benefits. the president's propose will common sense solution to improve the solvency of this fund and the short run so that americans who rely on it will continue to receive the benefits they need. >> treasury secretary jack lu recently talking about the latest report on social security and medicare. what did you hear there? >> what i heard is that as well as we've been doing for the present generation, that is on medicare and we heard a lot of comments from people who are experiencing medicare we will have challenges going forward and the treasury secretary didn't really hit all of the challenges that will come up. some of them are further off. the disability fund is in dire straits. it is somewhat of a lesson of what happens when you wait until
the 11th hour to do something. if there is not an infusion of funds, people will not receive the funds that they're scheduled to receive next year. we have different funding that is used for medicare and we have two main pieces. one is the wage tax that funds the part a, the hospital and nursing home. it is scheduled to be solvent until 2030 which is a good way off. precise years are rarely regarded as very accurate. it is not immediate problem. the more serious issue is that roughly half of medicare is now funded by general revenue. and that's where we are going to start to feel pressures earlier. right now as bob mentioned earlier, we are seeing very slow growth in medicare per person. however, we're in a position
where we are in the process of doubling the population on medicare. i think it is highly unlikely that we've been experiencing will continue. the real question is how much more rapidly will it grow? will it grow 1 1/2 time the rate of the economy? will it go back to its more traditional twice as fast as the economy? we don't know what we need to be mindful as of mentioned earlier this is the first year of anything that remotely resembles economic growth and we're beginning to see a bump up in spending. we need to be very mindful and we need to understand even without that we have a doubling of the population. we'll have to do something to shore up the financing with the babyboomers coming online, dr. doctor bar enson, what do you i >> 2030 is the projected day for
the insolvency of the part a trust fund the part that pays for hospital care. when president clinton was elected in 1992 the projected base was 1998. medicare will be around. the issue is here. that doesn't happen. i agree with gayle. the problem we're facing is a near doubling of the beneficial ary population. we have a baby boom that started. i was in year one of the baby boom. born in 1946. bill clinton, george bush and now i find out donald trump were all born within two months of me in 1946. >> lucky you. >> lucky me.
we are 18% coming on. that is the pressure on finances and medicare. per capita spending is under pretty good control. i agree with gayle. we don't note future. there the point i'm making is i don't think you solve a problem of a doubling of the population by ratcheting down more unspending. one has to put revenues into the discussion. and if we're caring for that many more people shouldn't r shouldn't we be providing revenues to help cover them? >> where do the revenues come from? >> you can have some modest increases in the payroll tax contribution that individuals make. i think most of them come from general taxes and more progressive taxes. >> where do the revenues come from? >> at the end of the day, additional revenue will be needed and come from additional taxation. the sprob that should be the last thing we fix not the first thing we fix. we know living in washington
that if you ease the pressure in terms of making sure you have solvency, by adding more revenue, congress is very unlikely to do anything else. so i agree at some point when you double the population you will need to add more revenues. the likelihood we will continue what we're seeing right now is as close to zero as anything i can imagine. we have to be very mindful. this is year one coming out of a recession. we're seeing a bump up in spending. let's not think we have that part of the problem solved. mike, good morning. >> good morning. >> i'd like you to know the importance to patience of electronic medical records. but mine were lost. the paper records and that's basically it. now my doctor fumbles with a
computer. but this is the other doctor that lost the records. they were very important to me and critical in my care. but that's basically it. it's very very important. >> i'm going to move on to john. port st. lucy, florida. good morning, john. >> good morning. i do have a question. before i get, there you know this is the 50th anniversary of unintended consequences which was an aide to president johnson said we passed so many bills in '6 a, we didn't take the time to think of the consequences of those bills. my mother wound up in the hospital this year for about two months. she received about 127 separate invoices. i went through some of the invoices. i discovered that a lot of the doctors were saying that they saw her from 25 35, 40, minutes and i was with her every day and the most they do is maybe five minutes, they walk in.
now i know they have to go back on the computer and. that i'm sure they didn't spend another 20 30 minutes putting in information after good morning, how are you? and how do you feel? i've had to call in on some of the invoices and the trouble is when you do an appeal you know, the people that are answering the phone for medicare, they just read from a script. and you can't get them to answer anything specific. the lawyers have taken over. god forbid they should say the wrong thing. they have a script they have to read from. then you get a letter back from a contractor like novitis or in florida we have a place called first choice in jacksonville. they don't give you any specifics. for instance, my mother this is the question she had to -- she almost had a stroke in the emergency room. and she had a c.a.t. scan done. they came back and said it was a routine examineationexamination. i had to appeal that. when i appealed it, i talked to
the people of medicare. i said we don't have the correct code number. don't worry we'll send off to the provider you know for the correct information. so i get the better lack from first choice and it says basically the same thing. you know, the decision is it was a routine exam. so why do the people read from a script? what we're doing here is we are sub subsidizing medicine. so where are the people reading from a script? >> okay. >> well, i think the caller raises an interesting issue. there is no question that there is -- there's froud and abuse in the medicare program. there is also elsewhere. we have a very complicated -- the most complicated health system in the country. partly because we have all these different payers with different rules and different bureaucracies. people are just as unhappy with their private insurance company denying them a service or denying a claim as well.
i am with the caller that we have now what is called waiving at the door consultations. that is one of the problems we have with the fee for service payment system. then you have to put in all sorts of rules to try to prevent the gaming and the abuse of the payment system. so i don't have a simple solution. i can't tell you why the people are reading from a script. in fact we want to move the payment system so organizations have responsibility for that spending and they're in a better position to work with -- to sort of determine why the physician is billing for things he or she may not have provided than somebody sitting in a call center. many states away can. >> gayle, how is it that when we see the headlines that such and such doctor or group got away with millions in fraud and medicare. shou that possible? >> it's not clear to me how it's possible. it's an enormous source of frustration. the agency is pulled in two
different directions. it is very mindful that spending the taxpayers money and very frustrated about physicians and other clinicians general medical equipment people that rip off the system. when they get aggressive going after physicians many of the congressmen scream because they say either you're harassing the physicians in our community or you're keeping my patients from being able to see their physicians. so there's a the love tension when the agency attempts to become too aggressive in going after physicians and other providers. they now have the legal authority for many years they didn't even have the legal authority that was granted in 2008 to go after those who are extreme. a year ago there was the release
of billing information on medicare by four physicians. there are a lot of things that are wrong or unhelpful with in a information in the sense that people may go under the same under. didn't exclude the first year. some of the expensive pharmaceutical that's were part b drugs that were used for oncology. it begins to put pressure on those that are receiving very high amounts and allowing light to shine on that to see whether or not there is something going on that is inappropriate. i agree with a comment that bob made in passing which is having systems ctionz r integrated delivery system, they come in all kinds of forms is likely to be less infective than the government trying to decide
whether a particular service was really necessary and appropriate. >> they only bill for what is called a level five office visit. that's an office visit that takes 45 minutes to complete. that's all they bill for. it defies belief that physicians are seeing every patient for 45 minutes and yet it took the public release to figure out that we got a problem. there are the same number of employees that there were in 1980. they don't have the resources. they also have administrative contractors to do some of work. but we have basically not provided the infrastructure and the resources for the people we want to be policing these
claims. you need a large infrastructure to get it right. it's difficult to say that an agency is underfunded. >> terrific information systems. a lot of what the credit card companies do quickly i had my wallet stolen. then i had a call from a credit card company saying there was fraudulent activities going on. that's as much real time as you can help. you can't figure it out in weeks. a lot of it has to do with how it pays. it doesn't do an immediate on time payment. if we really want to go after
the problem, we have to solve both of those. >> i want to get to more calls. if you add inadequate staffing and information system that are not up to par and then the babyboomers coming on. >> it's a challenge. >> anna in youngstown, good morning. >> good morning. i was widowed at the age of 45. i lived for 16 years bring reached the age of 60 when i could get my social security due to my husband's death. i've been a self-employed hairdresser for 49 yirz but recently retired. we have no benefits. my comment on medicare and medicaid program and the prescription drugs, i have
medicare advantage. and for five years i paid almost a $500 insurance premiums to cigna. i stayed with cigna. and i'm splitting. one of my prescriptions -- i have a nerve disorder. i was diagnosed 17 years ago. i've have to take all kinds of medications. but the other issue is not bad. it was a prescription that was written by a gynecologist for a pap test. he ordered a prescription and i had to pay $75 for like a two inch tube of hormone cream. recently in the past year and a half, i applied for the state of arizona insurance and talked to
the department of security. the state of arizona picked up my medicare part b and now i have no co-pays and i get cancer screenings and blood work because i was told i was prediabetic. >>, so anna i because i have other calls waiting, what's your question? >> i'm just saying, the other problem is the pharmaceutical companies. the $75 -- >> okay. i'm going to take. that pharmaceutical companies. we haven't discussed that yet. >> the important thing is to look around at the options available. part d has a lot of choice. it is possible some seniors need help in doing this. if you put in the drugs that you have been prescribed it will tell you the best plan for you and frequently they are very low cost especially for people who have a relatively prescribed set
of pharmaceuticals. people need when they're in both the me plans and if they're buying their own part d, if they're seeing a change in the pricing that they're facing, they need to look at the other choices again. the access in arizona is the state program. they have all of their programs in a managed care form. they were the last n but ended up coming up with a very good medicaid program. >> let's go to mary allen in kentucky. go ahead. >> hey. yes. this is a wonderful subject. i've been -- i was born into a medical family.
some in the wrong documentation and -- okay. and the other thing started in the '80s. i have a degree in health care organizations. they were promoting how to build your practice and a lot of it was doing more procedures and to get your practice built up. it built up the accounts receivable. so that's when doctors start getting surgeries in their office so they can bill for more procedures. >> okay. we're running out of time. i'll have the doctor jump in. >> she is right. they reward procedures and tests and doctors have a financial benefit if they bring lots of equipment in. i heard a few years ago i was at a meeting in the cardiology group with 11 doctors. they had their own p.e.t. scan, their own c.t. scan and their
own c.t. 5 sngiography and i believe an mri machine. and they were complaining that medicare was going to payment rates for those procedures. there has been an ongoing discussion about whether the medicare fee schedule is tilted too much in favor for tests and procedures and not enough spent for prevention. we haven't made much progress in the last two decades. we made a good start in 1992 that gets into a whole issue of where cms gets its information from, there's a committee that's sponsored by the american medical association, which at least some things is too dominated by specialists and results in services that are -- where the fees are pretty distorted in the sense of paying too much for some procedures. >> well, let me bounce this off
of you. let's call it for what it is, it's not health care it's disease care. i think karen says this, i've heard that the majority of medicare payments are made in the last two months of the senior's life is that true? >> no that's an easy one. 28% of medicare spending occurs in the last 12 months. the last calendar year of an individual's life. that is neither the majority and it's not the last two months. some gremlin is out spending information like that. the other one i heard voted is that 60% of your lifetime spending occurs in the last x months of your life. we have no clue -- that one, the first part is an easy one to answer. there is a concentration, of course, that goes on because health care tends to be provided mostly to a relatively small number of people who are very
sick. that hasn't changed over time, and it's more concentrated in the under 65 than it is in the over 65. >> i would like to know is you get a monthly statement where you go that month. and say a doctor charges you $75, well medicare alone gives these people $40. i don't know where the fraud is in that. and last year two years ago i had breast cancer and they told me to go on a supplement. i went on a supplement and i was paying 300 something a month extra, which was very hard for me. within that year i had my breast cancer done i had my foot done because i had a pin in it i had a lot of trouble with my feet, and i had my eyes done, i had cataracts.
then when i had told -- i went back and i took off the supplement. they said, well, with medicare all you do is go up to 3500 and then you don't pay it any more. and i was paying more in the supplement than when i was just on the medicare. >> okay dr. berenson any thoughts on this? >> not quite sure. one thought i had is that charges that health care facilities have, the hospitals call them charge masters doctors have their fees no longer bear any relationship to the underlying cost of producing the service because we do not have the retail market individuals aren't paying for it. there's a lot of incentives to jack up those charges. so the fact that medicare may pay a relatively small percentage of that is not necessarily -- doesn't mean that medicare's not paying their fair share. >> i'm going to give you patricia here. gail is in fair born ohio.
also on medicare. >> good morning. good morning patricia you're on the air. >> i have a question, i'm a medicare recipient and i pay $261 a month for my supplement. and then my real question is, the medicare prescription drug plan. i've never been able to use it i have it through anthem, and they have a -- like a $360 deductible. which i certainly understand, that's a low figure. but i'm told that i cannot drop that but if i drop it, that there is all kinds of ramifications from dropping that. but i pay 32 to $37 a month for 16 years now and i've never used it, i've never been able to use it. >> you're shaking your head. >> yes. >> there will be an open enrollment period coming up approximately november 1st. might be october 15th and you
will have six weeks. go online, have someone help you. check to see what other plans are available. you want to have a plan, but you don't have to have that plan. look for a plan that gives better coverage for the drugs you use. doesn't have as high a deductible. you will see all kinds of premium variations, so you need to look at the drugs covered put in the ones you have, how much it would cost you and what the deductible is. for sure you can find something better than that don't let anthem or anyone else scare you, that you have to have that plan. but you should have a plan. there's a penalty if you don't have any plan, and then you want to have a plan in the future. >> we'll squeeze in mark from carlton, ohio. good morning to you. >> good morning. my question is why doesn't medicare raise their premiums so they could offer more services? and number two, how can cuba
after 50 years of embargoes still offer free health care and free education to their people? thank you. >> i'll do the first. basically, the premium actually does go up every year according to a formula. but the congress -- a couple times now has developed a policy where well endowed or relatively affluent seniors pay more. and there's actually, it's a significant increase in the premium. up to $335 a month, i believe. for somebody at the high end of that income bracket. i don't think we can do much more of that, but there has been at least recognition that the premiums at least for relatively rich people can be higher than they have been. >> before gail jumps in, we're
going to wrap up here, what's your takeaway for viewers to end the medicare program? >> a huge success, the record of the great society and lyndon johnson is somewhat mixed. i don't think there's any mixed report card on medicare it's been successful it has growing pains because the health care's very complicated, it has evolved over the years. and needs to continue to evolve over the years i don't believe we need some kind of fundamental new direction or fundamental restructuring of the program. >> your final thoughts? >> we didn't hear very much from the people who really help, which are the people who are not on medicare, are paying for medicare, and are worried about whether it would be there or not. it was very interesting to listen to those who are on medicare, they're very important. they're the current recipients, as you indicated. the millennials and many of the people under 65 if not the
millennials don't believe the program will be there for them, social security or medicare, it would be helpful if they would become more be actively involved in the political process they are going to be paying in no matter what, what's there for them, when they get there i think they'll be something there, i don't know what that something will look like a lot of challenges, medicare's been very successful for the current medicare beneficiaryies, the challenges going-forward are formidable. unfunded liabilities are $47 trillion. not a small number, even for washington. >> former administrator of medicare and medicaid economists for project hope, and international health foundation who served as deputy administrator of the program now at urban institute, correct? >> yes. >> good to have you both for this conversation. thank you. >> enjoyed it. >> on the next washington journal, we'll start the program by getting your reaction to the
voters first presidential forum, and then more from joseph mcquaid of the new hampshire union leader as he reviews that forum in new hampshire and the importance of the state's role as the first in the nation primary. after that jason plots examines president obama's announcement that would limit power plant carbon emissions. and finally, a recent state department report which rates countries across the world on efforts to combat human trafficking. plus your phone calls facebook comments and tweets. washington journal's live 7:00 a.m. eastern on c-span. sunday night on q & a, former emergency manager of detroit kevin orr talks about detroit's financial issues and his job overseeing the largest municipal bankruptcy in u.s. history. >> if detroit had taken that $1.5 billion that it borrowed in
2005 and 2006 when the stock market went down to 6700 and just invested in the dow jones or s&p the stock market is trading at 18,000, almost three times what it was. they not only would have tripled their money, they could have paid the pensions in full and got back to declaring the business of a 13th check. at the end of the year in addition to -- it could have fixed itself if there had been some sort of sober management going-forward. if you have some strong leadership and some focus leadership, you can resolve these problems, it takes a lot of effort. >> sunday night on c-span's q & a. retired general john allen and special presidential envoy for the global coalition to counter isis. he recent