tv Politics and Public Policy Today CSPAN October 1, 2015 9:00am-11:01am EDT
captions copyright national cable satellite corp. 2008 >> right. thank you for the question. there are a lot of knes about the blue cross blue shield organization and our part in that delivery distribution in the marketplace. you should know that we are in 14 states licensed as a blue cross blue shield plan. we do not compete in other states by way of the so-called license agreement we have with the association, so we are strictly performing in those 14 states. what will then happen with respect to the cigna acquisition is the fact that in our so-called non-blue states, those states outside of our 14-state domain, cigna will compete. it will be a competitor in the marketplace competing against the blue cross blue shield plans in those states.
within our own 14 states, the cigna brand, the cigna products, may come into our blue cross portfolio within those 14 states. however, in the national account space it will still continue to compete as cigna, so it's a combination of kind of placements in the country that are based on our blue states and our non-blue states where cigna will, in fact, compete. with respect to the best efforts rule that you brought up, we do need to comply with that rule, and we do not need to respond to the rule in terms of how we will comply until after the transaction closes. and then we'll have two years thereafter to adjust our portfolio, but we do not believe that will be an impediment to the deal nor do we believe that will present any competitive
deterioration in the marketplace. >> whereas today cigna has every incentive -- it's incentivized naturally to compete as much as possible and fight for as much market share as possible, but boe won't the best efforts rule necessarily limit and cap cigna's future competitiveness given that arrangement? >> mr. chairman, we believe it is just the opposite. our acquisition of cigna will make the cigna brand stronger. nationally, in terms of the non-blue states where they will compete against all plans. i think there will be a significant upside to the cigna brand in those markets with respect to whether it provides support to national accounts, large group, or other methods that will engage in the marketplace. >> okay. i've got another question now that i want to ask to both you and to mr. bertolini. each of you talked a little bit
about how customers, consumers, would benefit from your respective transaction as a result of improved efforts in connection with value-based health care. tell me how these benefits would be merger specific. that is, why couldn't those benefits be achieved in the absence of the merger? >> thank you for the question, mr. chairman. it's about, again, capabilities and presence in the marketplace, having a footprint of products that you're able to contract with the provider system. this discussion earlier of living in two worlds, fee for service and value-based insurance design. the more of the revenue that you can include in the new design, the easier it is for the provider to transition. from our point of view, having that opportunity to provide a broader breadth of products by market where we can engage in a full conversation
with the provider about changing their revenue model to a value-based model is our intent. >> with respect to our engagement in the marketplace, we believe that there are three core elements. focus on the consumer, focus on the provider, and then focus on building the value that is then delivered to the consumer. with respect to value-based payment methodologies and probably can label them alternative payment models, just within the last three years we've built out a value-based effort that now totals 53% of all of our payments to providers are value-based. we have an infrastructure that combined with the cigna infrastructure that will accelerate at a fast pace value-based payments in the marketplace. value then does go to the consumer. we have 150 acos.
we have 780 hospitals that are now affiliated with us in these alternative payment methodologies. with over 100,000 physicians that are participating. cigna has likewise built a very elegant infrastructure that in alignment with us and engaging in the marketplace, we believe we will deliver tremendous uptake in value that will benefit the consumer. >> thank you. senator franken? >> we're not going to recess for votes now? i can get through this? i'm going to depart. i was just listening to mr. swedish's answers on the cigna now, which is competing against blue cross blue shield. won't be able to.
i saw some skepticism about your answers, and i want to make these answers short. dr. dafny, did you share with me a little skepticism because i think that all the cigna plans will not be able to compete with the blue plans in many of these markets? >> thank you for the question, senator franken. my first response is with regard to the national plans, the notion that anthem and cigna could continue competing in that segment. they're going to be the same entity, so they might have two names, but i don't see how that's competition. with respect to whether the agreements with the blue cross and blue shield association would inhibit the expansion of cigna as a brand, that very much
depends on how big they are in the various markets and whether they would exceed the thresholds. and i would say i sure wish i had the data to assess the veracity of the claim that that constraint isn't binding. >> i'm going to continue on because you spoke to that. i'm sorry? i've got to go pretty soon to vote. okay. let me try to do this fast. mr. slover, i wrote the medical loss ratio provision of aca, which everyone knows requires insurers to pay at least 80%, 85% of their premium dollars on the actual health care for large groups. mlr has saved billions of dollars for consumers.
i'm just a little worried about a couple things. dr. dafny said something that could be repealed. i hope not. can you talk to how mlr has been saving money for consumers and made competition better in the insurance markets? >> yes, senator. we are strong supporters of the medical loss ratio requirement. we're very glad it's in the law. it's brought tremendous benefits to consumers. as you've indicated, billions of dollars. and it has disciplined insurer spending, but it works only in that one dimension. it's working very well in that one dimension to put a floor on the percentage of premiums that has to go to paying health care and quality improvements. it doesn't address the other ways competition can be affected
by mergers. and if we lose the competition among insurance companies in the non-price -- competition isn't just about price, although price may be the easiest way to measure it. and so we think that for all of the great work that the mlr has done, it works better in conjunction with a competitive marketplace. >> absolutely. mr. bertolini, mr. swedish, you both described how savings will be passed along to consumers, so are you saying that you will commit passing these savings on to your policy holders? >> it is our intention to make our products more affordable, and we commit to continue to drive affordability across the system. and the changing relationship of providers -- >> that's not quite an answer to my question. >> okay. >> do you commit to passing
along your savings to your policyholders? >> which savings are you referring to, senator? >> the savings you'll have by virtue of being able to do this merger. >> we'll need to do that and more in order to make products more affordable going forward. >> that's not quite an answer. will you commit to passing on the savings to your policyholders? >> our savings will be passed along in the price of our product? >> mr. swedish, do you commit to passing along the savings, all of the savings to your policyholders? >> we're committed to driving affordability for all of our customers. we're committed to balancing the investments that are necessary to improve our products for the benefit of our consumers, and i believe by definition that generates savings that goes to the consumer. >> do you commit to pass those savings on to the consumers? >> we'll certainly do so to the extent we're providing a very
balanced portfolio of offerings to the marketplace that is driven by great value, driven by the desire that the customers want us to address, and again, i do believe that all translates to improved distribution of savings to the consumers. >> i'm out of time. i do think we could have gone quicker if those answers were yes. >> okay. i'm going to go vote right now. senator hatch is going to assume the gavel while he does his questioning for the next few minutes. i'm going to be very fast. i hope i'll be back by the time he finishes. if not, we'll go into a recess for a few minutes until senator klobuchar and i are back. senator hatch. >> thank you, mr. chairman. let me just ask this question to mr. bertolini and mr. swedish. opponents of the merger argue that entry into a commercial
health insurance market is difficult because it requires an entrant to assemble a broad provider network to obtain prices and discounts comparable to leading incumbents. do you agree with that view? i would like to have your answer from both of you. and if so, why or why not? >> senator hatch, our acquisition is a medicare advantage combination, so there will be very little impact, if any, on the commercial marketplace. we see no competitive impact related to market entrants. however, there are 400 commercial insurers in the marketplace today. there are new entrants, 75, in the last three years on the public exchanges. as they begin to offer more products and services, so we think there's a robust competitive market. there are ten in the overlap
markets between anthem and humana and the commercial public exchange markets today. >> thank you for the question, senator. [ inaudible ]. appreciate the fact that the relationship with cigna and anthem presents -- there is no -- number two, you're looking at the individuals states. we are both in many states. we only overlap in five states. the choices to the consumer in the individual states is incredibly robust. from an average of 40 health plan plans --
we have witnessed tremendous growth in the number of plans. a lot of provider health care networks are offering health insurance products to the marketplace. again, i believe competition is robust. the entry points are many, and it is producing tremendous opportunity for the market to receive products and services for many health plans going forward. >> thank you, sir. mr. slover? am i pronouncing that right? >> yes. >> based on past experience, how likely are enrollees to change plans when premiums go up or benefits are cut? if a post merger etna orran them
were degrading services how likely is it they would lose subscribers? >> well, there probably is some sticking effect up to a point that consumers are going to stay with who they've got and employers are going to say with who they've got, but it's important that they have a choice, another place to go, and a place where they can get as good of coverage as they had before or better coverage at a more affordable price and to have those insurers competing against each other to hold each other in check. and so what we're concerned about -- and this is something that the justice department is going to have to look at in each one of these markets -- is how this combination is going to affect that and is going to risk losing that benefit. >> could i have you two, mr. bertolini and mr. swedish, comment on his comments? >> senator, like politics, all health care is local.
there are many competitors and a lot of varria bility in each competitive marketplace. the large driver behind our acquisiti acquisition, there are 18 different plan options available to seniors. in non-rural markets and in rural markets there are ten, so we view the ability for lots of choice still available. the government benchmark against which we compete is still dropping every year, and so we see the markets still very competitive. wall street is investing in new entrants into the marketplace. the plan called oscar, which entered the new york market, a very large market, just received a $2.5 million investment from google to open that marketplace up. >> mr. swedish? >> i can simply underscore what mr. bertolini brought out by
referencing dr. ginsburg's paper on page 5. he speaks to the growth in one sector in the industry. he states a recent health analysis reports that 15 of the 28 new entrants into medicare advantage between 2012 and 2015 are, in fact, health systems, and 37 provider-sponsored plans offer coverage on the public exchanges. i simply want to underscore that there are many new entrants to the marketplace. oscar being one that's probably more recent and called out quite frequently as an entrant that's having great success in the marketplace. so again competition is becoming more robust in every sector of the health plan marketplace. >> professor ginsburg, what is the relevant market or markets
here? >> excuse me, sir? >> what is the relevant market or markets here? >> yes, well, i would say there are two markets that these days are particularly easy to enter and are seeing entrants. one is the individual market as a result of the public exchanges, and the other is medicare advantage. this is where you're seeing the entry. i don't think you're seeing that much entry in other markets, but as the other witnesses have said, i think those markets are becoming more competitive. >> is it the national market? is it each state market, or is it some number of smaller geographic markets? and should traditional medicare and medicare advantage be considered part of the same market or different markets? and what's the right way to define the health insurance
market, i guess is what i'm getting down to? >> it's very challenging. in some markets, markets for individuals, small groups, some of the large group markets, very local markets. medicare advantage is very local markets. for large self-insured employers, a lot of that is a national market. so that's quite distinct. >> do you care to comment, professor dafny? >> i would concur that market definition depends on the access channel and the specific customer segment, and it would be for different commercial populations and for medicare advantage populations most likely. >> okay. let me get back to you again, mr. bertolini, mr. swedish. mr. bertolini, the american hospital association has argued that the aetna/humana merger
would increase the score for medicare advantage by over 200 points. in 19 of 24 highly concentrated markets. mr. swedish, the association assembly argued that the anthem/cigna merger would increase the score for health insurance by over 200 points in 600 highly concentrated markets and by over 100 points in another 217 highly concentrated markets. now you first, mr. bertolini. but then, mr. swedish. do you agree with those calculations, and if not, why not? if those calculations are correct, does that mean the mergers will increase market power? >> thank you, senator. i'll point to a comment dr. ginsburg made earlier.
market concentration is just one measure of looking at potentially anti-competitive issues. i'm not an expert on the hh index. i have enough to do in my day job to manage all that i can think about relative to medical loss ratios and the like, but i would say as we look at the markets where aetna and humana compete, we have 18 competitors in non-rural markets and 10 plans offered in rural markets. 18 offered in non-rural. we see plenty of competition and plenty of entrants. entrants have been more than half hospital systems. we view that in the event we get to the point with the department of justice that we need to engage if divestitures, there will be hospital systems that want to have an opportunity to enter the medicare advantage market. thank you. >> senator, likewise. i'm not completely familiar with the analytics that you
mentioned. and in particular the research results that have been referenced. i would rather respond back to the committee at another time maybe for the record, very soon, and, of course, to the department of justice regarding their assessment of the combination of these two companies. that's probably the best i can offer at the moment. >> thank you. this has been interesting to me. i'm supposed to recess until further notice. i think they'll be back shortly from their votes. we'll just recess until the senators get back. >> we're ready to reconvene. senator klobuchar is next. >> thank you very much, mr. chairman. i talked a little bit about the health insurance consolidation,
and i know we had some quick answers there from both of you. we have a little more luxury of time now, so if you could, finish up, mr. swedish. i was asking you, remember, about why you needed the merger to achieve some of these cost goals that you have. >> thank you for the follow-up question. what i'd like to do is maybe describe to you the various products and services that we do offer in terms of how we segment our business. this is a highly segmented industry that then serves a very focused effort in and around local markets. for instance, we are very active, as is cigna, in the national marketplace serving large national accounts. these are very sophisticated, highly educated buyers of health care services typically using consultants who then they rely
upon to make the selections for the health plan that will serve them in the national market space they reside in. very competitive landscape in the national account marketplace. so specific to your question about why come together, we'll both be better able to serve that customer base of national accounts that highly desires our support as an administrative services only support team to what they need in terms of health plan delivery. what's fascinating when people ask about the competitive landscape specific to national accounts is that there are 130 unique health benefit companies serving that self-insured marketplace. in 2014, there were 30 new companies that began competing in that space. the gao reported in 2014 that there is an average of 11
insurers competing in that large group market for specific contracts, so you can see that the combination of our two companies in an area where we're most active is very valuable to the customer. let me briefly go to another environment. small group. while you were out, i mentioned, we do not cross over at all. they don't have small group. we'll continue our small group coverage competition in markets we serve. with respect to the individual space especially in the exchange environment, they have a very small market presence in the individual space and today consumers can choose from an average of 40 plans that support their choices. in that regard, it's all about choice, whether it's a national account, small group, individual plans. we're coming together. finally, the complementary nature of the two companies allows us to combine and access
their expertise in the international market, which we do not have a presence in that space. and finally services like wellness programs are very vital to moving the needle on value for the customer. and cigna has a phenomenal wellness program that will integrate with us, which then translates to more value to the consumer. so the combination of all those products and services brings value to the marketplace that i would argue is exponentially significant in value. we both believe one and one equals three in terms of the combination, in terms of how we can serve the customer. >> dr. ginsburg and dr. dafny, you both have these studies that you're relying on on consolidation that you've talked about. can you just explain them in more layman or laywoman's terms?
maybe how it's working and how it's going to affect consumers? maybe you want to start dr. ginsburg. maybe your microphone there. >> i would say certainly the literature on insurer consolidation is a very limited one, and i think professor dafny's study of the aetna/prudential merger, which was 15 years ago, is well regarded. she explained how difficult it is to do these studies. the information on provider mergers is much clearer. >> and what does that show? >> that shows clearly hospital mergers leads to higher prices and without an impact on quality. this is a very extensive literature that's been synthesized by some very good people. nevertheless, i think that there
are other dimensions that are quite relevant besides consolidation, et cetera, that either policies -- the policies can make some markets much more competitive. this is what has happened with the affordable care act. >> that's right. we do a lot of that in our state with the geographic disparities between parts of the country and the fact that certain states and certain regions of the country seem to have had in place historically more innocecentive different culture that makes things more cost effective. that's what we have in our state that i was trying to get at, too, that could be a potential solution here. the affordable care act has those incentives, but we haven't seen the full results of them. we've seen some. >> i think one of the upsides to consider and perhaps not overdo it is that -- i think we're placing a lot of a big bet as a
country in alternative payment models, value payments. it's really the only thing we've got to try to address costs on a long-term basis. and i think there are some specifics where insurer consolidation can lead to this trend moving forward more rapidly. i think the role of medicare has been and will be very important in this trend because providers need to move all of their -- eventually all of their patients from fee for service to value-payment models. >> dr. dafny? >> if i may, i'm delighted by the question, what can we learn from prior research on this. in addition to the discussion of the aetna/prudential merger, there is a study on another larger merger in nevada that found large increases of 14% in small group premiums. i have, myself, done a study on the individual insurance
exchanges, which demonstrates that competition on exchanges also leads to lower prices. in particular one of the large nationals sat out in the first year, and we estimate in those areas where they had a bigger presence in the individual insurance market, premiums on the exchanges were higher. competition matters today, and it mattered then. >> okay. very good. thank you. >> senator blumenthal. >> thank you all for being here today and the excellent testimony you have offered so far. i am deeply concerned about these mergers because of the potential effect on competition and the concentration of power in fewer hands. i've expressed those concerns publicly in some sense. i have a feeling that like the saying about marriage that this
merger may be the triumph of hope over experience. the experience that is suggested by a lot of the scholarship done in this area is that consolidation is so rapidly taking over this industry. we have seen it in other industries, and we have seen the consequences of it in higher prices. in this case potentially higher premiums. and i am deeply troubled by the evidence that shows that neither providers nor consumers benefit from these consolidations. in other words, that the prudential/aetna experience shows that premiums are not lower, that consumers do not benefit, and that the savings are not passed along to consumers. when viewed together, i think both of these proposed deals raise those serious competitive concerns. in addition to conducting a
market by market analysis, i believe that the department of justice also must scrutinize these mergers together, all together, as part of a single national health care market and the goal has to be to sustain and enhance, if possible, competition and protecting consumers. i want to focus in particular on an area that has not been covered so far, and that is the issue about barriers to entry. as you may know in 2010, former assistant attorney general kristine varney explained the results of a review of the antitrust division in the insurance marketplace and this was her conclusion before the american bar association. quote, our conclusions reinforce
our concern about strong barriers to entry and expansion in health insurance markets and are particularly significant in light of the enactment of the affordable care act. it is, therefore, imperative that the division prevent mergers or acquisitions that will create or even increase the size of dominant health insurance plans, particularly in the small group and individual markets. entry defenses in the health insurance industry generally will be viewed with skepticism. she was talking about the doj and will never justify an otherwise anti-competitive merger. a suggestion has been made, and i think it is a pillar of the argument for this merger that these barriers to entry are insignificant. and i think experience belies
that contention as assistant attorney general varney explained. i'd like responses from mr. bertolini and mr. swedish. >> thank you for the question, senator. i understand your point of view. i would like to make clear what the data shows us in the markets where we compete. in medicare advantage, there is plenty of competition. 28 new entrants. more than half hospital systems over the last three years. more and more hospital provider systems are entering the market. in the public exchanges where we have overlap between aetna and humana, there are at least ten other competitors. investments by wall street, private equity and venture capital into starting new health plans, is evidenced by oscar in
new york where google invested $2.5 million in furthering their expansion of the new york marketplace. all health care is local just like politics. at the local level, we continue to see more and more entrants. we continue to see more competition, so we are not at all concerned about the lack of competition in the local markets. in medicare advantage specifically, the government sets a bench market, which requires us to beat in order to offer a affordable plan to consumers. so we have over the last five years from 2010 reduced rates by 6% in medicare advantage to the benefit of seniors with a higher quality product and a more affordable product each year. >> mr. swedish? >> thank you, senator. if i understand the question, it's dealing with barriers to entry and the perception that barriers do exist such that new entrants cannot come into the marketplace. >> there are powerful barriers
to entry, notwithstanding what mr. bertolini said. i understand your point, and i respect it. i can't just start an insurance company that will have any hope of competing with the combined entity once this transaction is completed. yes, all health care is local, like all politics is local, but there is national politics and national markets and those markets are profoundly important for the department of justice to review in scrutinizing this merger because of the barriers to entry. and that's true of other industries as well, so that's the perspective that prompts my question. >> yes, sir, and i certainly appreciate that perspective. what i can share with you is that there are many new players that have entered the market and continue to enter the market. i would like to begin with reference to oscar that mr. bertolini just brought up serving new york and new jersey.
year one of their entry of that highly competitive marketplace, they accumulated 45,000 new members, and the company was founded based on venture capital funds and just recently a google investment that will accelerate their engagement in the marketplace by way of them going to california next year. again, one company, multiple products, demonstrated success year one. let me underscore maybe the bigger view. as we deal with the national marketplace for large group and national accounts, what we've witnessed is 30 new companies that have entered the marketplace competing in the national accounts sector. gao report brought out the fact that on average there are 11 insurers competing amongst themselves for national accounts. with respect to another slice of
the development in the marketplace, pwc in 2014 revealed that 50% of u.s. health care systems have or intend to apply for an insurance license. in fact, it was just brought out a little while ago that with respect to serving public exchanges, 37 provider-sponsored plans are now in the marketplace offering coverage for enrollees in the exchange environment. my point is that competition is becoming more robust, not less, with respect to our combination with cigna. quite frankly, we are compatible and complementary companies without a lot of overlap in how we engage in the marketplace. in that regard, i believe we will bring great value to our customers and compete very effectively in the marketplace
by virtue of this combination. >> my time has expired. i want to thank both of you for your very informative responses. i think we have only begun to scratch the surface in terms of the data and the material that has to be reviewed by the department of justice, and i hope that the scrutiny will be exacting and demanding, as i know you expect it will, but there seem to be two very different factually grounded perspectives here. one offered by professor dafny in the charts and testimony that she's offered and the other that you've presented. and i think it may result from the way markets are sliced and diced and the different analyses that are done. my hope is that the department of justice will look at the national market rather than only the local markets because insurance is not all local. thank you. thanks, mr. chairman.
>> senator tillis. >> thank you, mr. chair. i want to welcome all the panelists. thank you for your testimony. i was here for the testimony. and i apologize. i had another meeting, a vote, and another meeting and then another meeting before i got back here, but it's not for lack of interest. and i'll certainly be reviewing the comments from some of my colleagues. this is a very complex process in not only the issues that you have to deal with in terms of the geographic market competition, the saturation, all these other things. a number of the things that dr. dafny mentioned go beyond, i think, the things we tend to look at. i'm glad congress saw it fit to make this task something that the doj would do.
as far as i'm concerned, market concentration is when i'm doing at the grocery store and trying to figure out what my wife asked me to buy when i got there. the way you're looking at market concentration here and all the other factors is in an area that should be making judgments on a nonpolitical basis on the merits of the deal based on factors that have been outlined. here's a concern that i have with this particular transaction. it's been alluded to by some of the comments today. different public policies that have been outside forces that are causing some of these things to occur, either in the insurance industry or in the hospital industry. so my question is, do you feel like in light of particularly some biases on the administration's part on where we should go with health care in the future in this nature, do you feel like the process that we have in place in the doj is likely to produce a decision
based on the parameters set forth versus something that may potentially be influenced by an outcome that better serves legacy agenda item? i'll start with dr. ginsburg. >> well, certainly the department of justice is guided by the age-old antitrust laws, which i think has served the country very well. clearly, there are judgments that are hard judgments to make. i really can't get into the minds of the officials in the justice department as to how they will come out, but i think they are committed to very extensive review. >> mr. bertolini, what are your thoughts? >> senator, i believe the process is very thorough and complete. we expect it will be a fair and appropriate process. >> dr. dafny, you mentioned -- and i'm a data person myself.
i ran a data analytics practice back before i entered politics. do you feel like the process today -- do you have enough insights in the process now? you and i may be coming from a different frame in the argument the data would support. do you believe it incorporates the things you're looking at when you study this? >> i'm confident in the process of the department of justice. i just wish that the public had some access to the information so that we could perform analyses too. >> i think that's a valid point in terms of transparency, but i understand some of the competitive elements that have to be taken into account. i have another question, and it seems to me one trend would cause the other trend to occur. in north carolina, we've had a lot of consolidations. to your point, mr. pollack, we've had problem hospitals in rural areas that were acquired and but for that may have been
out of business, diminishing our ability to serve the rural population, which is the most underserved in north carolina, probably nationally. by the same token of consolidation, you mentioned how it has improved outcomes and the delivery of services. it's also created large provider networks. one of the advantages to the kinds of mergers that we're talking about here is that -- and i'm not missing the sumo wrestler analogy, but as long as that trend continues, it seems to me that as someone who is involved in strategic sourcing and supplier negotiations that there is a valid argument to the extent that you have a larger buyer base, strategic sourcing base, you're probably going to be able to negotiate better
price points, not only for medical services provided, but also addressing a very serious problem about the cost of pharmaceuticals. i'll start with mr. swedish and then time provided, our chair allowing, have at least one other person respond. thank you. >> thank you, senator. if i understand the question, it's about provider consolidation and the -- >> provider consolidation is something that the hospital industry has used as an argument for improving care and reducing cost. i think a part of your argument -- there's very clearly a model you want to adopt and have pervasive in the products and services you provide, but what i'm getting to is the business of your business where you have to get out there and negotiate provider rates that can fit within the models that ultimately reduce the cost of pharmaceuticals and medical services provided. so my point is, it seems inconsistent to argue that the
consolidation of hospitals to address their challenges is okay, but the consolidation of insurance companies, if they fit within the doj constraints for such a merger, would not be okay. i'm trying to understand why that's consistent or not consistent. >> thank you for that clarity. i would like to give you a tale of two cities. one, as i mentioned earlier, our organization anthem has developed a value-based payment infrastructure that today 53% of our payments to providers are value-based driven, i.e. alternative payment models. we've got 106,000 physicians that are participating in those models. as they say, vote with their feet. they're part of the models going forward, to your point. cigna's infrastructure, likewise, have multiple models, acos, and a variety of value-based payment models that will integrate with our model at the close of the transaction. however, let me shift now to a different perspective.
as you heard earlier, i served as a provider executive ceo for many integrated delivery systems in the state of north carolina quite frankly for probably 15 years, so i know those delivery systems extremely well. i've keenly observed the combinations and consolidations happening on that front, so i'm well aware of what's happening in that state as well as 49 other states given the view that i have today from my perch as a health plan executive. what i can tell you about my lived experience in that world is for the last 15 years, we were focused heavily on acquisitions, consolidations, purchasing hospitals, purchasing physician practices all built under the premise we're going to clinically integrate. i would further submit the build-out had a lot more to do about building a better price. it was all about negotiating better price by way of delivering better quality.
i would argue in terms of today in our commitment to value payment and new models of care delivery supporting practitioners are data, i think today is a totally different day than what history suggests in terms of what the old story looked like, versus what it looks like today and what it will look like going forward. so i think competition is robust, but our alignment with providers is value added to the new markets that we've come upon relative to whether it is small group, large group, aca related. it's all connected in terms of the value to the market. >> i'm sorry. my time has expired. if any of you have feedback on that, i would like to have that communicated back to my office. i would welcome it. >> senator coons. >> thank you, mr. chairman. i've had a chance to review much of your testimony, so i will be fairly brief given a vote has
just been called and this has already been a very long hearing for many of you. if i might, to mr. swedish your testimony highlights some of the important quality initiatives and partnerships between anthem and cigna. and as someone who has been intimately aware of cigna's work in improving patient outcomes and quality, how will these partnerships or programs either expand or increase after the merger or be negatively impacted by the merger? what kinds of metrics will you use to make sure they continue and continue to have an impact on patient outcome? >> thanks for the question because i think it does speak to future state, and future state with respect to how we envision it lays out a very strong model of building on the respective successes of both organizations. as i mentioned before, i believe cigna has built out a wonderful model in and around accountable care delivery methodologies.
they've generated a situation in which patients, their members, are more compliant with diabetes measures to the extent of some they have witnessed a 45% lower medical cost trend versus the industry at large. that is a wonderful asset to capture in terms of blending with our own successes in like fashion with respect to how we have administered our services in the 14 blue states that we oversee. long story short, i think the combination will be sinnerynerg and clinical performance will be advanced by way of one key asset combination, data. taking data repositories, the respective repositories, melding them together to create valued information for the provider community. i believe care delivery will get
better because, number one, our stewardship of that data and the stewardship that we then administer in terms of our partnership with physicians will become more enhanced by virtue of the benefits and the strengths of both companies coming together clinically. >> my last question, if i might, a number of you have talked about how the insurance market is either national or really local. i think there's an enduring tension between the perspectives about whether it should be nationally or locally. i will ask a concern, from delaware, because anthem has 100 folks doing data analysis and cigna has 500 folks who i fought hard for who are critical to the program that's been administered out of there. what sort of opportunities do you see should there be a merger, post merger for increasing your footprint in my home state? what sort of risks do you think there are to the significant employer base for my state? do you think given the lack of competition in the marketplace
in delaware and what a significant negative impact that is had a had what opportunities do you think there might be for expanded opportunities on either the individual exchange or in other market segments? >> well, senator, i appreciate your comment about the work force in delaware. let me first underscore that we are concerned about all of our associates nationally. we really focus heavily on building a culture folk -- that is rooted in our commitment to creating value in the marketplace. so i do want to state that on a national basis, national perspective. that's critically important in terms of our relationship and support of all of our associates. with respect to delaware, i recognize thatred there, which s engaging with pharmaceutical enterprises to analyze the benefit of pharmaceutical products that go to market.
about 100, 150 associates with respect to cigna's presence. they have an incredibly successful international outreach, going global as you know. the number of associates there probably approach 500 plus. our sense is that certain sly will remain in delaware. it's a critical contributor to the delaware economy. we recognize that. quite frankly, under score the fact being a growth oriented enterprise, we would expect both of those areas with respect to international services as well as research to continue to grow. thank you. >> thank you. thank you, mr. chair. i would like to thank the panel. >> mr. pollack, some industry on serb observers have suggested these mergers might provide necessary counter pressure to balance out the widespread consolidation that's starting to occur among
providers, specifically providers who were getting into the business of offering insurance plans. what's your response to that suggestion? >> i think it's just the opposite. right now the insurance field is already incredibly consolidated. we were talking earlier about barriers to entry. there have been studies from kaiser family foundation and the commonwealth fund talking about how 97% of the medicare advantage markets lack competition. if you look at the breadth of blue cross blue shield fans in 40 of the 50 states, they are the largest plan. so we think that you need to have continued robust competition. we don't see how these deals promote that aspect. as for the provider-based plans, while they are out there and they are growing, they pale in
comparison in terms of scale to what we have seen with regard to the insurance company side, the commercial insurance company side of this. and while they actually bring great value and great -- get great quality ratings, it's still hard in the face of some of these other entities to, in fact, get into these markets. very often, you have to have a minimum number of lives, which it's sometimes very difficult for these provider-based plans to do. >> so they don't weigh the same? >> exactly. >> let me get back to mr. bertolini and mr. swedish. i'm sensing you wanted to respond to that. you can work that into your answer on this question. they are kind of connected. i've got questions for both of you related to the fact that both of your companies have represent eed that entry into health insurance markets is relatively easy.
if that's the case, why not enter into the markets that humana and cigna are already in, why not enter into those instead of buying those competitors? for example, why can't aetna just expand its medicare advantage offerings instead of buying hugh ing humana? i would like your reaction to that. also just any thoughts you've got about whether new entranlts are likely to remain in the marketplace. >> i think the tradeoff as to whether or not to enter markets versus acquire markets is simply an economic discussion. how do we want to deploy our capital and how quickly do we want to get there? aetna was going to spend the next five years getting into markets that covered 70% of the medicare eligibles. why is that important? because seniors are now more
portable. they need to move around. they want to keep the kind of quality and benefits that we offer at the prices we offer to them, which in a lot of cases, more than half, are zero premium policies for full benefits. so with this acquisition, when it closes, if appropriate, then we will be in markets covering 92% of the medicare eligibles across the country. so they have that portability and are able to move around. >> mr. spewedish? >> i can echo some of the same comments. with respect to being specific to our combination, you know, certainly, we spent considerable time analyzing the economics of the transaction, the value add to our members. but more importantly, pivoting as an organization at a very fast pace relative to how fast the market is changing and the
demands of the consumers are changing, whether it's a national account, small group, individual. any segment you want to look at, the turbulence, the speed of change in the marketplace necessitates a combination that brings new value to the marketplace. in that regard, we believe this economic combination makes a lot of sense for us because we can come to market faster, better and then in turn create more value for the consumers. otherwise, quite frankly, we're dragging with respect to the responsiveness that we believe is necessary to best serve the marketplace. final analysis, we're going to craft and administer a transaction that truly is in the best interest of not only our consumers but also the business itself in terms of being a sustainable business going forward. we believe this combination creates both sustainability and support to the customer in equal fashion. >> thank you. i've got additional questions.
in the interest of time, given there has been another vote called and we have to get to that vote, i will adjourn the hearing. we will submit any additional questions in writing. senator klobuchar, do you have any -- >> i appreciate you holding this hearing. it's important. i assume we'll have more to come. thank you. >> thanks to all of you for your participation. this has been very helpful. thank you for being here today. we'll be adjourned. a signature feature of book tv is our all day coverage of book fairs and festivals from across the country with top non-fiction authors. here is our schedule. in early october, the southern festival of books in nashville. after that, live from austin for the texas book festival. near the end of the month, we will be covering two book festivals on the same weekend,
from our nation's heartland, it's the wisconsin book festival in madison and on the east coast, the boston book festival. november, we will be in portland, oregon, followed by the national book awards from new york city. at the end of november, live for the 18th year in a row from florida for the miami book fair international. that's a few of the fairs and festivals this fall on c-span2's book tv. the c-span networks feature weekends full of politics, non-fiction books and american history. saturday morning at 10:00 eastern on c-span, with nasa's announcement of liquid water on mar mars, they talk to the experts about the announcement. sunday evening, at 6:30, policy makers, industry innovators and media personalities discuss the issues driving the national conversation at the washington ideas forum.
speakers include former massachusetts governor mitt romney and valley jarrett. saturday night at 10:00 eastern, martha kumar discusses her new book. she's interviewed by mac mclarty. and sunday we talk to thom hartmann. we take phone calls, e-mails and tweets for thom. on american history on c-span3, saturday afternoon at 2:00, steve oni explores the murder of 13-year-old mary fagan in georgia and the arrest and lynching of a jewish factory owner. sunday afternoon at 4:00, on real america, the 1975 federal
energy administration documentary on the supply and demand of fossil fuels in the u.s. and a look at alternative energy sources. get our complete weekend schedule at c-span.org. we're live on capitol hill this morning for the next in a series of congressional hearings on the recent toxic waste still at the gold king mine in silv silverton, colorado. they will hear from local business owners and county officials about the costs and the environmental fallout related to the spill. this event occurred when a company contracted by the epa to remove pollutants from river water mistakenly released toxic elements into the river during their work. the epa has taken responsibility and they have created an operation to clean up the damage. by the way, the other hearings in this event on capitol hill, the other capitol hill hearings on the gold king mine spill are
silverton, colorado. chairman vitter could not attend. i want to thank him to have this opportunity to chair this hearing. i ask that his statement be entered into the record. without objection it will be entered into the record. before hearing from the honorable scott tipton, i want to mention that the epa was invited to testify this morning but was unable to send a representative. instead they submitted testimony and we have their testimony before us. i ask it be entered into the record. and i also want to welcome to the committee senator bennett who will be here momentarily and will be joining us not as a member of the committee but as a member of the senate who will also be able to participate in this committee hearing. he will be here shortly. in the interest of time, i will withhold my opening statement.
the congressman's district includes silverton and north where the spill occurred. mr. tipton was elected to represent this area in november 2010. congressman, your perspective is invaluable. we appreciate your service and look forward to your statement. welcome, congressman tipton. >> thank you, senator gardner. extend my thanks to chairman vitter for convenie inine inin' issues. when it comes to the impacts we're going to be feeling in southwestern colorado but in other states as well. i would like to extend my thanks to the small business committee for folk using on what i believe is a very important issue, the life blood of our economies in rural colorado and the rural united states which is our small businesses. i'm grateful for your willingness to work with me to begin what will be a long, complicated process to obtain a complete picture of what the
economic impacts of the epa caused gold king mind blowout have been so far and into the future. i first would like to provide context for why in the wake of this disaster a focus on its impacts on small businesses in this area is so crucial. there's without question going to be a long-term impact on farm and ranch communities in the area from this spill as well as many other sectors of the regional economy. given the approach you have given me today, i will focus on one sector where we are likely to see the most impact more than any other, and that's in regards to tourism. many decades ago, western colorado relied largely on its mining and agriculture ral industries for economic growth. however, our state economy is diversified. we are fortunate to have beautiful landscapes that stimulate and thriving tourism industry. thrilling vistas, unparalleled outdoor recreation and finest
facilities in the nation. skiers descend on our slopes. it thrives the rest of the year by offering mountainous terrains to hike and explore as well as fishing, rafting, kayaking opportunities and other outdoor activities on our rivers. many of the small businesses that cater to tourists are found throughout my district. including southwest colorado's regional directly impacted by the gold king mine spill. a study published this year courtesy of the colorado tourism office provides a detailed look at the importance of tourism to the various regions and counties in colorado. in 2014, direct travel spending totals $18.6 billion, supporting approximately 155,000 jobs in over $5 billion in wages. the first county down stream,
relies on tourism to sustain its economic well-being. the county of over 53,000 people will plot a share of that spending, supporting about 3,000 jobs and generating close to $8 millioned in local tax revenue. let's not discount the importance of tourism in san juan county. it has 692 people. in 2013, tourists brought $14.2 million to san juan county. that's a little over $200,000 for every man, woman and child that live there. a loss of that revenue would devastate the economy of a remote area with few other economic opportunities. the epa maintains the people, businesses and local governments can apply for competition. this sounds great in theory. calculating a dollar amount in this situation is difficult at best. for example, how do local businesses accurately estimate lost revenue from tourists that
don't come this summer? or the next or the one after that? almost every county in colorado has seen a year over year increase in direct tourism spending since 2009. how do you calculate the loss that would have been seen from larger increases? these are the questions that we must start to try to grapple with. some have opined decembsignatin as a super fund site is sensible. but what do the town residents think? shouldn't they be at the center of the debate? it's my understanding that the residents still oppose any such listing on the national priorities list, fearing it would negatively impact the tourist economy. their fears are not without merit. designating it a super fund site, a town in which many of the local businesses rely on seasonal visits for outdoor tourist enthusiasts could damage the town's reputation and prove costly to the local economy.
many of the local businesses are small operations, as are many of the rafnches and farms in the area. as a small businessman myself for over three decades, i know how important credit and loans are to staying afloat in a lean year. ultimately, a bank wants their money back and will not loan to a business whose customer base they believe is in decline or a farm or a ranch whose access to clean water supply is in jeopardy. the uncertain status of the river means many businesses that were healthy and thriving now are consequently struggling or feel they about to be endangered. without certainty, that comes from the tourists and providing crop water, they may not be able to make it through lean times. a listing under the super fund could taint the area for decades to come without regard to the impact it could have on businesses. we can all agree tourism requires a clean environment. especially river-based tourism.
tourism is also dependent on a perception, a belief the area is contaminated with toxic waste would affect how many people are willing to spend the night and spend their money there. super fund status is a billboard announcing to the world that the environment here is not safe for humans. whether it's true or not, people will look to the rivers, see the super fund designation is there and decide possibly to go elsewhere. super fund status does bring with it a stigma. often with that perception is a reality. that seemingly simple choice to spend vacation dollars somewhere other than southwest colorado would have a severe impact on the small business owners who rely on that tourism income. we all want the best possible solution to this devastating spill. but throwing the full weight of the super fund designation when other more effective options could be available could have serious consequences for these
communities and beyond. i have believed that local communities know what's best for themselves. they have an intimate understanding of their hometown economies and hear from their customers about why they visit the area. it may increase harm done in this area. we should seek solutions, put the power to address these problems in the hands of the folks on the ground who have been working to solve these problems for years. the good samaritan approach that have i been brooching -- policed to see the senators from the state of colorado to address the problem and make sure we're achieving a positive result. i appreciate that support. one of the possible solutions as opposed to super fund designation. the river is a significant source of revenue in southwest colorado and beyond. especially during the summer tourism season. this avoidable spill will have a significant impact, a long-term
impact and we're working with state, local and federal officials to gather information to assess the damages and get a full accounting of what transpired. as we contend with the damage already inflicted on small businesses in southwest colorado, and the future difficulties that they will face as a direct result of the gold king mine blowout, i urge everyone to consider options that do not ultimately compound the disaster. i appreciate this hearing and appreciate the opportunity to be able to testify. >> thank you, congressman tipton. thank you for your testimony this morning. i know you have a vote that you probably will be able to make now. thanks for your time today to be here. thank you very much, congressman tipton. senator bennett, pleasure to see you. >> i will proceed with my opening remarks. on august 5, 2015, the environmental protection agency released approximately 3 million gallons of contaminated water from gold king mine.
the water moved downstream and flows into lake powell. it had an impact on colorado, new mexico, utah, and the navajo nation. from the outset, i have set the epa should be held to the same standard as epa would hold a private company for the spill. it means investigations must be conducted, people must be held accountable and tough questions must be asked. the sheriff closed public access to the river. the epa still did not have an appropriate crisis response team in place four days later. it was not until august 10 that the epa established this. the river was not reopened until august 14, nine days after the initial surge of contaminated water. water testing shows the surface
water has returned to preevent levels. the sediment contains various pollutants. the epa installed settling ponds to address this which we hope will slow the flow of contaminants in the river. last month there was a series of congressional oversight hearings that took place in the united states senate and the house of representatives. we learned answers to some inquiries during the epa's testimony. but more questions remain on what exactly took place in the events leading up to and following the spill and how to get our communities back on track including compensation. it's my hope the report will provide more clarity and transparency. i look forward to the release of the department of interior's assessment of the gold king mine spill. for colorado and downstream communities there are concerns that exist that the epa must address. epa announced that by october 14, the agency will open a temporary water treatment system which will replace the settling
ponds that were constructed by the epa in august. it's good news for our communities for the winter months. but further mitigation and the need for future monitoring must still be addressed. some claim the gold king mine spill shows the need for broad mining reform legislation which would include reforms to the mining law of 1872. in reality, what we have to work on right now is the need for legislation that would allow these mines to be cleaned up by good samaritans. this has been broad for passing good samaritan legislation in the past. i'm committed to working with senator bennett to get good samaritan legislation through the senate. that's the only way we are going to get good samaritan legislation through is to work in a bipartisan fashion. i'm working with senator bennett on the need for a water treatment plan in the river watershed. today's hearing is important because it provides us with a
different view than we have had in previous hearings, with an opportunity to hear from people on the ground who are business owners, who represent businesses and communities and who represent the people of the counties affected. that's why i am disappointed we do not have an epa representative here who can answer basic questions about the points that congressman tipton raised in his opening statement about compensation, about how do you determine what level of compensation to provide to a hotel, whether it's a cancellation, is that related to the gold king mine spill? a rafting trip, cancellation of a hotel room, a dinner reservation? how can we determine what costs incurred? these are questions that we still have and we will have liked to have answered today by the appropriate representative. property damage, lost economic opportunity and as congressman tipton mentioned, the long-term impact. how do we get answers and
compensation for these very significant issues? there will be a number of proposals before congress. i look forward to working on them with senator bennett and again, i think it's important that the only way we can address some of these issues is by -- with bipartisan support. with that i will turn it over to senator bennett for your opening statement. >> the panel, if you would like to come take your seat while we're opening the statement, that would be great. thank you. come on up to the -- three panelists and senator bennett, if you -- >> thank you. let me say, thank you so much for holding this hearing. thank you for including me. he didn't need to do that. i appreciate it. i'm not on the committee. i'm deeply interested in getting to the bottom of this, as you are, and getting the answers we need. thanks for inviting me this morning. it's my pleasure to welcome commissioner blake. the blowout at the gold king mine affected communities and businesses as you have heard throughout southwest colorado. there is no denying that the epa
caused this. and that's unacceptable. we have held hearings as the chairman said on the epa's actions and its appropriate that we consider the economic aspects of this spill. the river is the life blood and economic engine of southwest colorado. rafting companies lost business. sport fish trips were canceled. tourism suffered. farmers couldn't water their crops. the damages from the spill are still being calculated. we may not know the full extent for years to come. businesses and individuals are starting to file claims to recover their losses as chairman gardner said. they deserve to be fully reimbursed for damages. the epa is committed to doing so. the gold king mine spill recovery act that i've introduced with senator tom udall will ensure the epa follows through on this promise and will continue to work with our colleagues to get that bill right. the bill requires the epa to reimburse businesses, tribes,
governments and individuals for property damage, lost revenue and emergency expenses. it calls on the epa to construct a permanent water treatment plant north of silverton to tackle this problem at its source. the four mines in the river basin release more than 300 million gallons of acid mine drainage every year. we need solutions as senator gardner said to address this pollution all across the west. that's why senator gardner and i are working on good samaritan legislation to encourage the cleanup of abandoned mines. it's long pastime for us to address this issue. i think part of the issue is that people in this place are too focused on the east coast and the west coast and aren't paying attention to the rocky mountain watersheds, which if you look downstream, which almost everybody in the united states does, you need to take an interest in what we're doing there to make sure that we don't have another disaster like this.
i also believe that as part of this we should reform the 1872 mining law to make sure that mining companies pay royalties to taxpayers just like everybody else on our public lands. like many other business owners and elected officials, our witnesses today, understand firsthand the need to address legacy mining so we don't get hit with another blowout. we appreciate meeting with you during our visit together to durango four daze after the spill. the co-owner of four corners river sports in colorado. it's a retail store, paddle school and rafting business. it's open for business today i bet. if anybody is listening to the hearing, please go. mr. corra has built his business and raised his family in southwest colorado like so many other entrepreneurs. as with so many small business
owners in durango, he depends on the river for his livelihood. when the water turned orange in the middle of peak rafting season, it hit his business hard and without warning. i look forward to learning more from all the witnesses this morning. mr. chairman, thanks for inviting me to speak briefly and for holding this important hearing. >> thank you, senator bennett. our first witness is the commissioner brad blake from colorado. his family first moved to doll colorado in the 1930s. we are pleased to have him here today. next up is the executive director of the silverton area. last but not least, we have mr. corra, owner of four corners river sports. four corners is on the banks of the river which is described in your testimony as the life blood i believe the heart of durango
and has been in business for over 35 years. mr. corra will provide firsthand experience on what this spill has meant for the community throughout the region. thank you to the witnesses for traveling so far to be here today. time away from work, from family, it's appreciated to shed light on the questions that need to be draaddressed. mr. blake. >> thank you, senators. i appreciate the opportunity. i would like to,nkyk
starts in the mountains above silverton and flows through colorado and 126 miles through the county and the city of d durango and the indian reservation on on to utah and lake powell. the mountains are rich in minerals and metals. which attracted miners to the area starting in the 1860s. mining support companies followed along with other businesses that developed as a community flourished. some you would recognize such as the renounced durango silverton railroad. others you might not. but they encompass different enterprises such as rafting companies, bike stores, hiebing and outdoor outfitters, hunting and fishing guides, hotels, restaurants and other related support services. the county has considerable ago
actu agricultural interests to support their operations. then there are the businesses you would expect to find in a thriving community, including retail and grocery stores, real estate offices, banks and all other services that support our economy. all of these great businesses employ a few to hundreds of people and the spill has impacted all of them in some way. news of the gold king mine spread far and wide, not only nationally but around the world. the durango area tourism conducted analysis from august 5 through august 24 and determined that 19 million impressions were made. impressions like this that i have from the durango herald. this was seen around the world. i had friends from all over the
country call me and ask me about it. i brought you all a copy of the paper to look at this. the 164 articles about the incident had a value of more than $3.4 million worth of advertising. the wrong kind of advertising. summer is the height of the tourist season and it was cut short. first bit visual impacts of the gold king and then by lingering questions about the impact of the spill on the river and our community. the businesses most severely impacts were rafting companies. their season was interrupted on august 5 and 6, the day of the spill. there are ten local rafting companies that employ in excess of 150 people. all were directly impacted. had to lay off employees during the period of the river closure. one company owner advised me that estimates his losses to be
$100,000. when tourism related businesses are impacted, there's a ripple affect throughout our economy on hotels, restaurants and retail stores. those in turn impact the collection of local sales tax and lodgers tax. tourism businesses were not the only ones impacted. agriculture took a hit as well. small local farm her ters had r crop yields due to the lack of water at the hottest and driest time of the growing season. ditches that provide irrigation water to farms were closed for up to ten days. in some cases leaving farmers high and dry. one rancher reported that he lost half of his second cutting of hay, which is $8,600 worth of hay. for a small rancher, that's a big deal. equally significant is the impact of the spill on the reputation of the organic storms that utilize the river.
how can their reputations be restored when doubts about the quality of the water remain? in another example, the entire inventory of durango nursery, a local plant and tree nursery located on the banks of the river, was threatened by the inability to use the river for watering purposes. the owner had to haul water at his expense until arrangements were made for the water to be delivers and until the river could be used again. of even that couldn't help bring customers in. tom estimates he lost $20,000 worth of business due to the decline in customers during the period of the gold king incident. sales have not recovered. in fact, tom estimates that his sales for the year will be down 1.25% from his projections as a result of this spill. as news of the incident spread, calls came in to our community from around the country asking questions like, are all the fish dead? will the fumes harm my family if
we walk by the river? is the river ever going to recover? it's obvious that our community's image has and reputation as a natural scenic family friendly outdoor mecca has been badly damaged. as a result of this spill. clearly, we do not know yet what the long-term impact of the gold king spill and the publicity generated by it might be. but we anticipate that there could be lingering negative images, public health and safety concerns and a decline in futue visitors. i'm concerned about uncertainty created for our local businesses resulting from the spill and heightened awareness of acid mine drainage. i ask for you to support -- for your support of expeditious reimbursement to businesses and employees impacted by the gold
king mine spill. i urge your thoughtful consideration of s 2063, the gold king spill mine recovery act of 2015. i also advocate for a speedy and collaborative response to this ongoing and age old problem of metal loading in the upper river. i urge congress to move expeditiously but also thoughtfully to address the larger problem of acid mine drainage in the watershed that impacts not only our county but all communities along the river. on behalf of the citizens, i thank you for your interest, your time and your consideration. thank you very much. >> thank you, mr. blake. the newspaper article you referenced, without objection, will be entered into the record. >> thank you. >> good morning, gentlemen. thank you for the invitation in bringing silverton to the table. i am the executive director of the silverton area xchamber of
commerce. silverton was a ruckus, rumbling mining town. it was the pioneer spirit that brought folks out to the west with the discovery of gold, silver and other minerals in the hills as to why we still exist. silverton was incorporated in 1874. from 1881 to 1882, auto mears build a train which changed the entire area. we still depend on that 100-plus-year-old train as part of the heart of our summer economy. there are 699 of us, technically 701, both lisas had babies this summer, and 520 live in silverton. we get an influx of summer
residents and then they go south. then we get an influx of winter residents. so the solid hard core number of year round residents is around the 500. but we fluctuate with depending on the season being a tourist town. the number one landowner in san juan county is the federal government. 85% of our land is owned by the blm or the forest service. we have 388 square miles in our county. in silverton, it's the only municipality left standing. san juan county used to be linked and littered with many mining towns which are now ghost towns, literally gold towns, buildings you can go in and see the past. but we are the heart of the san juan mountains right off the
continental divide. i'm telling you, it takes an extremely hearty soul to live there. i know. being third generation, my grandfather came after world war ii to be a miner. my father and mother met silver didn silverton high school. were homecoming king and queen in the late '50s. my father started a family right away and went into mining but moved to the city, which i was born and raised in denver. i would spend all my summers in silverton as a child. now as an adult living there full-time resident, it's like reliving your childhood. it's a base camp for us. we live there so we can live in those mountains. that is something that is untangible unless you experience it, unless you stood in the bowl
of that volcano which created the only level land which is where my town was built. because of that, 48% of our economy is dependent on tourism. since the 1990s, when the last mine closed, we have tried to figure out who are we and where are we going. but we also embrace and celebrate our mining heritage. it is who we are. we offer tourism through ecology, yet our ecology and our economy are extremely fragile, just like the tundra that we live below. silverton is at 9318 elevation feet, just below timber line. that is why folks come to visit us, repeat tourism is critical and actually a very stable part of our economy as well as second homeowners and the influx of
seasonal workers that come in and out of our community to help us get through our tourism seasons. we experience a little over 400 inches of snow in a year. we have got one road in and one road out in the winter. that's highway 550, which is one of the most dangerous highways in the united states. along that highway, which separates us from services, 50 miles either to the south to r durango is avalanche panels. we are eventual vulnerable to b blocked in or out. we have the alpine loop. camping, hiking, and in this back country is exactly where gold king is seated. when you go into our back
country now, you do see the incident firsthand. you do see the blue tarps with the sediment and the activity that's going on. across the street from our number one employer in the winter, silverton mountain, is this remediation situation and base camp for the epa. we understand and acknowledge and know that we are now in a long-term relationship with the situation, with the epa. we look forward to taking responsibility and being proactive in dealing with being at the top of the watershed and these old mines. again, if it was not for all of these mines, the west may not be what the west is today. again, we embrace our heritage
and our past and we're proud of that. in this situation, it has changed the way that is looked upon. talking about employers and employment. again, we are 48% of our economy is tourism. when you talk about the top employers in san juan county, we have no corporate entity. we don't have a big office building. it is silverton mountain at 40 employees. second largest employer in san juan county is one of our largest restaurants at 22 employees. we have a 10-month business cycle out of a 12-year calendar year to make it. winter and summer are night and day. a lot our town closes for the winter. in the summer, when that train comes rolling in, we open up all
our doors, clean all of our windows off and we are there to welcome the influx of thousands, hundreds of thousands of tourists who come to experience us whether it's a day, a week or four months. and we are dependent on that, thankful for that and understand that without that, we, too, could have the potential of being one more ghost town. i bought my grandmother's home that was moved from a ghost town in the '40s. my kitchen is slanted. my walls are little and the doors are tiny. but i love my house. and i love my community. that's why we're all there. that's why i'm here. to speak up for them. before the incident, we already
were struggling with a housing issue, which is a domino affect of if we can't house seasonal employees, then who is going to work in the restaurants and the shops and the hotels? we were already struggling with more jobs than people in town. but we have to also be conscientious of switching of seasons. the folks who leave, they are replaced. we don't live in a normal, typical day to day town. we have dead fiber in the ground. when we sit around and we discuss what is economic development for silverton and one of the type of individual we can bring in is someone who can bring their own business, we don't have the infrastructure to support that. so, again, we go back to tourism.
gentlemen, we are counting on you to represent us and to speak up for us. i know you both have been there. we had a meeting on august 12, senator gardner, that was set up before the epa incident. and i blissfully, naively, wanted to stick to those issues to discuss the housing and the employment pool and our tourism and where do we go from here, not knowing that the train was coming down the tracks and we were tied to it. but what i do know about my community is that we still embrace that pioneer spirit. therefore, we want to create a new relationship with the federal government and the epa, not status quo. we want them and you to be aware of our situation. housing is an issue, to have an
influx of federal workers coming in and subcontractors, we cannot allow the housing we already didn't have for the people to be displaced because of that. because who is going to be there to help these small businesses? i have had small businesses tell me that they had left over 60 grand on the table this summer alone because of lack of employees. i have a business that it can only open five days a week instead of seven, which null and voids one business week a month, because he literally didn't have employees. we have had cancellations. we have had real estate deals fall through. we have had banks pull out of our new community construction loans providing loans just because of this talk, because of what's going on. so i ask you two to remember us.
we are important. just because we're the little guy and there's only 700 of us doesn't mean that we don't matter. and we're putting trust and faith in you to do so. thank you. >> thank you. tell the lisas congratulations. >> i will. >> mr. corra. >> yes. thank you for having me today. as senator bennett said, my name is andy corra. we have been around for 35 years. we employ up to 50 people. we have a retail store. a paddle school. and we have a commercial rafting operation. you know, the day the gold king spill happened, it was a hard day. the river is in many ways the heart and soul of the community. it runs straight down the center of the valley. it runs just adjacent to
downtown. it's important to the people in town. the picture there mr. blake has of the three kayakers, those are friends of mine who found themselves surrounded by the orange sludge. they told us, something is going on with the river. word spread quickly throughout the community. i went out on the river trail late in the afternoon as the spill was moving towards town. there were literally hundreds of people gathering along the trail. in the section i was in. the whole trail through town i understand was filling up with people. i can tell you, it was like a funeral that day. people were really upset. it felt really personal. there was a lot of tears shed. it felt like a close family member had been injure order hurt. it really hurt the town. it hurt people's -- just morally hurt the people. but it woke us up. it woke us up to this long-standing pollution issue that we have. durango invests a lot of money in making it a desirable place
to live. it pays off. we attract a lot of great businesses. we attract a lot of entrepreneurs, small businessowners, creative thinkers, telecomputmuters. our economy is strong. examples of these investments. we just completed a new $3 million whitewater park, a playground for rafters and kayakers. the town invested $20 million in the river trail. i think one of the better examples is recently there was a half cent sales tax passed in town. its earmarks for parks and recreation. that passed by 69.5% of the vote. nearly 70% of the people in our town voted to tax themselves at a higher rate. i don't think that happens very often. i tli thathink that's a testame the spirit of our community. 2015, for my business, was great.
it was the best year that we had had in a long time. we're used to a lot of adversity in the river business. we drought years. down economies that seem to affect the tourism market first. we can plan and adjust for those things. this year we were going full speed. sales were great. the rafts were filled with tourists. then boom, the river was closed. we didn't have any time to plan. any time to adjust. my rafting company, our sister company lost about $19,000. the paddle school was down about $8,200. rentals down about $3,800. we went from up 9.8% to down 23%. as mr. blake mentioned, one of the largest outfitters in town, the $100,000 that he lost, that was in the eight days of closure. he was down 50% for that month of august. beyond those losses, it's the 150 employees who immediately
lost their jobs. those are raft guides, action video photographers, bus drivers, office personnel. they were immediately out of work. so, you know, while we had the problem in the business, it's really those individuals that really concern me. you know, i'm confident that with senator bennett's bill, the gold king mine spill recovery act of 2015, our local community, our state and the federal government that a lot of those people will be made whole. my greater concern is that we address this long-term problem created from our region's mining legacy. you know, mine pollution isn't new to the river. the gold king mine blowout was spectacular. there's no doubt. 3 million gallons of bright orange toxic sludge going into the river in a matter of hours. it's important to know that that same mine was leaking two to 500 gallons of the same water every minute prior to that.
that there are other contributing mines that add up to 6 million gallons a week. so that's 330 million gallons of toxic water going into our watershed every year. the gold king represents, what, one week's worth of that natural drainage. so that's where the outrage should be. that's where our energy should be directed. this is the ticking time bomb that hangs over our heads. as a businessowner, it makes me reluctant to invest in the future if this is going to happen again. from silverton, colorado, to grand canyon, arizona, people depend on this river. it's the life blood. it sdedeserves to be cleaned up. i think everybody agrees that the epa messed this one up. we waste a lot of our energy and anger going after these epa
firefighters who were tasked with the impossible job of putting out this out of control fire with a garden hose. the spill makes clear that the piecemeal approach past isn't working. it is a complex problem. there's tons of mine portals, bulk heads, water that needs to be redirected, water that needs to be treated. and it's an ongoing problem. you know, we need a comprehensive approach to cleaning this up. so, yes, good samaritan legislation is proposed by the last congress. makes good sense. yes, the 143-year-old 1872 mining law needs to be reformed is and brought in line with other extraction industries. the epa needs to partner with the stakeholders in silverton. they have a lot of knowledge up there. they need to consult with those folks. and, yes, we need a water treatment plant in cement creek today. and it needs to be fully funded.
and i want to thank you senators here for proposing that. it's a really important first step. but understand that it is only a first step. all the above list does nothing to give us money today that we need. it does nothing to plant a long-term fix for this problem. look, it's a complicated problem. there is really only one entity. if we can reinvent the wheel and get money elsewhere, great. let's do it. right now today there's only one entity that can handle this. only one entity that has the experience, the technical expertise and has the potential funding sources. and that's the epa. i understand that it makes a lot of people nervous to invite the epa in on a big basis. i get a lot of the senators may not want that type of fix. but right now, animas basis
offending mines is really the only clear path forward. i know there is a lot of fear around that. but i go to mow an, utah. super fun site. it is is booming. there are thousands and thousands of tourists in that. as salesperson, colorado. i don't think they are hurting from this. i think it can be done in a sensitive, directed manner just at those mines. if there is another funding source that can happen, great. if i were the federal government and somebody came to me with this laundry list, i would say that looks great. we have an excellent program with that. it's called the epa and super fund. in conclusion, durango and surrounding communities depend on the animas for water, drinking, industry, recreation. the ongoing pollution and the likely periodic releases affects the community's livelihoods. only the full effort and
comprehensive approach of the epa can address these problems. i appreciate your comments is and welcome any questions. >> thank you, mr. corra. we will jump into questions. i think we will go back and forth on questions and get through several of these. mr. blake, start with this. feel free to jump in as well. can you talk about some of the experiences you heard from businesses in the two counties about how they will calculate revenue and talk about lost revenue to the county if you have been able to make that calculation yet. >> i will start with lost revenue to the county. we have a lot of time just with can county employees in working with the epa. i will add our staff, county attorney just did an excellent job of really leading the effort and coordinating with the epa.
they have done an excellent job. so there is cost there. if you want to look at larger taxes directly that were affected, we're not sure quite yet. not sure yet how much they were ofbged. but those were taxes that would take a hit. some people said, well, the epa came to down and filled up all the rooms that weren't taken. but i'll remind you they don't pay lodgers tax. it goes to what we were talking about, fighting against any negative images that might have occurred. the durango area tourism office does a great job putting information about the whole four corners area and drawing people in. as far as businesses, i have talked to a lot of business
people from the farmers i mentioned to the real estate offices. i talked to one goal who had somebody walk away from a real estate deal, as was mentioned by miss gallegos. people are nervous about this. it really worries them. calls, i personally had calls from friends and family around the country that said, hey, what's going on? one of my cousins was extremely upset because he remembers the days when we were kids fishing in that river. he said fishing in the river and how beautiful they were, how beautiful the river was. he was very upset about it. so there are those images, those concerns. congressman tiptop mentioned perception. it really is is a lot of perception. the river may have returned back to its normal -- or as close to normal as you can get. it's back to where it was.
people don't necessarily get that information. they are still seeing the images like i mentioned earlier. that is what we are looking to next year, what will be the outcome of this and maybe even the following year. >> i would like to follow up on that. will the epa reimburse for the employee time that you have had and the time you have had. >> they have. >> full cost reimbursement? >> we are working with them on reimbursement. so far i think that's going as long as we have seen any funds yet. we have spent in excess of $200,000. just the county. that's just the county. there are a lot of businesses that were impacted from small amount to a larger amount.
>> mr. blake, if i could get 495 entered into the record too i think that would help too. we will put that on the record as well. do we know whether the real estate deal that you talked about walking away, somebody is is there walking away from the real estate deal, it's a lost opportunity, will that be something you can submit? how do you prove that? that's just a loss that will be hard to prove that they didn't walk away. i mean, real estate deals fall apart all the time. and there was more than just one. her story they specifically said, hey, that's it for us. >> mr. corra, i'm running out of
time. feel free if you want to add to that as well, there bennett. >> well, we know what our direct costs are. >> 130,000, is that right? >> yeah. that's easy for us to back into. my concern is the long-term impact. the media images were, you know, everywhere. we couldn't have asked for that kind of coverage and we didn't ask for that kind of coverage. what do we do about that? you know, i think showing a con is certified effort. if i was in the river the day from it closed and i was in the river the day opened. it was looking messy in durango. >> i was very jealous, by the way. >> right. right. but it is looking better in town. silverton, the same way. people are used to the stains on the edge. that's been going on 100 years
there. but it is things like when i first moved to durango 35 years ago, the river was pretty dead above town. there weren't many fish in the north valley. there were some but not many. the durango section became a gold medal fishery. the status has since gone down. and the fish now the bad water is moving down. durango is is down. the gold medal has gone down. with a treatment plan and cement creek, i'm confident we will start to see that clean up again. when that's a gold medal fishery again, people will forget about this. they will remember animas,
silverton, as the clean river. >> senator bennett? >> thank you. since there are no other senators here today, i can say without fear of contradiction it is an enormous privilege to represent the most beautiful state in the country, colorado. i know senator gardener feels the same way. it reminds me how much inspiration we draw from the people we represent. you cannot come to the north or south and think about the people who built that community. or take the alpine loop trail, which i have done, and see railroads built at almost 14,000 feet by people. first of all, i always think how the character must have been like, the