[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
DEPARTMENTS OF LABOR, HEALTH AND HUMAN
SERVICES, EDUCATION, AND RELATED AGENCIES
APPROPRIATIONS FOR 2020
_______________________________________________________________________
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
_________
SUBCOMMITTEE ON LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND
RELATED AGENCIES
ROSA L. DeLAURO, Connecticut, Chairwoman
LUCILLE ROYBAL-ALLARD, California TOM COLE, Oklahoma
BARBARA LEE, California ANDY HARRIS, Maryland
MARK POCAN, Wisconsin JAIME HERRERA BEUTLER, Washington
KATHERINE M. CLARK, Massachusetts JOHN R. MOOLENAAR, Michigan
LOIS FRANKEL, Florida TOM GRAVES, Georgia
CHERI BUSTOS, Illinois
BONNIE WATSON COLEMAN, New Jersey
NOTE: Under committee rules, Mrs. Lowey, as chairwoman of the full
committee, and Ms. Granger, as ranking minority member of the full
committee, are authorized to sit as members of all subcommittees.
Robin Juliano, Stephen Steigleder, Jared Bass, Jennifer Cama,
Jaclyn Kilroy, Laurie Mignone, Philip Tizzani, and Brad Allen
Subcommittee Staff
_________
PART 6
Page
Impact of the Administration's Policies Affecting the Affordable
Care Act........................................................ 1
Reviewing the Administration's Unaccompanied Children Program..... 91
Protecting Student Borrowers: Loan Servicing Oversight............ 199
Addressing the Public Health Emergency of Gun Violence............ 283
Oversight of For-Profit Colleges: Protecting Students and Taxpayer
Dollars From Predatory Practices................................ 371
Combating Wage Theft: The Critical Role of Wage and Hour
Enforcements.................................................... 457
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
_________
Printed for the use of the Committee on Appropriations
U.S. GOVERNMENT PUBLISHING OFFICE
37-614 WASHINGTON : 2019
COMMITTEE ON APPROPRIATIONS
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NITA M. LOWEY, New York, Chairwoman
MARCY KAPTUR, Ohio KAY GRANGER, Texas
PETER J. VISCLOSKY, Indiana HAROLD ROGERS, Kentucky
JOSE E. SERRANO, New York ROBERT B. ADERHOLT, Alabama
ROSA L. DeLAURO, Connecticut MICHAEL K. SIMPSON, Idaho
DAVID E. PRICE, North Carolina JOHN R. CARTER, Texas
LUCILLE ROYBAL-ALLARD, California KEN CALVERT, California
SANFORD D. BISHOP, Jr., Georgia TOM COLE, Oklahoma
BARBARA LEE, California MARIO DIAZ-BALART, Florida
BETTY McCOLLUM, Minnesota TOM GRAVES, Georgia
TIM RYAN, Ohio STEVE WOMACK, Arkansas
C. A. DUTCH RUPPERSBERGER, Maryland JEFF FORTENBERRY, Nebraska
DEBBIE WASSERMAN SCHULTZ, Florida CHUCK FLEISCHMANN, Tennessee
HENRY CUELLAR, Texas JAIME HERRERA BEUTLER, Washington
CHELLIE PINGREE, Maine DAVID P. JOYCE, Ohio
MIKE QUIGLEY, Illinois ANDY HARRIS, Maryland
DEREK KILMER, Washington MARTHA ROBY, Alabama
MATT CARTWRIGHT, Pennsylvania MARK E. AMODEI, Nevada
GRACE MENG, New York CHRIS STEWART, Utah
MARK POCAN, Wisconsin STEVEN M. PALAZZO, Mississippi
KATHERINE M. CLARK, Massachusetts DAN NEWHOUSE, Washington
PETE AGUILAR, California JOHN R. MOOLENAAR, Michigan
LOIS FRANKEL, Florida JOHN H. RUTHERFORD, Florida
CHERI BUSTOS, Illinois WILL HURD, Texas
BONNIE WATSON COLEMAN, New Jersey
BRENDA L. LAWRENCE, Michigan
NORMA J. TORRES, California
CHARLIE CRIST, Florida
ANN KIRKPATRICK, Arizona
ED CASE, Hawaii
Shalanda Young, Clerk and Staff Director
(ii)
DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED
AGENCIES APPROPRIATIONS FOR 2020
----------
Wednesday, February 6, 2019.
OVERSIGHT HEARING: IMPACT OF THE ADMINISTRATION'S POLICIES AFFECTING
THE AFFORDABLE CARE ACT
WITNESSES
AVIVA ARON-DINE, VICE PRESIDENT FOR HEALTH POLICY, CENTER ON BUDGET AND
POLICY PRIORITIES
ED HAISLMAIER, SENIOR RESEARCH FELLOW, THE HERITAGE FOUNDATION
PETER MORLEY, PATIENT ADVOCATE
JOSHUA PECK, CO-FOUNDER, GET AMERICA COVERED
Ms. DeLauro [presiding]. The subcommittee will come to
order. It is my pleasure to open the first hearing for Labor
HHS.
Congressman Cole has heard this story before but I will be
very, very quick and anecdotally, I think for me my
participation on this committee has come full circle.
It was some 24 or 25 years ago I wanted really to be on
the--when I was appointed to the Appropriations Committee I
wanted to serve on the Labor HHS Subcommittee because of my own
health issues or prior health issues, et cetera. So it was
very, very important to me.
But as the pecking order, you go through the--when we
organize by seniority you go through and you make your
selections, and I wasn't very senior at that juncture. So that
there was one slot left on the Labor HHS Subcommittee and my
colleague, Mr. Serrano, was going to go before me and I was
sitting there just really praying that what he would do was to
decide something else other than Labor HHS, and the Lord heard
my prayer because he did. He went to CJS and I got to be able
to sit on the Labor HHS Subcommittee of Appropriations.
So I feel as if I have come full circle, and the debate
this morning comes at what I view as a critical juncture--the
changing energy of the country. The changing dynamics of the
Congress are intersecting. The country has mandated that
elected officials tip the scale for people who deserve so much
more.
First, I would like to say a thank you to our distinguished
panelists for being here and I will introduce each one of them
in a few minutes. But I also would like to acknowledge the new
members of the subcommittee.
On the Democratic side and my colleague, Lois Frankel, from
Florida; Representative Cheri Bustos from Illinois, and
Representative Bonnie Watson Coleman of New Jersey.
On the Republican side is Representative Tom Graves of
Georgia. Just as a--in full disclosure, Congresswoman Roybal-
Allard, Congresswoman Lee, and my understanding, Tom, is that
Congressman Graves are all in a classified briefing for the
Conference Committee with regard to the Department of Homeland
Security and that appropriations budget. So they will get here
as soon as they are able.
And I will just repeat introductions of Congresswoman Lois
Frankel--delighted that she is part of the committee--
Congresswoman Cheri Bustos. So welcome to the subcommittee.
I would also very much like to acknowledge the ranking
member of the subcommittee, someone who has become a very good
friend and that is Congressman Tom Cole of Oklahoma, and I want
to say a personal thank you to you, Tom, for the last 4 years
where there has been real cooperation and respect and that we
have shared together on this subcommittee.
It is my intention to maintain that tradition. I know that
we will continue to disagree in some areas, and we have done so
firmly and we have done it repeatedly. But we also manage to
find common ground and I believe it is because we agree on this
one principle--it is how central the work that we do in this
committee can be for people and the difference we can make in
their lives and that includes health care, which is the subject
of today's hearing.
This is an oversight hearing. The subcommittee is going to
review the impact of the administration's policies on the
Affordable Care Act, specifically with regard to affordability,
the increasing number of uninsured, and the quality of the
benefits available to people.
Before the Affordable Care Act became the law of the land
in 2010, the cost of health care was rising at an unsustainable
rate. Spending was projected to rise to $4,100,000,000,000 by
2017. More importantly, health care costs were taking up a
larger and a larger share of the family budget.
But since the Affordable Care Act went into effect, its
impact has exceeded expectations. As you can see from the
slide, national spending on health care is well below pre-ACA
expectations--more than $600,000,000,000 lower than projections
for 2017.
Because of the Affordable Care Act more than 20 million
people gained health coverage, many for the first time in their
lives. For families, it meant that insurance companies could no
longer discriminate against people because of their medical
history and just being a woman was no longer a pre-existing
condition.
Then this administration went to work. The Department of
Health and Human Services has written new rules to
intentionally increase premiums and out-of-pocket costs for
families covered by the ACA health plans.
For example, the cost-sharing reduction payments to
insurers who provide plans on the exchange were crucial to
keeping down costs for families in the exchange. But President
Trump spent months threatening to eliminate them, and when
Democrats refused to bargain away this important mechanism for
affordability, on October 2017 the president eliminated the
payments outright, dramatically driving up health care costs.
The Congressional Budget Office estimated that doing so would
cause premiums to rise 25 percent by 2020.
Thankfully, as Dr. Aron-Dine points out in her testimony,
state regulators rushed to protect their state's insurance
markets and they mitigated the damage. In 2018, repeal of the
individual mandate was also responsible for helping to drive up
health care costs.
Now, let us look at pre-existing conditions. HHS has made a
concerted effort to shift consumers to, quote, what have been
commonly called ``junk plans.'' Just for a definition of these
plans, they impose lifetime and yearly limits. They do not
cover maternity care, prescription drugs, mental health care,
preventive care, or other essential benefits.
They can also retroactively cancel coverage after patients
file claims and often won't cover hospital room, board, or
nursing services on the weekend. And this allows then insurance
companies once again to gauge or deny insurance coverage to
Americans with pre-existing conditions and the administration
has also urged federal courts to strike down protections for
pre-existing conditions.
Our witness, Mr. Peter Morley, will share his story and
emphasize how important these protections can be. In many
cases, it is a matter of life and death.
If you look at enrollment, we see the administration's
efforts with regards to enrollment and outreach. HHS shortened
opened enrollment, reduced the annual budget for outreach and
advertising by 90 percent, reduced funding by 80 percent for
the Affordable Care Act navigators. These are the people who
provide in-person assistance to consumers who need help finding
a health plan.
In the administration's first week in January 2017 the
Department of Health and Human Services announced that it would
stop planned advertising for the final week of open enrollment,
typically the busiest period. But, in fact, they were following
the president's lead.
On his first day in office, the president issues an
executive order directing the federal agencies to begin
dismantling the Affordable Care Act, quote, ``to the maximum
extent permitted by law.''
And it goes on, and I will just say that I have here a
document that was prepared by the Center on Budget and Policy
Priorities. It has been compiled. It is a list from January
2017 and I think up to January and maybe further--January 28--
of the actions that the administration has taken to undermine
the Affordable Care Act, and the list runs for about 18 pages.
One of today's witnesses, Joshua Peck, will explain that
HHS made these decisions with full knowledge of the harm they
would cause. Mr. Peck estimates that HHS's decisions to
undermine outreach, advertising, enrollment efforts resulted in
more than 1 million fewer enrollments in 2017 and a similar
shortfall in 2018.
In all of these ways the administration has tried to
undermine the ACA and I would ask to what end. Due to the
administration's actions, costs for families and working people
are skyrocketing, and according to the Kaiser Family
Foundation, premiums in 2018 rose 30 percent, and according to
analysis by the Center for American Progress, a typical family
of four will see 2019 premiums increase by more than $3,000.
In addition, the uninsured rate is up to 13.7 percent from
10.9 percent. That is the equivalent of 7 million people losing
health care coverage, and the uninsured rates have increased
the most among women, low-income people, and those under 35,
all because of the administration's efforts to undermine the
Affordable Care Act.
This committee has the responsibility to stop the
administration from undermining health care for millions of
Americans, to stop it from allowing insurance companies to
discriminate again with Trump plans, and to stop it from going
after the very mechanisms that would--we have to hold down
costs for Americans.
We need to bring down the cost of premiums and deductibles.
The administration needs to defend the Affordable Care Act in
the Texas lawsuit, needs to defend those Americans who rely on
the law's protections for pre-existing conditions, and we need
to work to close the Medicaid gap. These measures would lower
health care costs for families so that they can afford quality
coverage.
I anticipate today's hearing to be a spirited debate.
However, I intend it to be an informative conversation and one
that is fact driven and a positive start to what I hope will be
a bipartisan effort to strengthen and bolster instead of repeal
and replace.
And now it is a pleasure for me to turn this over to my
good friend from Oklahoma, the ranking member, Mr. Cole, for
any opening remarks that he cares to make.
Mr. Cole. Thank you very much, Madam Chair, and before I go
to my prepared remarks, let me congratulate you on assuming
this really quite remarkable jurisdiction and that I always
told people that ask about you--I said that she is the best
informed member on the committee.
She is the most passionate advocate for the things she
believes but she knows the bill. And so I look forward to
working with you in your leadership. I thank you for your kind
words. But, you know, I have worked well with you because you
wanted to work together and you did look for areas of common
ground.
And I am particularly proud that in the last 4 years, while
we always started off in different places--and I suspect we
will again, in all due disclosure--we always ended up at the
same place.
All four times when the bill moved across the floor in
conjunction with other bills we were voting the same way on
final passage, and I want you to know from me that is my goal
again. I want us to be able to do that.
I want us to be able to find areas that we agree and there
are vast areas in this jurisdiction where we do agree, where we
have worked together in a bipartisan way and, frankly, in a
bicameral way with our partners on the other side of the
rotunda as well.
So I know under your leadership that is going to continue
and I look forward to being your working partner in that--in
that process.
Ms. DeLauro. Thank you very much.
Mr. Cole. You bet.
Again, I will congratulate you for holding your very first
hearing as well. I look forward to working with you in the
coming year on the vital public health, education, job training
programs funded in the Labor HHS bill.
Today, we have got an outside witness panel to discuss the
administration's efforts on implementing the Affordable Care
Act. Although the Labor, Health, and Education Appropriations
Subcommittee provides some of the administrative funding to the
Department of Health and Human Services to carry out parts of
the Affordable Care Act, direct jurisdiction of the Affordable
Care Act falls squarely outside of this subcommittee.
I think we can all agree that improving access to high-
quality affordable health care is a worthy and admirable goal.
However, I believe the best venue for policy discussions about
how to achieve this goal is within the primary committees of
jurisdiction: Energy and Commerce and Ways and Means.
As I have said before during debates on the American Health
Care Act, the current health care system is not working for too
many Americans. Premiums see double digit increases year after
year. This rate of increase is simply not sustainable.
Our nation spends more on health care than any other
industrialized country but receives less quality outcomes than
most other industrialized nations. Passage of Obamacare did
little to change that reality.
After nearly a decade, we find ourselves debating the same
issue--how to make health care more affordable for every
American. Today, we focus on the efforts taken by the
administration to fulfill its duty to faithfully execute the
law.
I wholeheartedly support efforts by the Trump
administration to create more affordable options for consumers,
protect human life, and respect an individual's right of
conscience.
I understand my colleagues' opposition to some of these
actions but there are consequences for passing vague
legislation leaving much to be determined by the executive
branch. The Affordable Care Act includes the phrase, quote,
``the secretary shall,'' unquote, more than 900 times. A
Democratic-controlled Congress passed hastily-written
legislation that gave broad and expansive authority to the
secretary of Health of Human Services to determine the best
means of implementation.
As a direct result of the latitude given to the department
by the ACA, my side of the aisle had strong objection to
several decisions taken by the previous administration. It's no
surprise that decisions taken by a new Republican
administration also received objections from the opposing
political party.
In the last five years, average premiums in the Obamacare
market in Oklahoma have increased over 225 percent. My
constituents cannot afford an increase of that magnitude on
such a short time.
For the first time in 3 years, Oklahoma will actually have
two insurance companies offering plans. Just two. For the past
two years, Oklahoma had just one. One insurance company is not
a choice. Two insurance companies is barely a choice and not
what I consider progress.
Higher premiums and limited options are the daily reality
of Obamacare in Oklahoma. I know both Democrats and Republicans
believe we can and should do better for the constituents who
elected us. I hope, on a bipartisan basis in the appropriate
venues, we do deliver on the goal of making health care more
affordable for every American.
I would like to thank all our witnesses for coming today. I
had the opportunity to read your testimony and I look forward
now to actually hearing it as well and to the questions we will
be able to pose to you and your responses.
I know you have dedicated much of your careers to helping
consumers have better health care choices. In the coming year,
I look forward to a spirited discussion with my chair on
funding priorities for this bill. I truly believe the programs
in the Labor HHS bill form the backbone of America's public
health and social service infrastructure. I am hopeful that we
will reach bipartisan support in the final spending package.
And with that, Madam Chair, I yield back the balance of my
time.
Ms. DeLauro. Thank you very much, Congressman Cole.
Let me know--indeed, we have a distinguished panel here
this morning and let me introduce them.
Mr. Joshua Peck, who is co-founder of the Get America
Covered, was the chief marketing officer for the health
insurance marketplace during the Obama administration. Mr. Peck
was in charge of outreach and advertising to populations that
were eligible to enroll in the ACA health plans and to help
them understand their options and enroll in a health plan that
met their needs.
Dr. Aviva Aron-Dine is vice president for health policy at
the Center on Budget and Policy Priorities. During the Obama
administration, Dr. Dine served in several senior roles
including acting deputy director of OMB as well as senior
counselor at HHS where her portfolio including ACA
implementation.
Mr. Edward Haislmaier, senior research fellow at the
Heritage Foundation, who works closely with state and federal
policy makers to design health care reform strategies including
alternatives to the Affordable Care Act. Mr. Haislmaier was
also a member of the board of directors of the National Center
for Public Policy Research.
And Mr. Peter Morley is a patient advocate who advocates on
behalf of millions of Americans who, like himself, live with
chronic and pre-existing conditions. This is Mr. Morley's 227th
meeting with policy makers as he advocates to maintain the
ACA's strong consumer protections.
Our first witness, Mr. Peck. Your full testimony will be
included in the record. You are now recognized for 5 minutes
for your opening statement.
Thank you.
Mr. Peck. Chairwoman DeLauro and Ranking Member Cole, thank
you for convening today's hearing.
My name is Joshua Peck. I am the co-founder of Get America
Covered and I was the chief marketing officer for the health
insurance marketplace during the Obama administration.
I was responsible for marketplace enrollment, retention,
and the $100,000,000 outreach and advertising budget that the
Trump administration cut by 90 percent. I am here today to
testify to the impact that these cuts had on enrollment.
Before I get started, it is important to note that these
cuts are just a single example of the current administration's
efforts to undermine the health insurance marketplace. They
have cut navigator funding by 80 percent, shortened the open
enrollment period, championed the repeal of the individual
mandate, encouraged the introduction of junk plans, didn't
engage with the news media to get out the word about the
deadline, and much more.
For these reasons it is no surprise that state-based
marketplaces are reporting an all-time record enrollment, while
the Trump administration has overseen three consecutive years
of decline.
First, it is helpful to understand just how important
outreach and advertising are to people who are considering
health coverage. Outreach provides the needed reminder to apply
before the deadline or to help people understand that coverage
may be more affordable than they think.
Providing basic information is critical to the
marketplace's operation. In mid-November last year, after the
start of open enrollment, just one in four people who buy their
own insurance knew that December 15 was the deadline to enroll.
Outreach and advertising not only increased the number of
people who enroll but improve the risk pool by helping younger
and healthier people enroll. Healthier enrollees lower prices
for all people with coverage as well as the federal government.
Cutting outreach and advertising not only hurts the
American people but makes government less efficient. It is
common for private health insurance companies to spend between
$250 and $1,000 per enrollment. During my time at CMS, we were
able to enroll or renew people for just $25 each. This kind of
efficiency is unheard of.
We achieved this not because we had a hip brand but because
we were a trusted voice, providing basic information about a
comparatively affordable product with strong consumer demand.
There is no doubt that marketing is important to increasing
the number of people who sign up for coverage. During my time
at CMS, we challenged ourselves to do everything we could to
make sure people had the information they needed to sign up.
But it was vital that we spend every dollar wisely. So not
only did we run experiments to determine what works and what
didn't, we meticulously measured each tactic. The evidence that
marketing directly drives enrollment is overwhelming.
There are numerous studies outside the federal government
show the correlation between advertising and enrollment. But
the best evidence that exists is the multiyear study conducted
by CMS.
The study demonstrated the causal relationship between
advertising and enrollment, telling us how many people enrolled
who would not have if they hadn't been exposed to a particular
type of outreach.
A causal relationship is the gold standard for evaluating
impact and something that is not possible in most analyses of
marketplace performance, which must rely on correlation.
We understand the relationship between outreach and
enrollment because a team of government and private sector data
scientists spent years developing, executing, and analyzing the
impact of outreach using individual and market-level randomized
control trials.
From these experiments, we were able to establish
approximately how many people enrolled or renewed because they
saw a TV ad, received a phone call, a piece of mail, an email,
saw a Google ad, display advertising, an ad on social media, an
outdoor sign, and more.
We also know how much we spent on each of those types of
outreach. Combining these two numbers, we get a cost per
enrollment for each type of outreach--an incredibly powerful
tool when designing a marketing budget if your goal is to help
people enroll in coverage or, as it turns out, an equally
helpful guide to an administration trying to do harm to the
marketplace.
Thanks to the Freedom of Information Act request submitted
by Democracy Forward, we have a window into what information
the administration considered before it made key decisions. In
the lead up to the 2017 open enrollment period, it is clear
from the Democracy Forward FOIA request that the administration
started to learn about the positive impact of marketing. They
discovered eliminating TV would be especially harmful to
enrollment.
Thanks to the same FOIA request, we know that CMS
Administrator Seema Verma's chief of staff discussed the
expansive multiyear study with career staff on August 10th,
2017, and received a PowerPoint deck with these results on
August 11th, just three weeks before their August 31st
announcement that they were cutting the budget by 90 percent.
The same day the administration announced the cut, they
released an official fact sheet stating, and I quote, ``no
correlation has been seen between Obamacare advertising and
either new enrollment or effectuated enrollment,'' end quote.
The administration hasn't disagreed with the findings of
the study. Instead, they deny that any of the evidence even
exists. I respectfully suggest this committee call on CMS to
make all the results and underlying data available to the
public so it can be reviewed and evaluated.
Despite the continued resilience of the marketplace, the
impact of the administration's actions have been severe. The
harm has been most acute for new enrolment because people who
don't currently have coverage or any kind of relationship with
the marketplace are much less likely to be aware of the
deadline or the availability of affordable coverage without
some type of paid outreach.
Conservatively, we can estimate that a minimum of 2.3
million new enrollments have been lost on the Trump
administration's watch due solely to cuts to outreach and
advertising. That is 2.3 million people, some of whom have,
unfortunately, gotten sick or unexpectedly had an accident, and
without insurance some of these people have gone bankrupt or
foregone needed care.
Now, the administration would be quick to point out that
the federal marketplace enrollment isn't down by 2.3 million
people so, surely, the marketing budget didn't matter, and they
would be right if marketing was the only factor that impacted
enrollment. But it is not.
Factors that help enrollment and hurt enrollment can and do
happen the same year but that doesn't mean that factors that
hurt enrollment didn't happen.
Thank you for the opportunity to testify and I look forward
to answering your questions.
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Ms. DeLauro. Thank you very much.
Dr. Aron-Dine.
Ms. Aron-Dine. Thank you.
Chairwoman DeLauro, Ranking Member Cole, members of the
committee, thank you for the opportunity to testify before you
today about the administration's stewardship of the Affordable
Care Act.
President Trump has been clear from the start of his
presidency that his goal is to repeal the ACA. With legislative
repeal off the table for now, the administration is trying to
achieve a version of repeal through the courts, declining to
defend the ACA in the Texas v. Azar lawsuit.
It has also continued to pursue some of the major policies
of the 2017 repeal bills through administrative actions. Josh
spoke to the damage done by HHS's cuts to outreach and
enrollment assistance. I would like to call a few other
policies to your particular attention.
First, where the 2017 repeal bills ended or weakened
various protections for people with pre-existing conditions,
the administration's short-term plans rule stands up a parallel
health insurance market that isn't subject to those
protections.
Specifically, the rule lets so-called short-term plans,
which used to be limited to three months, instead last up to
one year and be renewed. These are plans that can and do deny
coverage or charge higher premiums based on health status,
exclude essential health benefits such as maternity care,
substance use treatment, or prescriptions drugs, and impose
annual limits on coverage.
The first problem with expanding these plans is that the
people who buy them could face catastrophic costs if they get
sick and need care. Troubling, but unsurprising, new research
finds that the plans are being marketed with lots of fine print
and without clear warnings or sometimes any warning at all
about what they don't cover.
The other problem with a parallel insurance market, of
course, is the adverse selection it creates. Because non-ACA
plans can offer lower premiums to healthy people, they will
pull healthier people out of the ACA market.
That means premiums for ACA coverage will rise, and to the
people who need that coverage but have incomes too high to
qualify for subsidies, for example, middle income people with
pre-existing health conditions, will pay more.
Higher ACA premiums also mean that the federal government
will spend more on premium tax credits. That is important
because those additional federal dollars could instead have
been used to make ACA coverage more affordable for healthy and
sick people with incomes too high to qualify for subsidies
without the harm that results from expanding non-ACA plans.
Turning to a second set of HHS actions, the 2017 repeal
bills sharply cut financial assistance for marketplace
consumers. Now HHS appears to be looking for ways to advance
that objective administratively as well.
A few weeks ago, the department issued a proposed rule that
tweaks an obscure formula so as to cut premium tax credits for
at least 7.3 million people, increasing their premiums. These
premium increases are relative modest--about $200 for a
moderate income family of four--but they would cause 100,000
people to drop coverage each year, according to the
department's own estimates.
The same proposal has the effect of raising the ACA's
limits on consumers' total out-of-pocket costs. That provision
of the ACA protects people with employer plans, too. These cost
increases are entirely at HHS' discretion. They are not
required by any statute.
The proposed rule also notes that HHS considered and could
in the future propose additional tax credit cuts, and
meanwhile, last fall the department issued guidance and a
discussion paper encouraging states to use Section 1332 waivers
to much more drastically upend the ACA's whole system of
premium tax credits reducing costs for lower income people,
older people, and people with pre-existing conditions.
The final set of HHS actions I want to highlight are its
efforts to reduce the scope of the ACA's Medicaid expansion.
After Congress rejected the 2017 ACA repeal bills, which would
have effectively ended expansion, HHS started approving waivers
which, if they are all implemented, will take coverage away
from hundreds of thousands of expansion enrollees.
The first of these proposals to take effect, Arkansas' work
requirement, took coverage away from more than 18,000 people
over seven months. That is more than one in five of the people
who were subject to the new policy--a coverage loss rate so
high it is nearly certain that working people and people who
were supposed to be exempt from the new rules are instead
losing coverage due to complex and burdensome reporting
requirements.
Research finds that because of Medicaid expansion more
people are getting primary and preventive care they need, fewer
people are burdened with medical debt, hospitals and states are
seeing less uncompensated care, and there have been
improvements in health outcomes for people with various chronic
conditions.
Reversing a large share of the coverage gains from
expansion means reversing these other gains as well. Given the
large risks that HHS actions pose to programs that cover
millions of Americans, this committee's oversight role is
crucial.
Thank you for holding this hearing and I hope you will
continue to closely examine the impact of HHS policies toward
the Affordable Care Act.
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Ms. DeLauro. Thank you very, very much, Dr. Aron-Dine.
Mr. Haislmaier, love to hear from you.
Mr. Haislmaier. Thank you.
I presented in my written testimony for the committee,
Madam Chair, the actual administrative data on enrollment in
both the public and the private sectors and the trends and
observations about how the law has performed in that regard. So
I will reference that if we need to in the Q and A.
But at this point, I simply want to highlight a few basic
observations. First, I think it is fairly clear from the data I
am seeing that enrollment plateaued, starting about 2016. I
don't find that particularly surprising.
It was interesting. When the law was passed there was kind
of a, as often is the case, a disagreement between the
Congressional Budget Office and the Office of the Actuary. When
the Medicare Modernization Act was passed, there was a
disagreement about take-up of Part D. I thought that CBO had
the better argument then. In this case, I think CMS has proven
to have the better argument. The actuary--CBO sort of assumed
that people would come into this over a period of years and
year and years.
The Office of the Actuary said, well, no, you are going to
go out and you are going to basically enrollment screen a lot
of people and you are pretty much going to get 80, 90 percent
of this within the first 2 years.
The data seems to have borne that out not only for the
Medicaid expansion, which was explicitly what the Office of the
Actuary was referencing, but also for the exchanges. So my
second point is I think what we have here today, and I am not
terribly surprised by it, is a mature market and when I look at
the data what I see not only for the federal exchange but also
for the state exchanges and also for Covered California, which
basically accounts for half the state exchange enrollments and
it provides some of the most detailed data, what you are seeing
is that consistently over the last few years new enrollments
are declining and returning or renewals are increasing and,
again, that is not surprising.
I mean, it is kind of like saying, you know, what is the
trend of new people who have never bought a cell phone buying a
cell phone versus the number of people who own a cell phone
buying a new cell phone. I mean, this is--this is classic
mature market.
So, from here, I think it is unlikely--and this is my third
point--that we are going to see much change, plus or minus,
and, frankly, I think that is regardless of what this or a
subsequent administration does largely because most of this is
governed by some forces actually outside the jurisdiction of
this committee, which are permanent appropriations. The tax
credit subsidies, the Medicaid expansion money is there. It
goes out automatically.
The people who want and need subsidized insurance are going
to show up and they are going to get it and there is very
little that, you know, absent Congress changing this or a
subsequent administration can do about it.
Now, having said that, I think it is important to
understand that one of the effects is that the ACA essentially
created two markets in one. The traditional customers for
individual market were basically self-employed, small business
people.
There was a certain number of people who are between jobs
and looking for that. These are people who were not looking to
fund their current medical needs. These were people who were in
average health. They just wanted something in case something
bad happened down the road. So they wanted coverage, one, that
was affordable.
They weren't particularly concerned about having lots of
additional benefits on the coverage, and three, for the ones
who did have health issues, they weren't severe health issues
but they were used to seeing certain doctors and hospitals and
they wanted plans that were broad network plans that they could
go to.
What happened is that the ACA subsidy system brought in a
new group of customers and created a significant adverse
selection against that market. And so the way to understand
this is to understand that pre-ACA, about 10 percent of the
private market, was individual coverage and 90 percent was
employer coverage.
With the ACA, when you look at, as any actuary will show
you, there is a distribution of population where at any given
time 80 percent of people are pretty healthy. Fifteen percent
have some illness. Five percent are seriously ill.
What happened is a disproportionate number of those 5
percent that are seriously ill wound up being put on a very
narrow base of only 10 percent of the market and that is what
has driven the cost here. You have tried to merge two very
different markets.
And so what has happened is because of the subsidies and
the changes, the people who really need medical care because
they have serious medical conditions they are covered. They
show up. They get covered. They stay covered. Their bills get
paid. The coverage is comprehensive.
But for the people who are the old individual market and
are your constituents who are self-employed and things like
that, it has become a very unattractive market.
They can't get the doctors and hospitals they want. They
can't get the coverage they want. They don't have the insurers
to choose from. And so that is what needs to be remedied.
I think what the administration is trying to do is to try
to provide some assistance to those people, some alternative to
those people. I would encourage Congress to actually work with
the administration to do that.
Thank you, Madam Chair.
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Ms. DeLauro. Thank you very much.
Mr. Morley.
Mr. Morley. Thank you, Chairman DeLauro, Ranking Member
Cole, and members of the subcommittee. I am so honored and
humbled to speak with you today about the critical importance
of the Affordable Care Act and the Trump administration's
ongoing efforts to undermine it.
My name is Peter Morley, as you know. I live in New York
City. In 1997, I had an injury during a lapse of insurance
coverage. All treatment and medication costs were paid out of
my own pocket.
When I later needed surgery, my insurance company
considered my injury to be a pre-existing condition and all my
claims were denied. It was a financial burden for years,
totaling in tens of thousands of dollars.
In 2007, I was permanently disabled from an accident. I was
spared the costly medical bills of four spinal surgeries
because I had continuous health coverage.
In 2011, I survived kidney cancer and fought my way into
remission after losing part of my right kidney. In 2013, I was
diagnosed with lupus, which causes me severe fatigue and most
days it is a struggle to get out of bed.
I now manage over 10 pre-existing conditions, take 38
different medications, and receive 12 biologic infusions to
slow the progression of my disease. I live on the brink of
financial ruin and only live modestly, thanks to insurance and
the fact that I can't be discriminated against because of a
pre-existing condition.
Pre-existing conditions are a way of life for me and
millions of others. Thanks to advances in science and medicine,
most people like me with chronic diseases can live happy and
productive lives, but only if we are provided access to health
insurance that can't be taken away from us because an insurance
company decides it is in their best interest not to cover
something, or if Congress decides to repeal my insurance or the
single greatest threat I face to my health today, the Trump
administration's continual sabotages of the ACA.
As someone who spends the majority of my waking time in
doctors' offices, the Affordable Care Act has meant focusing on
healing, not bankruptcy. I used to be very private about my
health. But once President Trump was elected and set to repeal
the ACA, I could no longer be silent.
In December 2016, I decided to foster awareness for lupus
and advocate for health care. My congresswoman, Carolyn
Maloney, has taken up my cause and for those of people like me.
From day one I witnessed the Trump administration's
unrelenting sabotage to the ACA. Short-term plans and
association plans are an assault on my protections, allowing
insurers to bend the rules of the ACA and create fine print
that people like myself just don't have the time to comprehend.
When the Trump administration refuses to do appropriate
marketing and research to more people, it affects me directly.
Fewer people in the risk pool makes my insurance more expensive
and the administration's reckless support for lawsuits that
tear down the entire ACA--terminating it, as the president just
said--is a grave form of subversion. These are just a few
examples.
In the last two years, I shared stories because I have
traveled to DC 14 times to advocate for thousands who have
shared their health care stories with me. I have met from--with
anyone from Congress, Democrat or Republican alike. My message
is simple.
If you think people don't get hurt when the administration
doesn't implement the ACA to the best of their ability, think
again. We do. I do. Millions do.
If you think pre-existing conditions aren't important,
remember, someone you love can have an accident, be diagnosed
with cancer or lupus at any time and that will change how you
think about this.
I know firsthand that your health care can change in an
instant. I appreciate the subcommittee holding this hearing
today. If the Trump administration can choose not to implement
this in ways that are true to its intent, citizens like me
understand that administrations can do that with any law. I
enjoy legal protections only Congress can create.
I put myself at great risk to travel hear and share these
stories with you. I never know if this will be the last time I
am healthy enough to come to DC.
But I am here today to ask you to protect the Affordable
Care Act and to hold the Trump administration accountable for
trying to sabotage health insurance for millions of Americans.
Thank you for allowing me the opportunity to testify and I
am happy to answer your questions.
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Ms. DeLauro. Thank you very, very much. Thank you for your
testimony.
I thank all of you for your testimony and, you know, I just
appreciate the level of knowledge and, as I say, fact-based
information that we have the opportunity to listen to today.
Let me just mention that we are moved to questions and
answers at the moment, and as in the past, we will proceed with
five-minute rounds and we will alternate between--back and
forth by seniority as members were seated at the beginning of
the hearing, and I just--including myself, be respectful of our
witnesses and try to give them enough time to respond to your
questions.
If I can take one more second and wish our colleague,
Bonnie Watson Coleman, a happy birthday.
Happy birthday, Bonnie. Thank you. That is great, and
welcome to the committee. So that is great.
I just want to make one quick point. The Labor HHS
Subcommittee funds the Centers for Medicare and Medicaid
Services, the program management account as well as HHS's
Office of the Secretary.
What that means is that the subcommittee funds the
personnel who drive the administration's policies affecting the
Affordable Care Act. So our actions fall squarely under the
Subcommittee's purview. So I just want to set the record
straight.
Yes, Dr. Aron-Dine, your testimony notes that the Trump
administration released a new proposed rule for 2020, and you
talked about ``100,000 people drop their health coverage each
year,'' and that 100,000, as I understand it, comes from the
administration's own estimates.
You noted the proposed rule would increase families'
monthly premiums, out-of-pocket costs without a corresponding
benefit. Finally, you state nothing in the law requires HHS to
pursue this new policy.
I have actually two questions. If it isn't part of the law,
why is the administration proposing to increase health care
premiums and out-of-pocket costs?
Ms. Aron-Dine. The rationale that the administration gives
for making this formula change is twofold. Part of it is a
technical justification and part of it is saying that it would
reduce Federal costs.
I think we need to look at that reduction in Federal costs
relative to the burden that is imposed on consumers and also
juxtaposed with some of the other administration actions.
I talked about how the administration also estimates that
its short-term plans rule, for example, will increase Federal
costs by billions of dollars. And so I think those are funds
that could be better spent, first, not increasing people's
premiums by cutting their premium tax credits and also by
improving affordability.
Ms. DeLauro. You also said that the administration is
considering two even more harmful changes: ending or limiting
automatic reenrollment and attempting to end the silver
loading, a practice that lowers premiums and out-of-pocket
costs for millions of people.
Just--can you just briefly elaborate on those proposals
being floated for future years? What is the point of denying
someone the chance to reenroll in their existing health plan
through the easiest possible process?
Ms. Aron-Dine. Sure. So automatic reenrollment is, as you
say, an opportunity afforded to people who are already enrolled
in coverage. Most returning marketplace consumers do actually
come back and actively select a plan.
But some, just like people in employer plans, instead rely
on being automatically reenrolled, and if we didn't have that
backstop for those people, it is likely that a million or more
people would lose their coverage and lose that opportunity to
remain continuously enrolled.
The second change you talked about is eliminating silver
loading. As you talked about, silver loading is how the market
has managed the elimination of reimbursements for cost-sharing
reductions and it has actually had the effect of making
coverage more affordable for people and, according to CBO's
estimates, increasing coverage by $500,000 to $1,000,000.
So that, ironically, the unintended consequence of the
administration's action, which seems to have been intended to
undermine the market, has counteracted some of the downsides
from its other actions. And so eliminating silver loading would
make things more expensive for people and likely further reduce
coverage.
Ms. DeLauro. Well, I am going to--I just--you know, it just
seems that tried stabilize the market, refusing to deal with
cost-sharing reductions, and now, after states have thwarted
those attempts, we are trying to go after their work-around
programs is what it appears to me.
Let me just move to how would HHS guidance for 1332 waivers
subsequent discussion paper outlining the administration's
preferred types of proposals affect people with pre-existing
conditions and other vulnerable groups.
You also talked about people losing their health coverage
under types of Medicaid waivers that HHS is now approving. What
types of enrollees are at risk of losing their health care
coverage and how many people would gain health care coverage if
we move to 50 states in Medicaid expansion?
Ms. Aron-Dine. Sure. So if the remaining states adopted
Medicaid expansion, the Urban Institute estimates that more
than 4 million people would gain coverage.
So if we are looking for a way to continue the coverage
reductions from the ACA, that would certainly be one available
option. With respect to the Medicaid waivers, these are waivers
that HHS has approved with unprecedented restrictions on
eligibility including work requirements.
Ironically, some of the people at risk of losing coverage
from work requirements are workers--people who have unstable
jobs, who have variable hours, who can't meet that monthly
requirement.
Other people particularly at risk of losing coverage are
people with serious illnesses who are supposed to be exempt but
often have particular challenges navigating the paperwork, the
red tape to claim those exemptions.
Older people also seem to be particularly at risk because
they may be early retirees who aren't working, even claiming
Social Security but relying on Medicaid for their health
coverage.
Ms. DeLauro. I am going to do something unprecedented and
yield back my time.
Mr. Cole. [Laughter.]
Mr. Cole. Do I get the extra 16 seconds?
Ms. DeLauro. No. No. [Laughter.]
Mr. Cole. Thank you very much, Madam Chair.
Mr. Haislmaier, I am very intrigued by what you have to say
about markets really being, as I understand your testimony, the
driving factor here. Am I right if I--that in your view,
literally we were going to get most of the people we were going
to get in this market up front pretty quickly?
They were going to understand they needed it. They were
going to mostly continue to re-up and would continuous
advertising at the same level of the initial rollout of the
plans make much difference to coverage after that first two or
three years?
Mr. Haislmaier. In the--in the individual market, I don't
see it making that much difference once you have a mature
market. It is a point of diminishing returns.
I mean, if you look at the situation the question is do
people--does an individual believe that he or she needs
coverage or if they don't think they need it do they still want
it, and the primary motivators are a medical need would be one.
The other thing is, well, I am healthy but I have got
assets to protect. I mean, I don't want to lose my house if
something happens and I have to pay the bill. Or it might be,
hey, I have got dependents--you know, what would happen if
something happened to my kids--things like that.
Those are the motivators. That is why people buy life
insurance, et cetera. So those are the people who are motivated
to buy the coverage. Okay. And depending on how motivated they
are, you know, nudging them might help.
Interestingly enough--and Covered California, again,
provides the most detailed breakout of this--they found the
most effective thing were, guess what, insurance agents.
Consistently, since 2014, if you look at the Covered California
data, over half of new enrollments come from insurance agents
and another 30 percent are people doing it on their own online.
I mean, it is all in the Covered California reports. So
that is what you are looking at. So then what you are left with
is people who say, well, yeah, do I really need it--nah, I
don't think so. You know, or I will be okay if something
happens to me.
Now, you and I and the others here might think that those
people are mistaken, okay, and in fact they might be mistaken.
But the problem is that is what they think, and particularly
they are looking at other alternatives.
So, for example, just to--you are from Oklahoma, sir--an
example of that is if somebody is a member of a tribe in your
state who has access to the Indian Health Service and is
treated by the Indian Health Service, that is technically not
insurance.
I mean, they are entitled to that. They get--it is free.
The government pays for it. But that is technically not
insurance. That individual would be uninsured.
Now, does that person feel that he or she needs to buy
insurance? Well, not until there is a problem with getting
access for the Indian Health Service and at that point then,
yeah, they will show up on Medicaid or they will buy an
exchange plan.
So, again, different people in different situations. We may
disagree with their choices. But there are people out there who
say, you know, I don't need it. I don't--I don't have any
assets. I don't have any income. What are they going to do if I
show up at the hospital and can't pay the bill? They are going
to have to treat me. I don't have anything to come after. So,
you know, yeah, I will sign up then but I won't keep the
coverage.
Mr. Cole. Thank you. Let me squeeze in another one here
while I have got a little time. The nonpartisan Congressional
Budget Office estimated up to a million people who would
otherwise be uninsured would seek health insurance coverage
because of the alternative association health plans and short-
term limited duration health plan options offered by the Trump
administration.
Even the Washington Post has noted that several of these
association health plan options offered on the market have
premiums lower than the ACA marketplace yet comply with the
essential health benefit coverage requirements.
Can you describe some of the benefits these alternatives
have to middle class unsubsidized consumers?
Mr. Haislmaier. Yeah. I mean, remember, these are self-
employed people by and large. I mean, you know, I had this with
a research assistant from--you know, who was from Missouri and
whose parents had a small contracting business and as their
choices dwindled and the premiums went up they went to self--
they went to, you know, short-term plans because they are not
worried that, say, it doesn't cover maternity. I mean, I know
self-employed people who say, well, heck, you know, we just
paid cash for having our kids.
I mean, again, these are not poor people. These are middle
class people, by and large. Where I see this going long-term is
I think it is more interesting the association plans because
that market has dwindled.
I mean, prior to the ACA there were about 11 million people
who had unsubsidized individual coverage. The number of people
with unsubsidized individual coverage is now down to 7\1/2\
million. Now, you have added 7\1/2\ million with subsidized
coverage but the unsubsidized has dropped. I mean, that is very
clear in the data.
We don't know exactly where they went. Some of those people
might go to short-term plans. I think for them it is a short-
term solution because, hey, they are already on the market. You
can just go and get one.
Now, longer term I think where that--those people will go
like that, you know, family that runs a contracting business is
they are going to go once somebody sets up like NFIB or the
Chamber sets up an association plan. That is where they are
going to go.
Mr. Cole. Thank you, Madam Chair.
Ms. DeLauro. Mr. Pocan.
Mr. Pocan. Thank you, Madam Chair, and thanks to the
witnesses for being here today.
I guess I want to try to focus I think mostly on pre-
existing conditions in the sense that when we do town halls
back home this is the issue that comes up the most. You know, I
did a lot last year in my district, especially the last two
years. I did five in Paul Ryan's district in the last two
years, since he was a little busy doing other things, and the
No. 1 issue that came up was the pre-existing condition issue.
And while I appreciate the conservative free-market
theoretical aspects of talking about, you know, what percent
are severely ill and what percent aren't, I think the flaw in
all of those arguments comes in--I was in that 80 percent
healthy category for a long time.
I spent a night in the hospital when I was born and then
until I was 53 never spent another night in a hospital. Then
when I went there I found out I had 70 percent, 90 percent, and
100 percent blockages and I got to spend an overnight in the
intensive care part of the hospital, which is why people have
insurance, right.
So I would be in that healthy category so I wasn't thinking
about all the other theoretical--what is the cheapest plan I
could possibly have. Also, I was a small business owner for 30
years.
So I can tell you how most small business owners we don't
buy--we don't look for a cheap package without benefits. You do
it because you can't afford something. We want to make sure
that you have coverage for your family. In fact, more people
don't start small businesses because they can't get real access
to health care than otherwise would start businesses and that
would have an entrepreneurial push.
So that is why I had people--when I go to small towns--when
we passed the--the ACA was in place who came to me literally
crying about the fact that they now have health care.
So I think it is great on paper. It is a really different
thing on practice for people, and I am one of those people now
who has a pre-existing condition. So I get the great privilege
of if this thing falls apart and I am not in Congress figuring
out how to get health insurance.
So I guess what I would really like to focus on is where
HHS very specifically has done some of the measures, and I am
talking to Dr. Aron-Dine, about making it harder to have that
coverage for people with pre-existing conditions, because that
is what real people talk about not inside the Beltway. We don't
talk about all the stuff that we talk about around here. Like,
they are just worried that they have got a kid who is sick.
You know, you are telling your very personal story. Thank
you for that. That is what people do at every single town hall
we have and I would just like to know where we really have to
plug the holes and make sure that people who have pre-existing
conditions will never lose coverage.
I mean, Donald Trump can say Republicans will really
protect pre-existing conditions. Democrats will not. That falls
in the category of, you know, obviously, a giant lie.
We just want to make sure we are actually dealing with this
and fixing it in a way. So, Dr. Aron-Dine, the exact spots
where we need to plug the holes to fix this.
Ms. Aron-Dine. Let me highlight two. The first is the
short-term plans rule that I referenced earlier, and just to
talk for a moment about the CBO report that Congressman Cole
referenced, it found a few things about these plans.
First, it found that the Trump administration's actions
will cause a great proliferation in these plans that are not
subject to ACA rules, both short-term plans and association
health plans, with 80 percent of the people enrolling on those
plans being people who would otherwise have had comprehensive
coverage.
Second, it found that the short-term plans in particular
will look a lot like pre-ACA individual market plans. So just
so we all remember, those are plans that excluded essential
health benefits like maternity, like substance use, like mental
health, like prescription drugs, and also imposed annual limits
on coverage, which meant that in some sense they weren't really
health insurance at all because what you are looking for when
you have health insurance is coverage for those very high
catastrophic costs. If you have a limit on your plan, you don't
really have insurance.
The third thing CBO found is that the lower premiums those
plans provide for healthier people are coming entirely from two
places. One is the more limited benefits, which is zero sum in
the sense that people don't have coverage.
The other is dividing the risk pool, pulling in the healthy
people and then raising premiums for sick people by the same
amount in aggregate. So in terms of making like harder for
people with serious health conditions, pre-existing conditions,
raising premiums for them by that amount.
The final thing I would say is that I think that rule
creates a little bit of a false dichotomy, a sense that the
only choice is to do nothing for healthy middle income people
or to split the risk pool and help healthy people at the
expense of the sick.
I don't think that is the choice we face and, in fact, with
the increased federal costs from that rule, one could make a
start on subsidizing coverage for middle income people and
making it more affordable for the healthy and sick.
The second action I would point to, just very quickly, is
the 1332 guidance and discussion paper, which really invites
states to come in with very dangerous proposals that could
undermine their entire ACA market and leave people with pre-
existing conditions without any option other than a market that
looks like pre-ACA.
My hope is that states won't take up those options and fact
there are some real legal questions around that guidance. But
if any state were to come in with such a waiver, the danger
could be very great.
Mr. Pocan. Madam Chair, if I can just finish with saying,
you know, when we talk about not covering things like
prescription drugs it is ridiculous. Those people have to have
coverage.
I was only on two drugs coming out of the hospital that
were $600 a month. Forty percent of the people in the country
can't come up with $400 for emergency expense, much less a
monthly expense of $600. You know, clearly, that is a necessity
in coverage.
Thank you.
Ms. DeLauro. Thank you.
Ms. Beutler.
Ms. Herrera Beutler. Thank you, Madam Chair.
I had a couple thoughts. You know--I don't know what
anybody's preconceived notions are before we get started into
this. But we are here because we care about having access to
health care for the people we serve. That is the whole purpose.
That is why we asked to be on this committee.
This is not the easiest committee to be on. We do it
because we truly want to get people access to care, and what I
hear us debating and what is striking me a little bit is, I
mean--I don't think the Trump administration does everything
right.
We can argue about different things--the different changes
that they have made since they have been in office, right,
which is, I would argue, mid-way through 2017 they were able to
start really making some big changes and moving forward.
But there are a few facts we can't escape. The ACA is still
the law of the land, and the premiums that my constituents are
paying in most of my district--most of my counties, where they
have the privilege of paying them--I have had to step in to
make sure that a county is even offered a plan on the exchange.
I mean, we have had major deserts.
Those have gone up and those were set before he took
office, right. So right now, I keep hearing because of
marketing failures or choices to change, how we are
outreaching, you know, that is why premiums are increasing and
I have to smile because if you would just look at the timeline,
we are paying more as a result of the law of the land, which is
the ACA.
Now, I wish--I wish that the ACA did everything that we
were told it was going to do. I really do. I have pre-existing
conditions in my family. I have people that I serve. My goal
when I think about this is how do I get them access to care
that is worth the paper it is written on.
So right now, in my biggest county only 6.5 percent of
people are uninsured, which kind of alludes to some of the
numbers you were using, Doctor. You know, the numbers are going
in the right direction.
But when you break that down, you can wait 5 months to
get--as a child on Medicaid under the exchange to get in to see
a primary care doctor. It is not worth the paper it is written
on.
I have so many people--it is over half in that county who
are on APPLE Health and the major primary care clinics
literally stopped taking new Medicaid patients because they
can't afford them because there is a problem with
reimbursements.
Now, this is one of the reasons I think the exchange should
not have had the expansion because now we are paying to put
able-bodied childless adults ahead of those poor children and
those children--those disabled children, those children with
pre-existing conditions--that is the whole reason--one of the
main reasons Medicaid was created in the first place. But those
are the kids who are now waiting to get care.
So when we say we care about pre-existing conditions, it is
because we see them not getting the care they deserve under the
ACA. That is what we are talking about, and I think marketing
could change some of that, right. Maybe we can get some more
people in.
But by and large, your problem is with the ship, not with
the deck chairs on the ship. You know, I hear you talking about
you need to get rid of the--I think you call them parallel
coverage universe. That is so upsetting to me. In Washington
State, we have the Association of Health Plans, for example,
and I have had to fight to protect those.
We have nearly 400,000--people who receive employer-
sponsored health care coverage through AHPs in Washington
State, many of them union or teachers, small businesses, and
historically those folks are coming through the small business
plans and they are--they are kind of a lifeline right now for
people who are not--they are not--they are not--they are not
making--they are not getting the subsidy but it is what is
getting them coverage, right. they can afford it.
And so in my mind, we have to find a way that allows more
choice and more options, not less choice and less options, and
that may mean subsidies for certain folks, making sure we are
protecting the safety nets in Medicaid Part B. But it may also
mean that these--you know, this parallel coverage universe is
part of our solution.
And to that point, I actually wanted to see if Mr.
Haislmaier would speak to that as a solution. Association
health plans as part of the solution to what we are talking
about.
The law of the land isn't working. It is just not working,
and if we want to get more people with access to coverage, I
was hoping you could--you could maybe elaborate a little bit on
that.
Mr. Haislmaier. Sure. Essentially, in states that
previously tried to do this with the--in some states with what
they called a group of one where the question is if you are a
self-employed person are you the business owner.
Well, yes. Are you the employee? Well, yeah. I guess. You
know, and so can you be part of an employer plan that has
better tax treatment and better insurance regulatory treatment.
Now, that was interesting pre-ACA and this comes back to your
colleague's question about pre-ex because there is a lot of
misinformation about it.
As Mr. Morley actually pointed out, interestingly enough,
you know, before the ACA, 90 percent of this market pre-ex was
largely not an issue. That is because it was employer coverage
and in 1996 they had the Health Insurance Portability Act,
which is, as Mr. Morley was saying, you know, if you had
coverage and you wanted to switch from employers or switch to
another plan, no pre-ex, right?
And, in fact, I started working on this back in 2003 with
the D.C. commissioner when we had the situation where those
rules didn't apply in the individual market and the George
Washington health plan--university health plan went away, and
now people who had bought insurance for years were suddenly
being turned down in pre-ex.
So there is a way to solve this. The problem was the ACA
went about it in a sort of ham-handed way. But yeah, this was--
this was, A, a relatively small issue. B, it is largely solved.
C, we were trying to solve it before the ACA.
What happens is if you go into an association plan you can
essentially recharacterize as a large business and you have
more flexibility in benefit design and you have more choice.
I think it is interesting. I did some research before
coming here. Your district and actually Mr. Pocan's district
are two of the four of you who in your district it is not
possible to buy anything other than a narrow network plan on
the exchange in your district. That is true of four of you, and
you are two of them.
And so that is the difference. You get alternatives to that
sort of limited choice.
Ms. Beutler. Thank you, Madam Chair, for the time.
Ms. DeLauro. Thank you.
Ms. Frankel.
Ms. Frankel. Thank you. Thank you, Madam Chair. It is an
honor to be on this committee and I want to thank our
presenters today--thank all of you, really enjoying everybody's
testimony and I--even--well, I may disagree with some of it. So
my questions are going to be out of respect and I will try to
be as kind as possible when I say this.
I personally think the elimination of the advertising was
pure evil and I also want you to know that the cell phone
companies spend billions of dollars to advertise, and I can
tell you this. I probably get three or four emails every day
they want me to change my phone. I just bought a phone.
Anyway, I am going to move on to something that is very
important to me and that is the effect of these changes or
these efforts by the current administration, how it affects
women.
Here is what I know is that 90 million women ages 18 to 64
have had health insurance due to the ACA. Sixty-seven million
women and girls have pre-existing conditions and that the ACA
was supposed to require health plans to cover a set of
preventative services without out-of-pocket costs including
birth control, well-woman visits, and breastfeeding support and
supplies, and that the ACA was also supposed to allow for
essential health benefits such as pregnancy, maternity, newborn
care, pediatric services, prescription drugs, mental health,
substance use disorder.
Now, so my first question--I am going to have three
questions and I am going to give all the questions first. So,
you know, my first question is how has the administration's
attempt to dismantle the ACA undermined women's access to
health, and I think the discussion on the junk policies
probably could help us with that, and has it, if you know,
shifted more women to Medicaid, especially for the birth of
children.
My next question, and I don't know--maybe one of you can
answer this. There was an administration--in November the
administration proposed a rule to require insurers to send
separate bills to customers for a portion of their premium that
covers abortion and this month the administration proposed to
require insurance companies that offer ACA plans covering
abortions to also offer an identical plan in the same region
that does not cover abortion, and I am curious if you have a
comment on how these new administrative burdens impact whether
insurance companies continue to offer abortion coverage.
And my next question is thanks to the ACA, 62 million women
benefit from insurance coverage of birth control without out-
of-pocket costs. In fact, I am not going to go into all the
effects--good effects of birth control.
Yet, the Trump administration has issued rules letting
virtually any employer deny workers this essential health care,
and curious whether you have a comment on how the Trump changes
undermine access to contraception.
Who wants to answer?
Ms. Aron-Dine. I can address some of the issues that are
more in my area of expertise and then leave it to others,
because you raised a number of important points.
First, on the issue of essential health benefits, I think
you are correct that women face some particular risks if they
inadvertently find themselves in a plan that doesn't cover
these benefits due to aggressively marketing of short-term
plans, due to confusion about what is covered.
Mr. Haislmaier mentioned people paying for maternity care
out of pocket. I will say, I don't know any middle class family
that can afford to go into a delivery without insurance and
potentially be exposed to the very, very high costs that could
accompany a delivery.
Second, on the question of Medicaid, certainly Medicaid
coverage also in some ways is disproportionately important to
women because of coverage for pregnant women, because women
sometimes are in the position of caring for their families and
have low incomes and are enrolled in Medicaid.
So I wanted to just respond to some of the points that were
made about Medicaid coverage not providing maybe adequate
coverage. Overall, the research on people who have coverage
through Medicaid or through the marketplaces find that they are
able to access care at rates similar to people in employer
coverage.
People with marketplace coverage, according to Kaiser
surveys, report actually high rates of satisfaction with their
access to physicians, both primary care physicians and
specialists.
And people who have gained coverage through Medicaid see
improvements in access to care as well as improvements in
various health outcome measures. So not to say that the
situation is perfect. But Medicaid offers strong coverage to
millions of people including tens of millions of women.
Finally, on the contraception rules, as you say, the ACA's
preventive services requirements included the requirement that
insurers cover contraception without cost. Again, research by
Kaiser finds that that has improved, reduced women's out-of-
pocket costs and improved access and adherence, which is really
important, and the administration's rules, although I am not an
expert, have poked holes in that benefit mandate by letting
employers who say they have any kind of moral objection opt out
with no alternative way for their employees to get that needed
coverage.
Ms. DeLauro. We are over time.
Mr. Haislmaier. Oh, I am sorry.
Ms. DeLauro. Mr. Harris.
Mr. Harris. Thank you very much, and let me join the
ranking member in congratulating you on chairing out of
committee because we discuss important topics here and this is
one of them.
Let me--you know, I have to represent the people in my
district. That is who I am elected to represent. In Maryland, I
am going to tell you, we had pre-existing coverage before the
ACA and it was actually much cheaper than pre-existing coverage
under ACA.
Now, in fact, in 2014 the ACA--the high-risk policy on our
high-risk pool and I think, Ed, you had worked with us in
Maryland when I was on the health committee there--the high-
risk pooling mechanism did it through a way that I think was
what you were alluding to, which is it spread the cost of that
high-risk pool over a large population through a
hospitalization tax on all, and the problem with the ACA is it
concentrated it.
Furthermore, it--you know, and they said, well, you know,
we did have this 2 percent premium tax or we had the premium
tax. But the premium tax in the ACA bought up subsidies, didn't
buy down premium and that is why healthy middle class people in
my district can't afford ACA policies.
It is a fundamental policy flaw. You know, had they--had
they just said, okay, we are going to tax all insurance
policies and we are going to buy down premiums on the ACA,
which actually is what happened in the first years of the
policy because what you did is you effectively had high-risk
pooling mechanisms.
So in Maryland--I am 62 now--60-year-olds--last year, Blue
Cross/Blue Shield suggested a $1,600 a month premium for the
silver plan. Sixteen hundred dollars a month for a 60-year-old.
What healthy 60-year-old would say, yeah, I am going to pay
$1,600. No, they would look for some other.
The only reason we have got it down is Maryland passed a
reinsurance plan allowed under a waiver. We passed a
reinsurance plan that kind of looked like a high-risk pooling
mechanism.
So my first question, Mr. Haislmaier, is isn't that we
should be looking for is actually looking for ways to lower the
cost on healthy people who are in that ACA individual pool?
Mr. Haislmaier. Yes, I would agree with you, Congressman.
That--in fact, I did an entire paper looking at Maryland and
Oklahoma and seven other states that had done--unfortunately,
it was Oregon, not Washington but they--you know, next door--
that have done the 1332 waivers.
And essentially the way to understand this is that the
ACA--I mean, the thing you have to keep in mind is it wasn't--
there was a lot in the ACA that was just badly thought out and
badly designed and, in some cases, badly implemented.
What happened is it is all based on income and it is not
based on need. And so what the states--from, you know, liberal
states like New Jersey and Oregon and Maryland to, you know,
more conservative ones like Oklahoma, though they withdrew
their waiver because they couldn't get approved in time--have
done is to say, well, look, if instead of just allocating the
subsidy dollars entirely on income we shift some of those
subsidy dollars to focusing on need more. Then we can bring the
cost down across the board for everybody on the face premium.
And you are correct, Congressman. That was what they did
essentially with the temporary reinsurance in the ACA for the
first 3 years. I have done some work on that as well.
If I could just follow up on the previous question----
Mr. Harris. Let me just ask, I take it you are familiar
with the Medicaid work waivers that are being proposed.
Mr. Haislmaier. Somewhat. Yeah.
Mr. Harris. Somewhat. Because my understanding is that, you
know--that first of all, it is 80 hours a month, which by my
math is less than 20 hours a week and it is not just work. It
is work, job training, job searching training, or volunteering.
Mr. Haislmaier. I mean, yes, it is a pretty broad
definition.
Mr. Harris. I have got to say I just--yeah. I mean, for a
nonpregnant nondisabled nonelderly person, I am not sure asking
them to volunteer in return for getting a valuable health
insurance coverage is asking too much.
Mr. Haislmaier. I think--I think the issue with that is
that the waivers probably are better for other means tested
programs. But you are onto something and that is Medicaid is a
poor fit for that population and this was the point that your
colleague was making.
That is a population that you should really do a different
deal with the states. You should say to the states, look, we
are going to give you money to help cover that population but
we are going to give you a lot of flexibility as to how you do
it.
These are not the core population that really needs help--
the disabled, the small children, you know.
Mr. Harris. It is not the original purpose of the----
Mr. Haislmaier. Right. It is not the original purpose. This
is a population--you know, 84 percent of these people have no
dependent children. Half of them are between 18 and 30 years
old.
What you want is a system where, yes, you want to get them
off of dependency, into a job that has benefits and things like
that. So it is a different path.
Mr. Harris. Sure. And finally, you know, making Little
Sisters of the Poor going to the Supreme Court for their
religious exemption is an atrocity in America.
I yield back.
Mr. Haislmaier. I don't know if I have time to answer that.
[Laughter.]
Ms. DeLauro. Ms. Watson Coleman.
Ms. Watson Coleman. Thank you, Madam Chairman, and I am
very excited to be a part of this subcommittee. I am learning a
lot. Even in the few minutes that I have been here I have
learned a lot and I recognize just how complex this issue is.
I fundamentally believe that access to affordable and
comprehensive health care is a right, not a privilege. And so I
am interested in what it is that we need to be doing and what
we need to be eliminating and what we need to be protecting to
ensure that those have the insurance that is necessary to keep
them healthy.
I believe it is important that we have preventive measures
so that individuals stay healthy and ultimately cost the system
less.
I also think that young healthy people can get cancer any
moment and that changes the conditions of their existence. What
does that mean for them because they have not been required to
have insurance? So they come into the whole equation either
facing bankruptcy or trying to find something with pre-existing
conditions.
I think the education is vitally important. It is vitally
important as to what is available, when you need to enroll,
what is appropriate for you. I also think it is important for
young healthy people to recognize that but for the grace of God
you could be unhealthy in the very next day.
So I am interested in these junk plans. They really truly
concern me. I want to know what is it that they ultimately or
fundamentally don't cover. I want to--I want to understand the
impact of extending their viability for 3 months to 12 months
and I want to understand the impact of taking money out of
educating the consumers, who are very busy and who don't read
the fine lines and don't really understand what is all covered
in their insurance.
So I guess I want to hear from Mr. Peck and Ms. Dine.
Mr. Peck. So one of the most important things that the
Affordable Care Act did was provide a fairly comprehensive set
of protections to consumers to make sure that they don't need
to be health insurance experts when they sign up for coverage
and be surprised when they get sick.
The--we have talked about a number of them--you know,
protection against discrimination for having a pre-existing
condition, annual or lifetime limits, the 10 essential health
benefits, which make sure that you have--you are covered if you
go to an emergency room, if you need to get prescription drugs.
Ms. Watson Coleman. Let me ask you this question about the
junk plans. Do they allow for lifetime limits to be include?
Mr. Peck. Yeah. So all of these protections are permissible
through short-term plans. They have eliminated that requirement
and by making short-term plans acceptable--you know, by making
them last for 12 months they make them a viable alternative for
people looking for coverage because it means you can go from
one open enrollment period to the next with a short-term plan.
The danger with short-term plans, and one of those things
is they don't even have to provide the same information that
Affordable--that ACA-compliant plans need to provide.
So it is very easy for consumers, particularly, you know,
do to a lot of very aggressive marketing tactics by short-term
plan insurance companies--it is very, very likely that
consumers will sign up for short-term plans and not understand
that they are being scammed.
And they will one day get in an accident or get a sickness
that they weren't expecting and find that the coverage that
they thought was going to be there for them wasn't.
Ms. Aron-Dine. I would only add to answer your specific
question about what these plans look like, researchers at
Kaiser took a look at the plans that are currently offered that
are short-term plans of which none offered maternity coverage,
fewer than half covered substance use treatment, and fewer than
a third covered prescription drugs. So it is a concrete
problem.
Ms. Watson Coleman. The issue of maternity coverage is
vitally important to me. I have got a bill called the Healthy
Moms Act, which is--allows women who find themselves pregnant
to be able to enroll at that time into an insurance plan, and
that is very important, particularly in communities of color
like African-American communities where the mortality rate is
so much higher.
I thank you for this--for this hearing, Madam Chair, and I
hope we have more discussions about what do we really need to
do to ensure that the appropriate health care is accessible and
available to all that need it.
Thank you. I yield back.
Ms. DeLauro. Mr. Moolenaar.
Mr. Moolenaar. Thank you, Madam Chair, and it is a pleasure
to serve with all of you on this subcommittee and appreciate
the opportunity to hear from our witnesses today.
I had a couple areas that I wanted to explore and, Mr.
Haislmaier, I wanted to especially get your insights on this
with the short-term plans.
One of the things that seems to me is that we want to
provide alternatives--affordable options for people. I was
listening to Mr. Morley. There was a point where, you know, you
didn't have coverage.
You know, obviously, there are people in all different
situations in life don't have coverage. To me, it would appear
that you would want something that is flexible, affordable, and
Mr. Peck, you know, you made some compelling statements about
the importance of information for consumers and consumer
protection, and I think that is a big part of what we need as
well because you don't want people to be a victim to scams. You
don't want the small print to be there and then don't find it
out until you are in a situation.
You know, at the same time, it just seems that we use
rhetoric like junk plans or terms like essential benefits, and
what strikes me is at some point you want to empower the
consumer to decide what is an essential benefit from that
consumer rather than the federal government saying it is
essential that you have this and you are forced to buy it.
In the same way, like, I ought to be able to figure out
with the right information what is important and valuable
versus what is junk, and to me it seems like we ought to be
hitting on that.
So I am curious, Mr. Haislmaier, with the short-term plans
I understand they are 50 percent less in some cases, which gets
to this affordability. So if people aren't buying something and
it is too expensive, then they are in that situation where they
don't have coverage.
But this idea of offering flexibility seems to me to be
pretty appealing, and I am just kind of wondering with the
administration making more of these plans available are there
ways to have safeguards for consumer protection?
We have talked a lot about pre-existing conditions. I think
that is an important criteria. The president mentioned it last
night. As mentioned, the law of the land.
Are short-term plans--do they have coverage for pre-
existing conditions or is that something we should address? So
I want to get your perspective on that.
Mr. Haislmaier. Let me--you know, one of the benefits or
misfortunes of having been at this as long as I have is I
actually remember where all this stuff came from. So let me
give a little background here because there has been some
discussion today that doesn't, you know, reflect the origin of
this.
Short-term plans were a category created in the 1996 HIPAA
legislation where the legislation said that we are going to
impose regulations on the group market and the individual
market.
They did not impose--they imposed the restrictions on use
of pre-existing in the group market, as I said, but they did
not do it on the individual market and I think they should have
copied the same rules over but they didn't.
But what they did say is short-term plans don't count as
individual coverage. Then they wrote regulations saying, well,
what is a short-term plan--anything of 12 months or less, and
that was in place for 20 years--20 years before the Obama
administration, in November 2016, said, oh my god, as premiums
are going up people are fleeing and they are going into these
short-term plans--let us kill off the short-term plans by
making them three months, et cetera.
So what the Trump administration is just doing is reversing
that regulation, going back to where it was for 20 years
before.
The second thing to point out to your question is that on
short-term plans they are required--and this was something the
Obama administration added in their revision of the regs that
the Trump administration has kept--to have disclosure notices
about them.
The short-term plans can medically underwrite. They are not
subject to pre-existing condition exclusions. That is true. But
they are a possible solution for some people, not for
everybody.
The other point that I would make is as much attention as
has been devoted to this, I actually access the insurer market
data--all of your states, the insurers, have to file regular
reports and that data gets aggregated up by the National
Association of Insurance Commissioners.
So when you go into the market data you can actually see
what is going on. We have 175-plus million people with private
insurance coverage between employer, group, individual, et
cetera, and I am talking full benefit coverage, not the
supplemental Medigap, stuff like that.
Of that, about a couple hundred thousand have short-term
plans. So it is a really, really small market. As I said, I
think it will have maybe a little uptick in the next few years
as some people grab it as a life raft until they can get to a
bigger boat called association plans.
But I don't see it as a major thing. The only other point
that I would make, if I could diverge a bit, is on some of the
other comments that were made here, the formula change in the
subsidies that the administration--that Dr. Aron-Dine referred
to, that was the so-called fail-safe provision that was
included in Speaker Pelosi's Manager's Amendment in 2009 to the
final bill to keep the score below what they thought they were
going to get from CBO.
So that is the origin of that and the question is when
the--when it says that it has to be adjusted for the growth in
premium, the previous interpretation had been premiums in the
large employer market, not premiums in the market you are
talking about subsidizing, which is the individual market.
So, you know, the other point is and, again, the history of
this--yeah, the other point is simply the aggregation on
abortion funding was in the bill.
Ms. DeLauro. Thank you.
Ms. Clark.
Ms. Clark. Thank you very much. A pleasure to be back with
all of you and with our new chairwoman. Congratulations, and
thank all the panelists for coming.
As we talk about short-term plans, junk plans, whatever our
moniker for these plans, I think it would be helpful have a
little bit more history.
I appreciate going back to 1996 and individual markets. But
how did pre-existing conditions play out across the country as
far as insurance coverage?
Ms. Aron-Dine.
Ms. Aron-Dine. Yeah, I think that is a very helpful
reminder because what short-term plans are taking us back to is
a parallel market that would look a lot like the pre-ACA
individual market.
In that pre-ACA individual market people with serious pre-
existing conditions--Kaiser estimates about 50 million people--
were uninsurable if they needed individual market coverage.
Others could face rate ups, so higher premiums. And
individual market plans often didn't cover basic essential
health benefits, and that is because--just to respond to one
other point that was made--you can't really have essential
health benefits a la carte.
If people can decide for themselves whether to buy
maternity coverage, for example, men will not buy maternity
coverage. But that means that the cost of plans marketed to
women will be higher because only they will reflect the cost of
maternity coverage.
Similarly, if you let only people who need mental health
care buy plans that cover mental health care, the cost of those
plans will essentially equal, you know, the cost of mental
health care. They won't have bought insurance. They will just
have to pay for their care in the form of a higher premium.
So when it comes to benefits, it is sort of appealing to
say that we should just let people choose for themselves what
kind of coverage to buy. But insurance just doesn't work that
way.
If we want robust coverage to be available to anyone at an
affordable price, then we need to mandate some level of robust
coverage for everyone.
Ms. Clark. And, you know, I think that that point also
carries into one of the real public health crises that we have
in this country, which is the opioid epidemic.
Having worked with many, many families in my district and
across the country and having worked across the aisle to
address this crisis, it doesn't care if you are in a red state
or blue state.
I have not met the person in the throes of opioid addiction
who is saying, now I am going to go out and get a health care
policy that is going to give me the coverage that I need.
I am very concerned about this and our ability to access
health care, and what can be--come under the guise of
flexibility can take us right back to why we so needed the ACA.
I don't know if Mr. Peck or Mr. Morley want to comment on
that patient perspective.
Mr. Peck. So, you know, substance abuse services or
something, they are one of the 10 essential health benefits
that all ACA plans, you know, need to cover.
Consumers, when they are applying for a plan and, more
importantly, when they are picking between the plans they have
to choose from, research shows that that choice is
overwhelming.
The amount of information somebody needs to know to be able
to conceive of every possible thing that could happen in their
life, it is impossible and, frankly, even health experts
struggle to make the best decisions they can in choosing a
plan.
Asking normal people to factor all of these sort of crazy
hypotheticals is totally unreasonable. So, you know, I think
the substance abuse services that ACA-compliant plans are
required to provide are, you know, vital much like so many of
the other 10 essential health benefits.
Ms. Clark. Great. I want to also go back to sort of the
shocking statement that was made that zero percent of these
short-term plans offer maternity care. And what is the impact,
the other sort of on the opposite end of the spectrum, the ACA
was able to provide coverage for birth control. What are you
seeing under the Trump administration and the impact on the
ability of women to access birth control?
Ms. Aron-Dine. So I should say this is a little outside my
area of expertise. But as I noted, there is evidence that the
ACA's requirement to cover contraception as one form of
preventive services has improved women's access, has reduced
their out-of-pocket costs for contraception and has likely
improved adherence.
And so I think our expectation would be that if you carve a
lot of holes in that mandate some of those gains will be
reversed. That said, all of this is still under litigation and
so I don't think we have seen it play out as yet.
Ms. Clark. Thank you.
Ms. DeLauro. Thank you. We will begin a--I want to thank
all of you--we will begin a second round of questions, and let
me begin.
Mr. Peck, Mr. Haislmaier suggested that ongoing advertising
would be subject to diminishing returns. You were in charge of
advertising for healthcare.gov. What is the value of continuing
to advertise and is it important?
I also would note and have you answer this question that in
your written testimony you say it is no surprise that state-
based marketplaces are reporting all-time record enrollment,
while the Trump administration has overseen three consecutive
years of decline.
Can you discuss the enrollment trends in states that are
continuing to invest in outreach and advertising? How do the
trends compare to the direction of the federal marketplace?
Can you walk us through your projections? Do states have
access to lessons you learned at CMS about the benefits of
different types of outreach?
Are states conducting random controlled trials or is it too
onerous to do at the state level? And can you walk us through
your projections of ACA enrollment if the administration was
implementing the law in good faith?
I believe you have estimated as many as 2.3 million
additional ACA sign-ups.
Mr. Peck.
Mr. Peck. So Coca-Cola has been selling the same product
for over a hundred years----
Ms. DeLauro. Amen.
Mr. Peck. [continuing]. And it is one of the most well
known brands in the world. They spend about $4,000,000,000 a
year on advertising. I am not familiar with any mature market
where advertising doesn't play a central role in keeping it
healthy.
If Coca Cola stopped advertising we wouldn't all forget
what Coca Cola was. But we would buy a lot less Coke. And every
year that went by without advertising we would buy even less
and that is what is happening in the federal marketplace.
The ACA was passed to improve people lives and marketing is
necessary for it to succeed. You know, I think Mr. Haislmaier
he sort of speculated that consumers who hadn't purchased
coverage were not going to. They weren't interested in it.
And the consumer research simply shows that that is not
true. Most consumers in America who don't have coverage want.
There are obstacles to coverage. One of them is cost.
But every year there is a very substantial portion of the
population that is considering whether or not the coverage that
is available for them is affordable and right for them, and
advertising plays a central role in helping them to consider it
and, ultimately, to make a decision by the deadline.
So advertising--and we have really seen this play out
actually in the state-based marketplaces when we look at their
performance versus the federal marketplace.
The state-based marketplaces have collectively--their
enrollment is at an all-time high while marketplace new
enrollment has seen three consecutive years of decline.
Again, Mr. Haislmaier suggested that renewal had been
increasing. But I think he actually misunderstands the data
because retention has increased. If you look at the number of
people who are renewing their coverage during open enrollment,
the percentage is effectively the same.
What is different is the amount of people who stay in the
marketplace between the end of open enrollment and the start of
the next open enrollment has increased substantially. We
believe that is likely due to people being very satisfied with
their coverage, not wanting to leave it.
So what we--what we are seeing, though, is that new
enrollment, which is highly dependent on paid advertising, has
been declining. State-based marketplaces, which run their own
outreach and education campaigns, have overall taken marketing
fairly seriously.
In some cases, like in the case of California, they have
very substantial budgets. California and New York have very
substantial budgets devoted to marketing and we have seen that
those states have both easily outperformed the federal
marketplace during the--since 2016 when the Trump
administration initially cut outreach for federal marketplace
enrollment.
Ms. DeLauro. [continuing]. With your responsibility
safeguards that are built into the ACA system for enrollment in
the marketplace. What kind of safeguards are there?
Mr. Peck. You know, the most important safeguards are the
ones we have discussed. It is the 10 essential benefits, the
requirement to disclose information. Those--we could spend the
remainder of our time talking about those protections. But they
are very substantial.
Ms. DeLauro. Let me just interrupt you for one second. With
the role of the navigator in this--how can you--assure that
that person is going to help you select the right plan?
Mr. Peck. Yeah. So under the Obama administration
navigators would provide assistance to consumers. They would--
you know, they had to--they were required to give them unbiased
information about the plans that are available to them.
Under this administration, one change that has been made is
that navigators are now being required to also offer short-term
plans as options and they are not allowed to tell consumers
that this is not a good decision for them even though in most
cases it is.
Ms. DeLauro. I am going to say this but I want you to think
about this. How do we deal with unscrupulous insurance
companies that try to fool people into buying junk health
plans?
With that, let me yield my time to my ranking member.
Mr. Cole. Thank you very much, Madam Chair.
Mr. Haislmaier, as you know, I am sure, better than me,
over half of American counties have just one insurer, and in
2018 eight states had just one exchange insurer for the entire
state.
Can you explain why so many American counties have just one
insurer and why we are seeing so little competition in some of
these exchanges?
Mr. Haislmaier. Well, the good news, first, is that you
have actually seen that flatten out and in 2019 it is sort of
returning to 2018--2017 levels, which is, you know, well off
the high but it is about a third of counties, not half of
counties and, you know, you have gone up from 37 to 40 counties
having--percent having two insurers.
Essentially, and this was alluded to earlier by a
colleague--essentially, the way to think about this is the ACA
turned this into a fairly--turned the bulk of this--the ACA
turned the market for this coverage into largely a market
dominated by low-income people who were heavily subsidized and
were thus not sensitized to the price.
So and this is--we have seen this with--you know, is that
you can raise the price, and that was deliberate. That was the
way the bill was designed is that if the premium went up the
enrollee didn't pay more. The taxpayer did.
And so it achieved what it set out to achieve, which is you
got a whole bunch of lower income people with health conditions
getting comprehensive insurance at little or no cost to them.
And I remember back in when I was first looking at this
prior to the first open season in the fall of 2013 and the CEO
of Molina, which was--the then CEO, which was a Medicaid
managed care company, said, look, we looked at the market and
it looks a lot like Medicaid so we went into it.
Well, that is essentially what you have seen evolve is you
have seen that the plans that are making money, that are
working, that are expanding are basically recognizing that this
is a lower income Medicaid-like population with health
conditions and as long as the government is willing to keep
subsidizing the increased premiums they are fine.
And, you know, that is what it is. That is the way the law
was set up. That is an inevitable consequence. The problem is
that you have added that onto a very different market for whom
that is not a good solution. The other people are not
interested in that sort of a solution.
Now, I would simply make the observation I don't understand
where Mr. Peck's numbers come from because I looked at the
numbers. The total enrollments in state-based exchange from
2016 to 2018--we don't have 2019 data--has declined.
The new enrollment declined. The returning enrollment
increased. Same thing was true of Covered California. Same
thing was true with the feds. Yes, there is an argument that in
percentage terms the feds--the federal exchange may have been
somewhat larger. But the data shows that that his happening in
all of these.
And, finally, with respect to the point I was making about
advertising, I am not saying that companies aren't going to
advertise--whether they shouldn't. I am not saying that at all.
What I am saying is you see all sorts, as your colleague
said, ads for cell phones, right. What you don't see is
somebody say, hey, ever heard of this? It is a cell phone. It
is really cool. You can take it with you. You can make calls.
You can do all sorts of other stuff. You really ought to get
one.
You don't need to do that anymore because AT&T and T-Mobile
and everybody else will sell the cell phones.
So my point is yeah, you are going to have advertising. You
have it by, you know, Blue Cross and whoever, and we see it all
the time, just like FEHB, the federal employee benefits. You go
around DC during open season in November you see all the plans
advertising on buses.
What you don't see is the need for the Federal Government
to send out--they send out some notices to their employees but,
you know, everybody knows where to get it.
Mr. Cole. Let me ask you one more quick question because I
only have about a minute left.
Mr. Haislmaier. Sorry.
Mr. Cole. No, it is quite all right. It is all very
helpful. But I did want to get this one in.
I mean, the kind of complaints that I tend to hear the
most, and I suspect my colleagues, are not from people that are
getting subsidized. They are the people right above it, you
know, who have seen their premiums skyrocket, who have seen
these incredible deductibles, and it is sort of like--you know,
I hear this all the time at town hall meetings. I am working,
you know, hard and all of a sudden my deductibles are $5,000 or
$10,000 if I am a family. I can't afford this.
And it seems like by helping some people we have really
hurt a lot of others.
Mr. Haislmaier. Exactly. And the other thing that I would
point out, because money isn't the solution to everything. The
other thing that you probably hear is the only plans I can get
don't cover my doctors or my hospital, right.
Okay. That you are going to have to do something different.
You can't just fix that with more subsidies to more people.
Mr. Cole. Thank you very much. Thank you, Madam Chair.
Ms. DeLauro. Ms. Clark,
Ms. Clark. Thank you.
The Trump administration has also been approving Medicaid
waivers for states that wish to impose work requirements.
Currently, these waivers have been approved in Arizona, in
Arkansas, Indiana, Kentucky, Michigan, Maine, and Wisconsin.
Only a few have implemented so far and I certainly
understand that disabled individuals are supposed to be exempt
from Medicaid work requirements.
But I noticed in your testimony, Dr. Aron-Dine, that you
mentioned the work requirements could still impact the
disability community, and I wish you could explain that part of
your testimony a little more.
Ms. Aron-Dine. Certainly. It is the case that people who
qualify for Medicaid by virtue of receiving SSI or other
federal disability assistance aren't subject to these policies.
But among the people who gained Medicaid coverage under the
Affordable Care Act many of those low-income adults have a
disability and those people are subject to these policies.
States are saying that they are creating exemptions that
will mean that those populations will be protected but that is
not what we have seen in Arkansas and it is not what we should
expect to see in other states because the reality of these
policies is they are not just about the requirements. They are
also about the additional reporting and paperwork they impose
on people, and people with disabilities often face particular
challenges in complying with those requirements and, therefore,
can be at particular risk of losing coverage.
This is somewhat related to another point that came up,
which was, you know, is Medicaid coverage the right form of
coverage for this population.
And I would posit that it is very much--has very much been
the right form of coverage for the expansion population partly
because many of the people in the expansion population are
themselves people who have disabilities, people who have other
serious health care needs and have benefitted tremendously from
having Medicaid coverage.
But also I think all the evidence we have shows that the
expansion has improved access to care, has improved financial
outcomes, and has improved health outcomes for the broad
population of low-income adults who gained coverage.
Ms. Clark. Great.
I wonder, Mr. Morley, if you had anything to add on that.
Mr. Morley. I just want to go on record in saying I have
had the chicken pox twice. So if anything could go wrong it
would happen to me. [Laughter.]
Mr. Morley. So just now that is entered into the
Congressional Record.
Anyway, thank you. Thank you for the lending of your
microphone. I just want to say actually I just--before I say
that, I just--I just wanted to just to make a--to what Mr.
Haislmaier had said earlier.
I was actually--in 1997, I was actually not covered for a
pre-existing condition. So I just wanted to make that clear if
there was any--like, I just thought about that because--of an
injury that I had sustained.
But in answer to your question, you know, I hear from
people all over the country and, you know, in different parts
of the country and I have heard from people in the states that
have had Medicaid work requirements imposed on them.
I mean, from what I know, from what I have read, in
Arkansas people have--17,000 people have actually lost their
health insurance because of the work requirements and these are
people who, you know, in all good faith have gone out and tried
to, you know, find positions.
But I think I can speak best to the stress that is caused.
I mean, you know, as someone who lives with lupus, stress is a
huge factor in my life and stress is a huge factor in the lives
of people.
I have had the fortunate--you and Chairwoman DeLauro--to
work with both of your offices and, you know, there is someone
in your district who has a daughter who is chronically ill and
he is not able to work because he has to be full time
caregiver.
His name is Ben Jackson, and, you know, it is really--
people are extremely stressed and when you live with chronic
illness or you are a caregiver to somebody with chronic
illness, I mean, it is not something that you need to be
thinking about.
So it just adds that extra layer and it is--I mean, for me
it keeps me up at night. For other people it is--you know, as
bad as, like, you know, my story is and, you know, bad is
relative. But people have--there is always somebody worse.
There is always somebody who has--who has more issues and more
problems.
So it has been quite tortuous, I have to say, for the last
two years since the administration has taken over. There has
been a lot of sleepless nights.
Ms. Clark. Thank you.
Ms. DeLauro. Ms. Herrera Beutler.
Ms. Herrera Beutler. Thank you, Madam Chair.
And I guess I would--I would--just hearing that last piece,
for those of us who are on the exchange who have the chronic
conditions in our families and the pre-existing conditions, I
look around.
I am, like, every time you try and choose a plan you do
hours to research on the exchange. You have to figure out--you
have to read the fine print and then you overlay the
prescriptions that you need.
You overlay the different diagnostic tools you know you are
going to need. You overlay how much it is going to be in
premium. You overlay all of that.
It is not any--it is not better under the exchange. That is
my frustration. I want it to be better. I don't--this is
ridiculous that anybody has to do that. That is insane. It is
just absolutely asinine.
I think about the single mom in my district who has four
kids and two or three of them have major, major health needs or
behavioral mental health needs. She can't do that. That is
insane to ask her to do that, and that is under the exchange.
So my hope is that a little bit more--a little bit more
realistic assessment of what is currently the law. I know
there--politics out of it. You know, you were mentioning--you
were citing, Doctor, studies about the overall--you know, how
many more people--I think in kind of a response on the Medicaid
how many more people are getting coverage and what their
coverage looks like and they are generally satisfied.
I mean, that may be true. Maybe those are--I don't know
what is behind those studies. But I can tell you in Washington
State, which is--we used to have a high-risk pool that covered
everybody with pre-existing conditions and then we got a basic
health plan more for the lower middle income folks that was
subsidized. Worked really well.
And then we had Medicaid, which was that safety net, and it
worked well. As a result of the ACA, all those things got
pretty much outlawed. So now what we have, Medicaid
reimbursement for pediatric care, which is--so the reason I
bring up Medicaid is most of the exchange in our state is
Medicaid. It is not people who got private plans. It was a vast
majority got pushed onto Medicaid.
So here they are thinking, hey, I am going to get a private
plan. They got put into waiting lines because we have had at
least a 35 percent decrease for pediatric care in terms of
reimbursements.
In fact, Medicaid pediatric reimbursement is two-thirds of
what Medicare is. Medicare in Washington State is pretty
crummy. Nearly one in two children in the state relies on
Medicaid through this coverage, right. So it is pretty
important to use.
Waits for appointments on Medicaid in Washington State are
one to two months. Currently, since March, 435 children and
adolescent clinic patients who live in Vancouver, which is my
biggest county, have had to travel outside of the country to
Longview for care. That is, like, 40 miles one way, depending
on where you are at in the county.
Yet, our uninsured number is only 6.5 percent. So it sounds
good. But when you drill down, it is not worth the paper it is
written on, and I think one of the things that we have to think
about is how we substantively change the policy to make sure we
are subsidizing that we have to, making sure--shoring up those
safety nets.
We have to let the marketplace become more robust and open
up. That is where it was before, and it wasn't amazing. It has
been a blue state for decades, longer than I have been on this
earth it has been a blue state.
So I am not--I kind of laugh because I think I am pointing
back to that same--we actually had a more free market type of
proposal that had different offerings for different subsets of
people.
Like you were saying, you know, 80/20--80 percent of people
were in a certain type or need a certain type of coverage. That
is how we get them into the system. That is how we get them
paying. We don't say we are going to fit every single person
into a one-size-fits-all box.
That is what I see has been the biggest problem with the
ACA. So far, not the Trump administration. They haven't been
successful in their number-one claim, which was to get rid of
it. It is still the law of the land and it is not working.
I welcome any comments you had.
Mr. Haislmaier. I would just make one brief on and that is
I am always reminded that my instructions are not to bring up a
problem unless I have got some kind of a solution to it.
One of the things that I suggested, and Dr. Harris may
remember this from when he was in the Maryland legislature and
I was working with him--though I don't remember, so it has been
for a long time--is that insurance agents be paid as buyer's
agents, not as seller's agents. You saw that change in the real
estate market.
And I continue to recommend that to the state level and I
think, you know, I don't know if the federal government--if the
exchange has the authority to do that.
But the data is quite clear. The answer to the point that
you just brought up, Congresswoman, is that is what insurance
agents do. They help people navigate that. They help them
figure it out and they service the policy.
By that, you know, when you get some kind of problem with
your insurance company they go to bat for you. And so I have
been telling them for years--and, in fact, agents were somewhat
reluctant to go this way--they should all be paid a flat fee
per member per month regardless of what the policy holder picks
so that they are not biased to do that.
The navigator is really not able to fulfill that role. They
don't have the expertise. The navigator is more like a county
welfare officer saying, well, based on your income you qualify
for this and not this or maybe this.
So it is a different role.
Ms. Herrera Beutler. Thank you, Madam Chair.
Ms. DeLauro. Thank you.
I want to just take a moment of personal privilege which
has to do, which I think Congresswoman Herrera Beutler has
pointed out. It is a very complex effort, you know, to go
through this.
And I just wanted to ask you, Mr. Peck, because the point
is well taken. This issue just came up about the role of
individuals and navigators, would you be able to provide that
kind of assistance to an individual trying to, in fact,
navigate the system.
I don't care who you are and I don't care what level of
education you have. It is a very difficult process. If you
would just take a moment to do that and then we will go to
Congressman Harris.
Mr. Peck. Yeah. You know, I very much agree that it is--it
is a more complicated process than it should be and I support
any effort to simplify that process for consumers.
I disagree with the idea that it is not easier today and
the big difference is----
Ms. DeLauro. Are you on the exchange? I'm sorry. No--no. I
am just--sorry, I am asking.
Mr. Peck. No, I am not. But I have friends and family who
are so--the reason it is easier because there are these
safeguards in place. There are guardrails for consumers that
protect them from making catastrophic decisions.
So it is absolutely true that a consumer might take just as
much time as they did previously in evaluating what plan is
best for their family and their family's budget and medical
needs.
But the protections for them are fundamentally different
than before the ACA. But to your question on navigators, you
know, the--first of all, navigators are just as qualified as
agents and brokers to help people navigate the process of
selecting a plan.
They do incredible work and they literally get no incentive
if a consumer, you know, picks a plan or not or certainly which
plan they pick. So they are already closer to the model that
you are suggesting would be ideal.
I think it is really, really important to understand that
people who have never had coverage they often really struggle
with making such a significant financial commitment without
feeling like experts in this very complicated space.
So, again, I support changes to simplify it. But I think
these people who are helping people enroll are doing really
important work and it is very sad that that work is being
compromised.
Ms. DeLauro. Thank you very much, Mr. Peck.
Congressman Harris. Thank you.
Mr. Harris. Thank you very much, Madam Chair.
Yeah, I think, you know, clearly, health insurance is
pretty complicated. But it is not only purchasing. It is
actually using it and I think that is Mr.--probably Mr.
Haislmaier's point that, you know, the original ACA kind of cut
out the agents--the agent acting on behalf of the patient.
Now you are--you know, someone had a plan but who acts on
their behalf? When you got a problem, you call Blue Cross/Blue
Shield and you think they are going to act on your behalf?
They are not going to act on your behalf because nobody has
a financial interest in acting on your behalf. So that was the
real problem with the ACA that won't be dealt with, you know,
if you just increase the number of navigators.
But, you know, Maryland is one of those state-run plans and
I agree the state-run plans have not all seen increases, even
though we advertise heavily in Maryland.
Fact of the matter is that from 2016 to 2017--I am sorry,
2017 and 2018 we were down 2.6 percent in enrollment despite
advertising. Now with the reinsurance bringing down the
premiums now we are going to see whether it is advertising or
actually making a more consumer-friendly product that is really
going to be the--be the determinant.
And because, you know, I basically believe in federalism
there is certainly nothing--and correct me if I am wrong, Mr.
Peck--there is nothing that stops a state from picking up the
federal role and advertising the exchange. Is that right?
I mean, a state could do it. They don't--where they have a
state-run exchange, right? So and there is a reason I am asking
the question because, you see, I am already paying for
advertising in Maryland. Why should I support advertising in
some state that chooses not to advertise?
See the question? So nothing stops a state from advertising
the healthcare.gov in their state.
Mr. Peck. Funds are one thing that that stops.
Mr. Harris. Well, yeah. But funds stop us, too. We actually
run under a budget, too. So there is nothing that stops it
legally, right? The ACA doesn't say a state cannot advertise
healthcare.gov plans.
So what you are asking me to do is to not only pay for
advertising in my state but to pay for advertising in states
that choose not to advertise to their citizens.
I got to tell you, I am elected to represent the people in
Maryland, one, and if I tell people that I voted not only to
pay for advertising in my state but to pay for it in other
states that choose not to spend their funds, I wouldn't be in
office very long.
Let me just bring--Mr. Haislmaier, let me just ask a point
about the appropriateness of that population--Medicaid
expansion--I am sorry, the ACA-subsidized population.
Because one thing that has always bothered me, you know, if
you create a high-risk pooling mechanism specifically and the
state runs it, you can kind of direct it to perform intensive
disease management because the way it is now you go on the ACA
marketplace you are just buying a commercial policy, and that
commercial policy may or may not make disease management as an
essential part of that policy.
Now, Medicaid in Maryland makes disease management an
essential part of Medicaid coverage and if we really want to
get costs down, because Mr. Haislmaier said 5 percent of people
have, you know, this serious illness--they are the ones that
consume a huge amount of money--and the data shows pretty
clearly that intensive disease management actually works very
well at bringing down the cost for that most expensive part of
the population.
So is that--I mean, is that kind of what you are indicating
how we should tailor--we should look at what that population
needs and when we are--when we, the taxpayers, are paying the
bill we should insist on the most efficient way of dealing with
them, which is good for the--it is win-win. Disease management
is good for the patient, good for the taxpayer.
Mr. Haislmaier. Yeah. I see evidence that the market is
sorting itself out in that direction. One of the interesting
things about the insurers going in and out of the exchange is,
you know, the big brand name insurers like the Aetnas, Uniteds,
Humanas, they are gone. They are not coming back, and the
reason is this is a really small piece of their business. Their
business is elsewhere. You know, and Cigna--I mean, 80 percent
of Cigna is self-insured employer plans like mine.
The ones that are going into the exchange--and it is
interesting, this year when we saw a number of expansions in
states, there are two kinds. One is the sort of more disease
management focus--Medicaid managed care insurers.
The other kind that we have seen a growth of is the local
insurer that is vertically integrated with the hospital system
and those are the ones that have gone in.
So, yeah, they recognized, I think, sort of what the
population is and what they need to do and some insurers are
better at that than others and the ones that are better at it,
you know, don't lose money and they stay in the marketplace
where they actually expand their footprint.
So I think you are seeing some signs of that happening
already.
Mr. Harris. Good. Thank you.
Thank you, Madam Chair.
Ms. DeLauro. Thank you. What we will do from here is I am
going to--I know the ranking member has an additional question.
I have an additional question and then I will sum up and then
we will bring the hearing to a halt.
Mr. Cole. Thank you very much, Madam Chair.
And Dr.--Mr. Haislmaier, I want to go back and give you a
little more time because I want to focus in again on this
population that is not getting subsidized care, that is sort of
just above the line, and that is where I think all of us get
most of the concerns that we hear from.
I have often used the line, look, there is no question in
my mind that ACA has helped millions of people. But it has cost
millions of people a lot, too.
So it is that population. Nobody is trying to take anything
from the people that it is helping. It is just how do we do--if
you have some suggestions, what would make a difference for
that family that is just above--you know, not going to get a
subsidy. But they have seen their rates skyrocket.
They have seen their deductibles go up and they are really
the ones caught in the vice here and, you know, what I haven't
seen is much in the way--and, again, I don't pretend to be an
expert in this area, but I haven't seen a lot in the way of
suggestions.
What do we do to help that population so that this stays
affordable? What are the kinds of changes? Because we are not
going to repeal the ACA anytime soon.
So but what would be the sorts of things that would help us
reach that population and make sure that health care is
affordable for them?
Mr. Haislmaier. Well, this is where the experience with
other states and the 1332 waivers comes in because,
essentially, as I mentioned, what they are doing is they are
shifting more of the available subsidy dollars to focusing
those on the people with the greatest need.
They are also putting in some of their own dollars, by the
way. I mean, Maryland, for example, is putting in some of its
own dollars. What they are able to do is to concentrate the
assistance on where it is needed most and then bring down the
premiums who are low income.
If you think about it, if--you know, if you put somebody on
who has low income and is healthy but the government is paying
100 percent of the premium or 90 percent or 95 percent of the
premium, we now have free bronze plans for those people because
of the silver loading so it could be 100 percent of the
premium.
And then that person doesn't use the coverage but those
dollars go to subsidize somebody with a major medical
condition, well, why go through that rigmarole when you just
subsidize the person with the major medical condition and let
the other person buy with their own money something much
cheaper?
So that is kind of what is going on with the 1332 waivers
that states have looked at. Now, the advantage of this is
states are doing it differently.
I mean, most--of the state applications, seven of them,
including Oklahoma's, were on a dollar basis. Alaska is
interesting, as they do it on a condition basis--a medical
condition basis.
So, you know, some states might do one way, some states the
other.
Mr. Cole. Is that something we would need to work on
legislatively or is this just something that the market is
figuring out?
Mr. Haislmaier. Well, this is something the Trump
administration is trying to--and this was the Trump
administration's guidance is to give them more flexibility on
doing this and ways around that.
And, again, I think part of this is waking up to the
reality and facing the reality that you really have two
different markets here and it is not horrible that you would
treat them differently. In fact, it is probably a good thing to
treat them differently.
Mr. Cole. Thank you very much.
Thank you, Madam Chair.
Ms. DeLauro. Thank you very much.
What I want to do is if I can, before I--so I will wind up
actually with two questions. I would like to ask Dr. Aron-Dine
if you could briefly address Congressman Cole's question about
what the next steps might be.
Ms. Aron-Dine. Yes. Thank you. And if you don't mind, can I
just say a word about premiums because that has been sort of a
central issue in this hearing.
Ms. DeLauro. Go for it.
Ms. Aron-Dine. So I just want to share one fact, which is
that in 2017, which is before Trump administration policies
that raised premiums, but after premiums came in line with cost
for insurers, so after insurers were basically sustainably
priced, premiums in the ACA marketplaces were, roughly, in line
with premiums for comparable employer coverage.
That is according to an Urban Institute study, taking into
account the full cost of employer coverage, the part the
employee pays out of pocket and the part that their employer is
paying.
I think that is really important. Not to say that 2017
premiums were affordable for unsubsidized people. But I think
it helps us focus on what the challenge actually is, and the
challenge is that health care is expensive, not that there is
some particular flaw in the ACA marketplaces.
Now, the individual market used to sort of mask that fact
because since sick people couldn't get coverage and since lots
of benefits were carved out, that makes health insurance seem a
lot cheaper and so individual market premiums used to look
cheaper.
But they weren't really delivering better value. They were
just shutting some people out of care altogether. Short-term
plans and some of the other administration actions take us back
in the direction of that pre-ACA market.
I think the better place to go to help the unsubsidized
people would be first to reverse administration actions that
have raised sticker price premiums like short-term plans;
second, of course, to keep working to reduce system wide health
care costs.
But then the third option is just to address some of the
gaps in the ACA subsidy structure. One way to do that is
reinsurance. I think a better and more targeted way to do that
would just be to make premium tax credits available to people
above 400 percent of the poverty line so that they also didn't
have to pay more than 10 percent of their income for health
insurance.
And that may seem like an impossible or too expensive
proposal. Rand actually analyzed it and found that it would
cost $5,000,000,000 a year. CBO, I imagine, would estimate a
somewhat higher cost. But for context, the administration
estimates that the short-term plans rule is costing about
$3,000,000,000 a year.
So these are not giant unaffordable policies. This is a
realistic way to plug some of those gaps rather than doing it
in a way that benefits healthy people only at the expense of
sick people.
Ms. DeLauro. Thank you. I just want to try to wrap up.
The ACA and putting an end to annual and lifetime limits on
care----
Mr. Morley. Yes.
Ms. DeLauro [continuing]. For someone like yourself.
Mr. Morley. Yes.
Ms. DeLauro. I am a cancer survivor. What would happen if
the health plans would return to those lifetime--annual and
lifetime limits?
Mr. Morley. Well, I am going to answer your question but I
also wanted to--I want to address something after that as well,
if that is okay. Something that was brought up earlier. In the
short answer is over the last 10 years I have amassed 5 to 10
million in claims. I lost track. I would--I mean, I have--
between lupus and the cancers I have had, the spinal surgeries,
I would not be testifying before you right now, and that is the
short answer.
What I really want to speak about is I want to enter the
testimony of a friend of mine named Mina Schultz because I
think what has been overlooked here today is the fact that one
of the things that the Affordable Care Act has given us is
coverage under parents' plan until age 26.
My friend, Mina Schultz, developed osteosarcoma when she
was 24 years old and she was a graduate student and thought she
was one of those healthy people who didn't need insurance, and
her mother said, hey, there is this new thing called the ACA
and I can cover you under my plan.
So she did, and because she did her life was saved because
she got the care that she needed and she is here today, and it
changed her whole life. She just got her Master's--her MPH and
she also was an assister in West Virginia and she helped
thousands of people.
And there are people in West Virginia who do need that help
and there are people in many states who need help navigating
the ACA.
And whether it is the ACA, whether it is Medicaid, whether
it is Medicare, any help is always appreciated. I mean, there
are lots of nonprofits that are set up that are not funded by
the government that help these people.
But she happened to be part of--she was an assister in West
Virginia and not only did she--not only was her life spared
because of the ACA, not only did it change the course of her
life, but she has helped many people save their own lives, and
I thought it needed to be heard.
Ms. DeLauro. Let me just, before I just--we conclude, I
think it has been a very good discussion and I appreciate
everyone's testimony and everyone's point of view. I think this
is the way we need to move forward in terms of making a
determination of how we address the cost of health care and the
access to health care.
And I think that the issue does stem around a cost and the
increases that people are facing--those families that
Congressman Cole spoke about.
But I think, overall, we are looking at a time here where
we are now seeing that costs are increasing. The level of
people who are uninsured is increasing and we are looking at
diminishing the benefits.
We can call them essential or we can call them whatever we
want to call them, but the benefits that people need in order
to survive and thereby just tampering with the kind of quality
of care that we need to try to achieve.
I also believe that--concerning the costs that we have
heard different points of view. But I think that we have to
look at what in fact was happening before the Affordable Care
Act, what happened with the Affordable Care Act, and that
bending of that cost curve, seeing the drop in people who were
uninsured, and now we are seeing absolutely the opposite.
And one has to take a very, very hard look at what the
administration's policies have been over these last several
years in being a driver of increased costs when you take a look
at the cost share reduction payments, when you take a look at
the individual mandate, when you take a look at what has
happened with enrollment and outreach and advertising and
getting more people into the thing.
You look at waivers and where it is going and what kinds of
policies are looking to in fact do what the president said on
his first day was to maximize within the confines of the law
any way to look at dismantling the Affordable Care Act.
That is not the goal of this committee. This committee is
to take a look at how we can provide access to health care. So
we have got to take a look at those policies that have
increased cost and weaken benefits and move forward to look at
how we reduce costs for families.
We need to look at, in my view, how we want to achieve
universal health care and let us stop moving backward and start
to work together to ensure every American has access to
affordable health care.
And with that, I am going to draw this hearing to a close.
Thank you all very, very much.
Wednesday, February 27, 2019.
REVIEWING THE ADMINISTRATION'S UNACCOMPANIED CHILDREN PROGRAM
WITNESSES
JONATHAN MULLIGAN, CLINICAL FELLOW, UC DAVIS SCHOOL OF LAW--IMMIGRATION
LAW CLINIC
JENNIFER PODKUL, SENIOR DIRECTOR OF ADVOCACY AND POLICY, KIDS IN NEED
OF DEFENSE
MICHELLE BRANE, DIRECTOR OF MIGRANT RIGHTS AND JUSTICE PROGRAM, WOMEN'S
REFUGEE COMMISSION
ANDREW ARTHUR, RESIDENT FELLOW IN LAW AND POLICY, CENTER FOR
IMMIGRATION STUDIES
ALTHA J. STEWART, M.D., PRESIDENT, AMERICAN PSYCHIATRIC ASSOCIATION
Ms. DeLauro. The subcommittee will come to order.
Let me just say good morning to everyone, and we would like
to welcome you to the Labor, HHS, and Education Appropriations
Subcommittee, the oversight hearing on Reviewing the Trump
Administration's Unaccompanied Children Program.
Before I start my opening remarks, I want to just make sure
that we are all working from the same set of facts, which is up
in this chart. It is a little small in type, but you may have
in front of you a copy of what I am about to say.
So as I say, before I start the opening remarks, I was
struck by a timeline that KIND assembled to highlight the way
the administration has systematically targeted and dismantled
protections for children. You will see it up on the screen. I
do not think my colleagues are familiar with the timeline. So
let me just walk through quickly some of the major elements.
March 2017, only 2 months after being in office, the
administration publicly discussed separating parents and
children as a means of deterring future asylum-seeking
children.
June 2017, ICE began to target the parents and relatives
who came forward to sponsor unaccompanied children.
June 2017, Customs and Border Patrol began a pilot of a
``zero-tolerance'' family separation policy.
November 2018, the administration terminated the Central
American Minors Program.
April 2018, ORR finalized a memorandum of agreement with
ICE to conduct background checks on potential sponsors of
unaccompanied children, including fingerprinting all members of
a sponsor's household.
May 2018, the Attorney General announced a new official
policy to refer all immigrants that were apprehended at the
border for criminal charges and to transfer children to HHS
custody as unaccompanied children, which led to thousands of
children being taken away from their parents.
June 2018, the administration opened influx shelters at
Homestead and Tornillo. At its height, Tornillo held nearly
3,000 children, while Homestead is currently at 1,600 and has a
plan to reach 2,350.
By December 2018, the Unaccompanied Children Program had
nearly 15,000 children in custody, an all-time high.
I share that before I begin the opening remarks because I
think it is important to provide an overall framework for the
discussion. That way, we understand the scope and the breadth
of the administration's actions that are causing harm to
unaccompanied children.
So, with that, let me just welcome again everyone, and let
me just say a thank you to our panelists here this morning. We
have J.J. Mulligan of the UC Davis School of Law Immigration
Law Clinic, Jennifer Podkul of Kids in Need of Defense,
Michelle Brane of the Women's Refugee Commission, Andrew Arthur
of the Center for Immigration Studies, and Dr. Alta J. Stewart
of the American Psychiatric Association. I will do a brief
introduction for each of the panelists before your oral
presentations.
Thank you so much for offering your testimony this morning
and for helping us to identify both the root of the problem and
the solutions that we need to be advancing.
This morning, we are here to fulfill this committee's
oversight responsibility, demanding accountability. That is one
of the core components of our work here. The American people
deserve answers and actions, not evasion and excuses.
There was late-breaking news yesterday about the instances
of sexual abuse with regards to unaccompanied children, and all
the more reason that--we need to have the ability to look into
this. Today, we are here to examine the impact of the
administration's policies with respect to unaccompanied
children. My view, intentional policies, but in the words of
our witness Michelle Brane, and I quote, that are ``exposing
children in Government custody to lasting and to irreparable
harm.''
This is the question before us, and this ought to be the
question that we need to ask ourselves. And I say that with
maybe some scripture, et cetera. We need to look into our souls
on this issue. Are the actions of the administration producing
Government-sanctioned child abuse? And I think that is
something that we have to take a look at.
For the last 2 years, senior officials in this
administration have twisted and perverted the mission of the
Department of Health and Human Services, specifically its
Unaccompanied Children Program. Statute requires the Office of
Refugee Resettlement to ``promptly place children in the least
restrictive setting that is in the best interests of the
child.'' They are responsible for reunifying them with parents
or family in the U.S. as soon as possible.
Executing this lawful mission has not been this
administration's approach, however. Instead, it has attempted
to turn Health and Human Services into an immigration
enforcement agency. This is not about administrative agencies
going above and beyond to ensure the law is upheld, but it is
about senior officials in this administration turning suffering
children and overwhelmed caseworkers into pawns in the
administration's immigration deterrence policy. And as we know,
based on legal precedent, that separation as deterrence policy
is illegal.
We requested the testimony today of two senior HHS
officials who were in charge during the start and execution of
the administration's family separation policy. That is the
former Acting Assistant Secretary of the Administration for
Children and Families and the former Director of the Office of
Refugee Resettlement. We wanted to ask them key questions
because my colleagues on both sides of the aisle need to assess
the treatment of unaccompanied children, the effect of the
family separation policy, the costs, and so much more.
Unfortunately, the administration declined to make these
senior officials available, but we will continue to press for
them to appear before the subcommittee. So, yes, we will hold
future hearings. We need to question those who directly
implemented this policy.
As we know, the administration intentionally separated
thousands of children from their parents, and just last month,
we learned from the Inspector General that the Trump
administration's family separation policy began much sooner, as
soon as 2017, with the result that thousands more children were
separated. And what we are going to do is to demand a full
accounting of these children from the administration.
Family separation is only one element of this
administration's ongoing sustained abuse of these children. As
our witnesses can attest, this administration did not
prioritize the health and safety of the children in our care.
Instead, through a memorandum of agreement, the administration
directed HHS to collect immigration information for ICE, which
forced tens of thousands of children to spend additional weeks,
sometimes months, in Federal custody rather than in safe,
supportive homes with family members.
What was the result? The average length of time each child
spent in Federal custody nearly tripled, from about 35 days
during the Obama administration to 60 days last year, to almost
90 days this year. One of today's witnesses, J.J. Mulligan, met
several children who had been detained at the Homestead influx
facility for over 7 months.
As children spent additional weeks and months in Federal
custody, the overall number of children in the system swelled
to nearly 15,000 in December, a record number. As a result, HHS
began to move thousands of children to overflow facilities, or
influx shelters. These are under protected, nonpermanent
facilities. Since they are on Federal property, they are not
licensed by the States, which are normally tasked with
overseeing safety and security standards.
The 1997 Flores settlement sets national standards for the
detention of vulnerable children, and yet, as our witnesses can
attest, there have been many instances of violation of Flores.
We know of two such influx facilities.
The administration detained as many as 2,800 children at
Tornillo, again for potentially months at a time. However,
there was no education program, and for an alarming period of
time, there was not adequate background checks or
fingerprinting being conducted on the staff. They had an
insufficient number of mental health personnel.
Despite this, the administration offered a no-bid contract
worth up to $1,000,000,000 to the site operator that would
expand Tornillo to 4,000 children--$1,000,000,000. We shined a
light on the conditions and the standards at Tornillo, and it
has now closed. And I look to my colleague Congresswoman
Lucille Roybal-Allard and her efforts in this effort.
Yet there are 1,600 children in Homestead, Florida, today
that cost taxpayers $775 per child per day for children to stay
there. So with the average length of stay around 70 days, this
temporary holding facility is costing taxpayers $55,000 per
child.
Influx shelters and costs will be the subject of a future
hearing. Where is the money going? To whom is it going? How
much is being wasted?
This is why this matters. By law, the administration should
be quickly placing children in safe, supportive homes with
family members, and HHS's role is to do what is best for the
children. Instead, as part of an anti-immigration push, the
administration is trying to turn HHS into an extension of ICE,
leaving children languishing in Federal custody to their
detriment, and they are willing to spend $1,000,000,000 to do
it.
Studies have repeatedly shown that prolonged detention
inflicts serious mental trauma, depression, anxiety, post-
traumatic stress disorder, developmental delays, and compounds
trauma experience in the home countries, including trauma from
gang violence or sexual violence.
Now the administration is asking for an additional
$220,000,000 for this program. There has been no accountability
with the use of these funds. It cannot go on as it currently
is. That really is unacceptable.
What we have to do is to understand how this happened, why
it happened. Who was responsible? What is happening now? What
has been the impact on our children? What are its long-term
consequences, including mental health and trauma? How do we
stop this? How do we fix it, and what resources are necessary?
I am happy and I think people on this subcommittee would be
happy to provide resources. What we cannot do is condone the
policies that put children at grave risk at considerable cost
to taxpayers. We cannot throw good dollars after bad.
And of course, the failures of this administration as they
relate to the Unaccompanied Children Program are not because of
an unprecedent surge of children. In fact, the number of
unaccompanied children referred to ORR was higher in the Obama
administration. 2016, 59,000 children. 2018, 50,000 children.
The failures and the trauma we are seeing are a result of this
administration's cruel policies.
Let me quote Michelle Brane, one of our panelists this
morning. ``It is a crisis at the border. It is a crisis of
policy.'' And I add this in my own words that this is a
manufactured crisis.
As the Congress, we have an obligation to ensure the
executive branch is fully and faithfully upholding the law of
the land. Turning HHS into an immigration enforcement agency
and inflicting harm on scared children is neither of those.
What happened and what continues to happen is inexcusable.
It is indefensible. I am committed to uncovering the truth, but
what is more important, what are we going to do about it?
I am grateful for the solutions and the recommendations
that our panelists have offered. We look forward to working
with you, and we look forward to your testimony.
Let me now turn this over to my good friend from Oklahoma,
the ranking member of the subcommittee, Mr. Cole, for any
opening remarks that he cares to make.
And I also want to welcome the ranking member of our full
committee, Congresswoman Kay Granger of Texas. Thanks for being
here this morning.
Mr. Cole. Thank you very much, Madam Chair.
And I want to first begin by thanking you for, one, holding
the brief that we had with the Inspector General last week,
which was very helpful--or 2 weeks ago, I suppose now, and for
holding this hearing. I think it is an important subject, and I
think you are to be commended for bringing it up.
You will forgive me if I disagree a little on your timeline
because I would start mine in 2014, not 2017. This isn't a new
problem, and you mentioned the--and I agree with you, by the
way, the inexcusable problems that we had in terms of sexual
assaults at centers. The majority of those actually occurred
under the last administration, not this one. And I will submit
this for the record.
Frankly, and it is sad to say, and this would be lack of
supervision. Most of them obviously were by other minors that
were there themselves, not by members of the staff or
caregivers. That was true under President Obama. It is
certainly true today under President Trump. So I think we have
got a serious problem here that has been festering for a long
time, not somehow magically arrived in the last 18 months.
I want to thank, too, all of you that are here for the
hearing. I read your testimony last night, and it is
heartbreaking and compelling and interesting. And I think, you
know, in your very different roles really showed a lot of the
complexity of the problem that we have got in front of us, and
it is going to take some real serious work to try and get this
situation to one that we can all find acceptable.
Today, we have an outside witness panel to discuss the
oversight over the Unaccompanied Alien Children Program
operated by the Administration for Children and Families, an
agency under the Department of Health and Human Services. I
want to start by saying again I take our congressional
responsibilities of oversight seriously. Congress' primary
function is to serve as the branch of Government responsible
for writing and passing legislation, and understanding how the
executive branch is implementing that legislation is critical
to fulfilling our constitutional duties under Article I.
And I want to add parenthetically, I certainly agree with
you about the separation of families. That was something I
actually condemned at the time and glad to see the
administration, I think under public pressure, quite frankly,
backed off on.
When people think of this subcommittee, they often think of
biomedical research, support for public schools, or job
programs. Responsibility for the care of unaccompanied children
is relatively new. This duty came to HHS as part of the
Homeland Security Act of 2002. Federal law requires the
Department of Homeland Security transfer to HHS any
unauthorized minor not accompanied by a parent or legal
guardian.
The legal requirement means that when Customs and Border
Protection or Immigration and Customs Enforcement apprehend a
minor with an uncle, an aunt, a grandmother, grandfather, an
older brother or sister, the law defines that minor as
unaccompanied and requires the transfer of that child to HHS.
HHS and the Office of Refugee Resettlement, which oversees the
Unaccompanied Alien Children Program, does not separate
children from parents.
Let me repeat that. HHS does not separate children from
their parents and has not done so in the past. HHS is only
responsible for the care of children who are unaccompanied, and
this is a statutory responsibility given to them by Congress.
I think it is obvious to everyone here that there are
significant disagreements between the President and the House
majority on matters pertaining to immigration policy. I know my
Democratic colleagues are concerned about the administration's
actions in this area, and I share in many cases those concerns.
But disagreements over the interpretation or implementation of
immigration policy frankly falls squarely under the Departments
of Justice or Homeland Security. These policy discussions are
largely outside the scope of this subcommittee.
In 2014, President Barack Obama requested a supplemental
appropriation to address ``the urgent humanitarian situation on
the Southwest border.'' He went on to request ``a sustained
border security surge.'' This year, HHS made that request--the
year HHS made that request, 2014, HHS cared for over 57,000
unaccompanied children, an unprecedented number, because I
dealt with it as chairman of this committee and trying to make
sure that the funds were available.
In 2018, last year, the Trump administration cared for
nearly 50,000 children. His administration inherited a
humanitarian crisis on the Southern border. Numerous reports by
the Office of Inspector General have highlighted the challenges
administering this program, and these reports have documented
concerns under both President Obama and President Trump.
I believe oversight is necessary to ensure the program
continues to care for children in accordance with the law. Last
year, as chairman, I accepted over half of all amendments
offered by the minority to address oversight and reporting
concerns regarding Unaccompanied Alien Children Program. I
continue to work closely with the chair to ensure the final
appropriation for fiscal year 2019 addressed those provisions
from the House bill and report, and I appreciate the
opportunity to evaluate this program through our oversight role
as appropriators.
Again, I would like to thank our witnesses for being here
today, and I yield back the balance of my time, Madam Chairman.
Ms. DeLauro. Thank you very much, Congressman Cole.
And it is a pleasure to really--once again to welcome the
ranking member of the full Appropriations Committee,
Congresswoman Kay Granger of Texas.
Ms. Granger. Thank you very much.
I would like to thank Chairwoman DeLauro and Ranking Member
Cole, who also serves as the vice ranking member for the full
committee, for holding this hearing today. The treatment of
children entering our country unaccompanied by an adult is one
that concerns everyone in this room.
I have been engaged on this issue since 2014 when our
country experienced a really unprecedented surge in the number
of unaccompanied children, mostly teenagers, coming across our
Southern border. At the time, I was chair of the State and
Foreign Operations Subcommittee, and the Speaker of the House
asked me to lead a congressional task force to identify the
root causes of the problem and recommend solutions.
We took several trips to the Southern border, as well as to
countries in Central America to talk to their leaders
firsthand. Our recommendation at that time was that we should
keep these children near the border, determine where they came
from, and try to reconnect them with their families. We didn't
recommend sending them all across the United States in the care
of sponsors. We wanted them reunited with their families as
soon as possible.
Unfortunately, the violence and hopelessness driving
parents to send their children on the dangerous journey to the
United States has not disappeared since then, but it also did
not begin with this administration. The number of border
crossings by Central American youth continues to create
tremendous challenges for both border enforcement officials and
the Department of Health and Human Services, who have the
responsibility for caring for most of the children after they
enter the country.
It is unfortunate that our Government has not always done
right by these children. For example, we learned that officials
in the previous administration placed children with sponsors in
Central Ohio who were later discovered to be human traffickers
using forced child labor. This is terrible. We must work
together, all of us, to ensure that every child placed in the
custody of the United States Government is treated humanely and
with compassion.
This hearing should be an opportunity for us to learn the
facts, get the data, and help improve program operations in
order to better protect our children. We have proven that we
can work across the aisle on difficult situations and issues. I
know we continue to rise above our partisan divisions, and when
we do, we solve most of the difficult problems facing our
country.
I look forward to hearing from the witnesses today--all of
you experience this firsthand--and working with members of the
subcommittee on this very important issue.
Thank you. I yield back.
Ms. DeLauro. Thank you very, very much.
Let me again thank our panelists, and let me just do some
introductions. J.J. Mulligan is a clinical fellow at the
Immigration Law Clinic at UC Davis School of Law; Fulbright
Scholar at the University of Granada in Spain, focusing on
unaccompanied minors crossing the Mediterranean; and is the
author of No Human is Illegal: An Attorney on the Front Lines
of the Immigration War.
Jennifer Podkul, senior director of advocacy and policy for
KIND, Kids in Need of Defense. She is a national expert on
issues affecting immigrant children and has published numerous
articles, handbooks, and reports on U.S. immigration law.
Michelle Brane is director of the Migrant Rights and
Justice Program at the Women's Refugee Commission. She is an
expert on U.S. asylum protections and detention policies for
migrants and in 2012 won the Daniel Levy Memorial Award for
Outstanding Achievement in Immigration Law.
Andrew Arthur is a resident fellow in law and policy at the
Center for Immigration Studies. Before that, he served as an
immigration judge at the York Immigration Court in York,
Pennsylvania, and served as senior staff for multiple
congressional committees.
And Dr. Alta Stewart is president of the American
Psychiatric Association. Dr. Stewart is an associate professor
of psychiatry and director of the Center for Health and Justice
involved at the University of Tennessee Health Science Center.
Again, thank you all for being here, and we will start with
our first witness, J.J. Mulligan. Your full written testimony
will be included in the record. You are now recognized for 5
minutes for your opening statement.
Thank you.
Mr. Mulligan. Chairwoman DeLauro and Ranking Member Cole
and members of the committee, thank you for the opportunity to
testify before the subcommittee today. I am the clinical fellow
at UC Davis School of Law's Immigration Law Clinic, and I am
honored to be here.
As part of Flores counsel's legal team, we have been
granted access to any and all facilities where children are
detained. This is important because congressional and media
tours of detention facilities rarely reveal the full story. As
our co-counsel through National Center for Youth Law Leecia
Welch put it, ``We see a very different picture. We see
extremely traumatized children, some of whom sit across from us
and can't stop crying over what they are experiencing.''
This distinctive insight we obtain is the difference
between believing a detention center is a ``summer camp'' and
knowing that it is a house of horrors. Throughout the course of
these visits to facilities, we have uncovered numerous
violations of the Flores settlement agreement through our
countless conversations with detained immigrant children.
The children also described policies that prolong their
detention. These misguided policies that have rapidly expanded
the population of detained immigration children, which swelled
to a record of 15,000 in late 2018, before a policy change only
requiring the fingerprints of the sponsor and not everyone in
the home resulted in more than 4,000 children being released
from ORR custody within a span of 4 weeks, the largest decrease
in the program's history.
The change in policy also displayed a clear causal link to
ORR policy. Once fingerprints for every household member were
no longer required, the Tornillo influx facility was no longer
needed and promptly closed.
For the unaccompanied minors that we speak with, these are
children that have suffered intense trauma and abuse either in
their home countries, on the journey here, or both. This is a
population that has much in common with the forced child
soldiers of civil wars past across the globe, and the Federal
Government is responding to their PTSD with steel cages,
causing them to act out until they are detained under even
harsher conditions, creating a continuum of trauma that these
children are ill-equipped to endure.
One child told us he was waiting to be reunited with his
mother. ``My mom has done everything the Government has asked
her to do. My case manager has told me that they are waiting on
the fingerprints for my brother to clear because he lives with
my mother. It has been a month since the fingerprinting was
done.''
A mother told us that her son's caseworker ``kept asking me
for more and more documents. Among them, files from doctors to
verify that my cancer would not hinder me from taking care of
my son. These caused me great sorrow, and they did not seem
necessary to have my son. I believe that a mother has the right
to take care of her child even though she is incapacitated,
although I am not. It occurred to me that they were looking for
an excuse to deny me my son.''
In addition to these examples, we have heard from sponsors
who were told that children will not be released to their care
unless they comply with the following requirements--that they
move to a different neighborhood, move to a larger apartment or
house, reduce the total number of children living in the house,
or produce a photo establishing a prior relationship with the
child, despite the fact that many families do not have access
to this technology.
There is also the memorandum of agreement, which Chairman
DeLauro mentioned, between ICE, CBP, and ORR, which provides
for the information collected by ORR on potential sponsors to
be shared with ICE. This had a chilling effect on sponsors and
has serious consequences.
I spoke with one youth detained at Homestead whose father
was picked up by ICE shortly after being fingerprinted by ORR
and whose detention was being prolonged by his father's own ICE
detention. I cannot stress enough the courage and selflessness
that it takes for an undocumented immigrant to submit to
fingerprinting under this administration.
In response to its inability to release children to their
family members, ORR has established unlicensed temporary
``influx shelters,'' first in Tornillo, Texas, and now in
Homestead, Florida. These facilities have held thousands of
children.
At Homestead, the facility director has told us that
capacity there will be 2,350, even though some rooms that we
visited already held over 200 children in the same room. Both
Tornillo and Homestead are unlicensed facilities that do not
meet the standards of care in the States where they are
located, nor do they comply with the Flores settlement
agreement. These include the failure to perform basic
background checks on facility staff, at times leading to cases
of sexual abuse, as we learned yesterday.
The harm to children, first at Tornillo and now at
Homestead, goes further and includes the denial of basic
freedoms and the human contact vital to developing children.
The treatment of detained immigrant youth at these facilities
is not an issue of immigration law or policy, but of human
dignity.
Deterrence by mistreatment should no longer be the leading
immigration policy of this administration. The children I
interviewed at Homestead commented on their inability to have
any freedom of movement. All youth, including 17-year-olds,
have to get escorted to the bathroom. Youth move throughout the
campus walking in single-file, military-style lines led by a
youth care worker.
A girl at Homestead told us, ``I also get huge headaches
because I don't feel like I can cry here. I wish I could cry
here, but I can't cry comfortably. I have to hold my tears
because, if not, they send me to the clinician. I don't want to
go to the clinician because they don't want to help my case. I
also want to hug my girlfriends when they are crying, but staff
won't let me.''
Previous court rulings interpreting the Flores settlement
have set the grace period for detaining children in unlicensed
facilities at 20 days. According to ORR, the average length of
detention at Homestead is 69 days, and as Chairman DeLauro
mentioned, I spoke with multiple youth who have been at
Homestead for over 7 months.
Unlike someone in the criminal justice system who will
usually know the length of their sentence and can ``do their
time,'' immigrant children detained by ORR have been told they
will be released in next week, and that was 3 months ago.
The harmful practice of detaining children in huge
unlicensed facilities could be ended if ORR would simply abide
by the Flores agreement and release children to sponsors
without unnecessary delay. The constant calls to revoke the
Flores agreement by those within the Trump Administration in
order to ``protect children'' are misplaced and disingenuous.
We would not tell a soldier in battle that they are safer
without armor.
The Flores settlement agreement plays a critical role in
protecting the safety and welfare of unaccompanied children in
Federal immigration custody. While Flores counsel and other
legal organizations will continue to investigate conditions of
confinement and bring actions to enforce the letter and spirit
of the Flores agreement, we urge Congress and it is vital that
Congress play its role to ensure that the Government of the
United States lives up to its legal and moral obligations to
the children in its care.
Thank you.
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Ms. DeLauro. Thank you.
The second witness is Jennifer Podkul. Ms. Podkul, you are
now recognized for 5 minutes for your opening statement.
Ms. Podkul. Thank you, Chairwoman DeLauro, Ranking Member
Cole, and members of the subcommittee. I am grateful for your
invitation today.
I am here to represent Kids in Need of Defense, a national
organization dedicated to promoting the rights of child
migrants and ensuring that every child has access to high-
quality legal representation. KIND serves both children who are
in the custody of ORR, as well as children who have been
released and reunified with a sponsor while they are going
through their immigration process.
KIND attorneys work to help children, children who have
undergone unimaginable horrors, to explain heartbreakingly
difficult and complex stories. They work to gain the trust of
children who have been hurt by adults in their country of
origin or even at the hands of our own law enforcement agents.
Many children have suffered in detention, and some have been
separated from the only caregivers they have ever known.
This has always been a difficult job, but it has only
gotten harder over the last 2 years by changes affecting the
way our Government is processing these children. Despite the
detention and removal process already being incredibly complex
and adversarial, the administration has implemented policies
that make it harder for children to be able to tell their
stories.
Among these is a memorandum of agreement between ORR and
DHS that enables the agencies to use information about
potential sponsors for immigration enforcement. This policy has
led to significant delays in the release of children from ORR
and the administration's increased use of large-scale and
costly influx facilities.
Our Government should be working to find ways to make the
process more fair, less expensive, and more efficient. Instead,
it is stacking the deck against these children. This does not
make our country more safe, it does not make our justice system
work better, and it does not further any enforcement goals.
These policies not only harm children, but they limit our
Government's ability to efficiently and fairly decide which
children are in need of humanitarian protection and which
children may safely return home.
KIND recently represented an 8-year-old. His reunification
was needlessly delayed by ORR. The child began engaging in
self-harm, and he asked to be returned to his country of origin
out of desperation because of the prolonged detention despite
his mother's insistence that it was not safe for him to go
back.
In another case, a KIND attorney watched a 16-year-old girl
give up her strong asylum application because she was not able
to access an attorney in Tornillo, and she had no reunification
option.
To stop tragic stories like this and to fulfill its
obligation to serve the best interests of unaccompanied
children in its care, ORR must immediately end the MOA with DHS
to stop sharing status information about potential sponsors for
the purposes of immigration enforcement. ORR should focus on
finding the best sponsor for a child who will provide a safe
home and support that child during the removal proceedings.
Permanently ending the MOA will allow ORR to again prioritize
child welfare over immigration enforcement.
Secondly, ORR must only rely on emergency influx facilities
to house unaccompanied children when it is faced with caring
for an unexpected influx. ORR should use permanent, small, and
State-licensed facilities to house children only as long as
needed to approve an appropriate sponsor. Children must not be
held any longer than necessary.
Should an emergency present itself, ORR must have public
standards for its emergency facilities to ensure the provision
of legal, medical, and educational services within a reasonable
timeframe. There should also be limits on how long ORR can use
an emergency facility.
Finally, ORR should prioritize children's access to high-
quality legal representation. Children are in ORR custody
because of the immigration removal proceedings. Everything
possible should be done to ensure that children are fairly--can
fairly and efficiently tell their story. Having children
represented during the removal proceedings not only helps the
children access meaningful due process, but increases
efficiency in a sorely overwhelmed system.
Child protection must be a priority in the enforcement of
our immigration laws. Congress assigned responsibility for the
care and custody of unaccompanied children to the Office of
Refugee Resettlement because of its expertise in child welfare.
The basic tenets of child welfare must be reflected in the
agency's policies, and the agency must always act in the best
interests of the children.
I am happy to answer any questions.
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Ms. DeLauro. Thank you. Thank you very much. And giving
back some time as well, thank you.
Michelle Brane. Ms. Brane, you are recognized for 5 minutes
for your opening statement.
Ms. Brane. Good morning, and thank you for the opportunity
to present to you today.
The Women's Refugee Commission is a nonprofit organization
that works to protect the rights of migrant women and children.
As the director of the Migrant Rights and Justice Program, I
have monitored dozens of immigration detention facilities and
ORR children's facilities and interviewed Government officials,
children, detainees, service providers, and asylum seekers
about policies, practices, conditions of custody, and access to
protection.
Over the past 2 years, the administration has focused on
deterring migrants, especially children, from seeking
protection in the United States. Unfortunately, these policies
endanger children.
My colleagues here today have told you some tragic and
heart-wrenching stories about children in custody. I can tell
you those in answer to your questions, but now I am going to
focus on two policies that jeopardize children's welfare and
have obstructed the ability of the Office of Refugee
Resettlement to comply with its responsibilities. The first is
family separation, and the second the memorandum of
understanding--of agreement that Jennifer referred to.
Thousands of children migrate to the United States each
year. Most of these children are fleeing horrific violence and
abuse. In 2003, the Homeland Security Act transferred custody
of unaccompanied children to the Office of Refugee Resettlement
with the deliberate intention of separating the care and
custody of children from enforcement activities in compliance
with our child welfare laws and with the Flores settlement
agreement.
ORR was designed to care for and reunify children who
arrived in the United States unaccompanied. Yet we now know
that under the administration's family separation policy,
thousands of children who were separated from their parents at
the border were transferred to ORR custody.
By now you have heard a lot about family separation and the
brutal manner in which it has been implemented. There was no
coordinated effort to track children who were separated or for
how to reunite them afterwards. To this day, the Government is
unable to give a total number of the families it separated.
In addition to causing trauma, separations put multiple
burdens on ORR and affects the safety of all the children in
its care. These large numbers of separated children in ORR
custody required a sudden and immediate increase in bed space.
And despite the reality that this had been discussed for over a
year by the administration, ORR was unprepared and opened--
scrambled to accommodate these children.
The facilities they went to were inappropriate for
children, unlicensed, and temporary in nature. Supposed to be
temporary in nature.
In 2009, I expressed concern in a review of ORR facilities
that they were considering the use of facilities that housed
over 100 children. Today, that seems quaint as we see that
Homestead is housing--will be housing over 2,000 children, and
the recently closed Tornillo held almost 4,000 when it closed.
No facility of this size is appropriate for children. Yet
Homestead is still not licensed, even though it has been open
for over a year.
At that point, it is no longer an influx or an emergency,
especially since, as the chairwoman already commented, this was
a manufactured crisis that they knew was going to lead to the
need for additional bed space.
The repercussions don't end there. The costs, both
financially and in terms of manpower, of this policy were and
continue to be exponential. Emergency facilities cost up to
$750 a day per child. These are resources that could and should
be invested in actual services and appropriate care for
children, but they have been wasted because of a bad policy
intended to harm children and families.
In May 2018, ORR implemented a memorandum of understanding
with DHS. As you have heard, the very intent--one of the very
objectives of this policy was to identify, detain, and remove
adults who come forward to sponsor children. The MOA represents
a dramatic change in practice, replacing the best interests of
children with immigration enforcement.
The Women's Commission conducted a survey that found that,
indeed, the MOA has succeeded in frightening parents from
coming forward, resulting in longer length of stay and, for
some children, permanent lengths of stay or, as Jennifer
mentioned, withdrawing of their case out of desperation. The
MOA and family separation, like other policies of this
administration, are using children as bait and undermine family
reunification, a fundamental principle of child welfare law, by
turning safe placement screenings into a mechanism for
immigration enforcement.
This runs counter to Flores. It violates the Trafficking
Victims Protection Act. It runs counter to child welfare
principles and standards, and it is illegal. It is also against
the Government's fiscal interests.
Let me be clear. Seeking asylum is legal. Flores and TVPRA
are not loopholes. They are policies thoughtfully and carefully
considered by the court, child welfare professionals, and a
bipartisan Congress, designed to ensure basic child welfare
standards in Government custody and to protect children from
the risks of trafficking.
The MOA and family separation have jeopardized the quality
of care and compliance with general child welfare standards and
practices and, in doing so, has endangered children.
Thank you again for the opportunity to speak to you today,
and I can take questions later.
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Ms. DeLauro. Thank you.
Our fourth witness is Andrew Arthur, and Mr. Arthur, you
are recognized for 5 minutes for your opening statement.
Judge Arthur. Thank you.
Chairman DeLauro, Ranking Member Cole, and members of the
subcommittee, thank you for inviting me to appear today.
The demographics of migrants apprehended at the Southwest
border has changed significantly over recent years, and it is
important to understand that in the context of this hearing.
Before fiscal year 2011, 90 percent of all apprehended migrants
at the border were single males, mostly male and mostly
nationals of Mexico.
In just the first 4 months of fiscal year 2019, on the
other hand, just less than 60 percent of all apprehended
migrants were UACs or aliens traveling in family units, mostly
from the so-called Northern Triangle countries of Central
America, or NTCA. That is El Salvador, Guatemala, and Honduras.
And despite claims to the contrary, the numbers are
increasing, with UACs up 40 percent in the first 4 months of
fiscal year 2019 compared to a year before, according to
Customs and Border Protection, and family units up 290 percent.
This has created three resource issues for the U.S. Border
Patrol, or USBP.
First, Border Patrol processing centers were built to
accommodate single adult males, not minors or families
traveling with children. The recent influx has strained the
physical plant available for processing as groups must be kept
separated, especially UACs from unrelated adults. Border Patrol
attempts to keep family units together, but space constraints
can make that impossible.
Second, processing times for family units and UACs from the
NTCA are much longer than for Mexican nationals, who could be
quickly returned across the border. The relationship between
purported parents and children must be established, as must
legal guardianship where an adult traveling with the minor is
not that minor's parent.
Attempts are made to identify family in the United States.
In Yuma sector of the Border Patrol, where I traveled late last
month, processing times per alien increased from 8 hours in
2005 to, get this, 78 hours in 2018 as a result of these
changing demographics.
The changing demographics have also increased the cost of
care for those migrants. Diapers, formula, food, blankets, and
medical care are now staples. Some migrants come into custody
sick and injured, some with highly infectious diseases--mumps,
measles, resistant tuberculosis. Estimates range as high as
$1,200,000,000 this year alone for Border Patrol to provide
such humanitarian aid.
Further, the journey from the NTCA to the Southwest border
is a harrowing one. International smuggling networks from
Central America are some of the worst criminal enterprises on
the Earth. In 2018, the U.N. put the value of smuggling routes
to North America from the Southern border in 2014 to 2015 at
between $3,700,000,000 and $4,200,000,000 a year.
According to Doctors without Borders, 68.3 percent of those
migrants were subjected to violence, and almost one-third of
women are sexually abused during that journey. Migrants are at
the mercy of smugglers. This does not even account for the
physical difficulties of transiting over 1,000 miles, often in
hostile desert terrain in the heat without water.
Current border policies are intended to deter travel by
UACs and families with children because of those hazards. This
continues an effort by the Obama administration to dissuade
UACs and adults with children from undertaking this dangerous
trip. Loopholes in our laws encourage these migrants, however.
UACs must be turned over to HHS within 48 hours, usually for
release to family in the United States. That is what this
hearing is about.
This gives an incentive to parents to have their children
smuggled into this country by criminals, with the Federal
Government a co-conspirator in the smuggling scheme when it
delivers those children.
Further, even accompanied children must be released within
20 days, Mr. Mulligan will tell you. Migrants know this, and
they also know that the U.S. attempts to keep families
together, giving those migrants an incentive to bring their
children with them to hasten their own release.
HHS, which places and finds sponsors for UACs in the United
States, faces a daunting task. In fiscal year 2018, it kept
UACs in 1 of 100 shelters for an average of 60 days. We
discussed that earlier. Most of those UACs were subsequently
released to sponsors in the United States. Often their own
parents, which is confusing because that appears to be contrary
to Section 462 of the Homeland Security Act, but we will
discuss that later, I hope.
HHS has found suitable sponsors after performing background
checks for more than a quarter of a million UACs, as of
December 2018. Those UACs are supposed to appear in court, but
many don't.
In fiscal year 2018, half of all final orders issued for
UACs in immigration court, where I serve, were in absentia,
meaning the UAC did not appear, twice the in absentia rate for
removal cases as a whole. While the total number of in
absentias is low compared to the total population of UACs,
these numbers are still significant.
Thank you for your time, and I look forward to your
questions.
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Ms. DeLauro. Thank you very, very much, Mr. Arthur.
And let me just have our fifth witness, Dr. Altha Stewart.
Dr. Stewart, you are recognized for 5 minutes for your opening
statement.
Dr. Stewart. Thank you.
Chairwoman DeLauro, Ranking Member Cole, and distinguished
members of the subcommittee, thank you for inviting me to
participate in today's hearing.
My name is Dr. Altha Stewart, and my testimony today is on
behalf of the American Psychiatric Association, for which I am
the current president. The APA was among the first
organizations to speak out when it became clear that the zero-
tolerance policy would result in widespread separation of
children and families. As the physician experts in mental
health, we will continue to oppose such family separation
policies.
From my perspective as a psychiatrist, the APA's position
is grounded in an understanding of the brain science that
frames the toxic stress caused by these separations. All
children separated from family caregivers will experience
stress. And according to the work of the Harvard University
Center for the Developing Child, the biology that the adversity
takes in any individual child is based on three very specific
risk factors.
First, their age. Younger children are more vulnerable and
less able to adapt usually and primarily because of their
underdeveloped brain circuitry. Second, the impact of any
previous adversity. The piling on or cumulative effect of these
types of experiences and traumas shifts the odds away from
there being any successful and positive outcome related to
their normal development. And finally, the duration of the
separation. It is as if there is a ticking clock, and these
things increase over time to the point where the child can no
longer adapt, adjust, and be able to tolerate the stress.
Children depend on their parents or other trusted adults
for their comfort, safety, and support. Any forced separation
is highly stressful for children and can cause the lifelong
trauma, as well as an increased risk of mental illness, such as
depression, anxiety, substance use, and post-traumatic stress
disorder.
As a physician who has dedicated her career to promoting
the importance of trauma-informed care, my goal here today is
to give you a brief overview of the inherent trauma associated
with any forced separation and the potential for lasting
negative outcomes. However, for some, the incidence of these
traumatic experiences has an even more significant impact on
the trajectory of their future life experiences. For children,
for example, this impact can be especially profound and usually
the result of events over which the child had no control.
It is our understanding, as physicians and scientists, that
childhood experiences, either good or bad, can determine one's
future health status as it relates to a longstanding body of
knowledge called Adverse Childhood Experiences. These common
examples include physical, sexual, emotional abuse; neglect;
and household exposure to a variety of things in parents and
caregivers, including incarceration.
We also know that children are more susceptible because
their brains are still developing. In these situations,
although stress may be a common element for all of us in life,
when children are exposed to such chronic stress and trauma,
their underdeveloped brains remain in a very elevated state,
and ultimately, this consistent exposure to this heightened
stress and trauma changes their emotional, behavioral, and
cognitive functioning.
We promote for stress trauma-informed care. It shifts the
dialogue from ``What is wrong with you?'' to ``What has
happened to you?'' and we do this by first realizing that there
is, in fact, something called trauma and understanding how we
get from that trauma to a path for recovery. We recognize what
the signs and symptoms of trauma are. We respond using the full
knowledge that we have of trauma-informed care, this evidence-
based practice, so that we can integrate this into our
policies, procedures, and practices. And we, most importantly,
work to avoid retraumatizing these children.
When we fail to incorporate these concepts into the care
that we provide for children who are forcibly separated, we are
using an outdated approach to addressing the symptoms instead
of identifying and addressing the root cause. It is also
shortsighted to not embrace the notion that these childhood
events are impactful in relation to one's future life
experiences.
The characterization--and I want to take the opportunity
here to note that these are facts that are relevant beyond the
specific focus for today's hearing. We need to all ensure that
healthcare addressing increasing rates of substance abuse,
heightened mental health needs, and criminal justice reform all
overlap in the work of this Congress, the administration, an
average American, and anyone who seeks to build a better life
in this nation.
I want to thank you for the opportunity to share these
things with you today, and I look forward to answering your
questions later.
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Ms. DeLauro. Thank you all very, very much, and we are
really all grateful for your very thoughtful and powerful
testimony. We really appreciate the effort in all of your being
here.
As in the past, what we will do now is proceed to 5-minute
rounds, alternating back and forth by seniority as Members were
seated at the beginning of the hearing.
I would just say, and I have to say this to myself over and
over again, we want to be respectful of witnesses, try to give
you enough time to respond to questions.
And I am told I have to do this housekeeping thing here. To
my colleagues, please be sure to turn off your microphone after
your remarks. So there we go.
Let me just open it up with questions. At the beginning of
the hearing, I laid out the timeline of actions taken by the
administration to roll back legal protections for children. One
of the most egregious actions is the memorandum of agreement
between ORR and the Department of Homeland Security. You have
demonstrated that the MOA has resulted in children spending
additional months in Federal custody, and yet, as HHS finally
acknowledged in December, the MOA has not improved the safety
of unaccompanied children.
For me, it is a crystal-clear example of the
administration's effort to keep kids in Federal custody instead
of following the law, placing them in the least restrictive
setting possible.
They may have scaled back fingerprint policy, but in my
view, until they rescind the entirety of the MOA and the
requirement that HHS share any data with DHS, HHS is still
acting as an entity of law enforcement. I am going to read the
question.
Ms. Brane, can you expand on your remarks about the MOA
between ORR and DHS? How did ORR move away from its core
mission to care for children and place them with sponsors,
instead becoming an extension of ICE? I view this as child
abuse but leave you to speak about that.
Ms. Podkul, can you talk about the effects on children,
specifically effects of being held in Federal custody for
prolonged periods that you have encountered in your experience
working with kids?
Mr. Mulligan, if we can get to you, you have recently
worked with kids at Homestead. I would like to hear about what
you found in your conversations with children being held there.
Does the Flores settlement apply to children at Homestead?
Ms. Brane.
Ms. Brane. So really quickly, to give my colleagues an
opportunity to respond, the memorandum of agreement requires
continuous sharing of information that children provide in a
private setting without any due process on the part of the
child or the parent who may in the end be--bear the
consequences of that information sharing.
We have seen in a survey that we conducted that it, indeed,
did prevent parents from coming forward, and it also led to
some parents withdrawing an application for sponsorship. This
drives children to either stay, always stay in the ORR custody
for longer, sometimes indefinitely throughout their proceedings
because nobody else can come forward. Or leads to further, more
distant relatives or individuals coming forward to sponsor the
child, which also increases risks to that child.
And I will say also that while we have seen that effect,
the effect of longer detention or custody, we have not seen a
decrease in arrivals, right? It has not served as a deterrent
because what we have found over and over again is that for
people who are fleeing violence, deterrence and discouragement
in the form of punishment does not work.
Ms. DeLauro. Ms. Podkul.
Ms. Podkul. Thank you, Chairwoman.
I think, you know, there are two things. I think it affects
the child's mental and physical health, which my colleague
described so well. But also it really affects the child's
ability to move forward with their legal case, right?
In some of these facilities, for example, in Tornillo,
children were not given attorneys. They didn't have access to
attorneys to help represent them in their case. So they
couldn't move forward in their case.
Prolonged detention has encouraged many children to give up
valid claims for protection because of detention fatigue. They
can't take it being in detention anymore. And then for some
forms of relief, you need to be in a permanent setting, and so
they are not able to access, for example, a form of protection
called special immigrant juvenile status for children who have
been abused, abandoned, or neglected. So it has significant
consequences for their physical health as well as their legal
case.
Ms. DeLauro. J.J.
Mr. Mulligan. Yes. So you had two questions. One was what
goes on at Homestead? I would like to say that there are some
very difficult things that happen there. There are two
campuses, the north and south campus. Kids are separated by age
from 17-year-olds on the north side and 13 to 16 on the south
side.
Siblings are separated and can only see each other once a
week for an hour and a half. The schools are in tents, where 20
or 30 classrooms all together in one tent. And kids complain
about they can't even study because of the noise that goes on.
There are so many other things I could share, but I am running
out of time on this.
As far as the Flores settlement applying in the Homestead
facility, it unequivocally does. The Government has said that
because it is on Federal land, it does not apply, but it is not
exempt simply because of that.
Ms. DeLauro. Okay. So it does apply here?
Mr. Mulligan. Absolutely.
Ms. DeLauro. If you are done, I am just going to yield a
second, give a little bit of time to my colleague, Ms. Roybal-
Allard, who worked on the Department of Homeland Security bill
that recently passed.
Ms. Roybal-Allard. Okay. I would just like to point out
that in the 2019 Homeland Security bill, in a bipartisan way,
we were able to put in language that prohibits ICE from using
information provided by the Office of Refugee Resettlement
about sponsors or potential sponsors of unaccompanied children
to arrest, detain, or remove those individuals unless that
information reveals the individual has a dangerous criminal
background.
So I just wanted you to be aware that we were able to get
that language into our bill and hope it--now it is going to be
about oversight.
Ms. DeLauro. We also referenced in the Labor, HHS bill and
the chair at the time, Mr. Cole, accepted the amendment, the
committee accepted the amendments. One of them was not to
separate siblings so that they could not be in the same
facility. So if that continues to happen, that is something
that we ought to follow up on.
And with that, the ranking member of the committee,
Congressman Cole.
Mr. Cole. Thank you very much, Madam Chair.
If I may, Judge Arthur, in your written testimony, you
highlight some of the criminal elements and organizations that
participate in trafficking and smuggling across our Southern
border. A series of questions, if you would. Just roughly what
is the size of the industry? What role do the cartels play? How
does immigration policy interact with the criminal element? And
do our policies discourage or incentivize the transportation of
unaccompanied minors?
Judge Arthur. Well, let me start with the cost. Secretary
Kirstjen Nielsen last year, I believe in May, talked about
$500,000,000, but quite frankly, I think that is a gross
underestimation. It is based upon $5,000 per alien from Central
America and 100,000 aliens, which just isn't the numbers.
As I mentioned, the U.N. had said it is a $3,700,000,000 to
$4,200,000,000 a year industry for people coming from the
South. That is a huge amount of money. A lot of this is done by
small smuggling groups, and in fact, that puts individual
migrants in danger because they don't want to cross onto other
territory where migrants could pass through more easily.
So when I was in Yuma, they were talking about kids being
passed under the river, under accordion wire because that was
the area of the border they controlled. And these kids would
come up lacerated and gasping for breath. And there is no cost
to the smugglers because the laws that we have right now, they
don't need to enter the United States at all.
Thanks to Flores, thanks to TVPRA, thanks to the credible
fear standard, they don't need to actually bring these folks
into the United States. They could just let them off at the
border. They don't run the risk of being prosecuted in the
United States, and that is what we have seen happen in Yuma.
With respect to the criminal element, are some of these
groups tied to the cartels? Probably. Maybe. But the fact is
that when they cross cartel territory, they have to pay.
In fiscal year 2019, Rio Grande sector saw 8,685 UACs. I
was down there a couple of years ago, and I was followed around
by Mexican navy in jeeps. The police are too corrupt to
actually be allowed to be around anymore because there are two
groups of the Gulf Cartel, Los Metros and Los Ciclones, who are
fighting for territory down there.
You don't cross their territory without paying them. The
smugglers have to pay money. That money goes into the pockets
of the people who grow the heroin, who make the methamphetamine
that flows into the United States. They make the fentanyl that
flows into the United States.
The smuggling industry cannot be separated from those
cartels. Fiscal year 2017, most dangerous year in Mexican
history because of cartel violence. That is where the money
comes from.
And the worst part about all this, and this was something I
didn't know, and I only found out when I went to Yuma, that the
payment to these criminals doesn't end once they get to our
side of the border. I was told about a system of debt bondage
in which these individuals actually have to work for another 2
years and send money to their smugglers in the United States.
This is happening in this country because of the smuggling,
because of the laws. Yes, the laws encourage it.
Quite frankly, Flores, you are going to get released after
20 days. You can talk to any Border Patrol agent, and they are
going to tell you people are bringing their kids because they
know they are going to get out.
Because of TVPRA and HSA, Homeland Security Act, if you are
a parent in the United States and you want your kid, why not
pay a smuggler? Because you know that child is going to be
delivered to you in the United States. I mean, I am a father. I
want to be united with my child. Dr. Stewart talked exactly
about that. So, quite frankly, why wouldn't I pay a smuggler to
bring my kid to the United States, and there is no cost to the
smugglers, as I mentioned.
Mr. Cole. I may--one additional question. Obviously, as you
point out in your testimony, we treat Canadians and Mexican
nationals differently than we do others. Can you tell me why we
do that, and what the impact of that is?
Judge Arthur. I wasn't around when the TVPRA was passed,
but with respect to Mexicans, we can quickly return them back
across the border after a summary screening. The question
becomes why we don't use that summary screening for all
children that come to the United States? Because again there
are three bases for getting immigration relief in the United
States. You got a job, you got a relative, or you have a
humanitarian claim.
We can easily screen for those things. Take them out of the
removal proceedings, not have to worry about any of this time,
and actually have an administrative officer do this quickly and
easily. But we don't. We insist that they go through removal
proceedings. I was a judge. And again, thanks to groups like
KIND, we get advocates for those kids, but there is no reason
that it can't be done administratively, consistent with due
process.
Mr. Cole. Thank you very much.
I am out of time so I will yield back, Madam Chair.
Ms. DeLauro. I would now like to yield time to the ranking
member of the Appropriations Committee, Congresswoman Granger.
Ms. Granger. Thank you all for being here, although your
testimony was heartbreaking.
You talked about, Mr. Arthur, about the changes in our laws
and our rules and how that encourages. Can you go back and talk
a little bit about the other thing, the changes--the Northern
Triangle. We know those three countries. That is where by far
the majority come from.
So the changes in those countries, is that encouraging or
discouraging? Do you see any change in the most recent years
about why they are coming to the United States?
Judge Arthur. You actually make a lot of good points. Let
me just--you make a lot of good points. Let me just refer to a
couple of them.
One of my colleagues actually wrote about a study that was
done in Guatemala. This was back in 2017. It is captioned 91.1
percent of Guatemalans migrate to the U.S. for economic
reasons. Fewer than 1 percent leave because of violence or
gangs.
Violence and criminality really hasn't changed terribly in
any of these countries, and yet we see an influx of people from
these countries coming to the United States. So in reality, you
know, we can't really attribute it to that.
We talk about push factors and pull factors when we talk
about immigration. Pull factors are things like the laws that I
discussed with Ranking Member Cole. Push factors are factors in
the country like crime or, you know, a desire for better
economic conditions. By the way, the study was actually done by
the International Organization for Migration, not exactly a
fairly well-known and nonpartisan organization.
So with respects to the push factors, you know, are they
there? Case-by-case basis, I was a judge, and I would take the
case that I get before me. But we also get a lot of people
coming from Honduras, and we saw these caravans coming from San
Pedro Sula, which is a town I think in the state of Atlantida,
but my knowledge of Honduran states isn't very good.
Atlantida is the 26th most dangerous city on the face of
the Earth, according to a Mexican NGO a couple of years ago. I
live in Baltimore, Maryland. Dr. Harris, I think, represents
part of Baltimore, Maryland. It is the 21st most dangerous city
on the face of the Earth, and St. Louis, Missouri, is the 14th
most dangerous city on the face of the Earth.
If a Baltimorean were to go to Canada and make an asylum
claim based upon harm from the crime--in fact, we had, what, 12
people shot, 5 killed the other day in the City of Baltimore,
and this is commonplace. But if they were to go to Canada and
make that claim, they wouldn't be able to.
The laws in Mexico as related to asylum are actually more
lenient than they are in the United States. But we don't see
this population of individuals actually applying in Mexico. The
violence, that crime, that insecurity that they have would
probably make them eligible under Mexican law for asylum, but
they are not--most are not stopping there to apply for asylum.
There are five factors for asylum relief in the United
States--race, religion, nationality, membership in a particular
social group, and political opinion. Very strict standards. And
again, I have argued thousands of asylum cases. I have heard
thousands of asylum cases. And--at least 1,000 asylum cases.
And you know, again, these are pretty strict rules, and yet
individuals come to the United States. They make these claims
based upon crime, based upon violence, and it doesn't really
help.
Based upon economics, they are not going to be eligible at
the end of the day. But if you stay in custody, your case is
going to take about 40 days. If you are released from custody,
according to the Associated Press, your case is going to take 8
years. Two years is what you hear about when the case gets
scheduled, but the fact is we get numerous continuances. GAO
wrote about that last year. And you know, cases get continued.
In fact, I can't quite figure out, maybe one of my
colleagues could explain this to me. UAC cases are supposed to
be expedited, and yet the number of UAC cases that are actually
decided is astoundingly low compared to the population. I don't
know why that is.
So, again, with respect to insecurity in these countries,
it really hasn't changed a whole lot. But we have seen the
numbers increase. We saw them drop in 2017 when Donald Trump
was--just after his inauguration. In fact, I think 25,000 of
the 41,000 we saw in 2017 occurred up to January, UACs. And you
know, thereafter, it dropped off.
And then, when the smugglers realized that there was really
nothing the Trump administration could do to talk about the
laws we discussed--Flores, TVPRA, credible fear--the numbers
started to bump back up again, and now people know that, you
know, these laws aren't going to apply. We are on track right
now for about 60,000 UACs coming into the United States this
year, which is actually going to top our number in fiscal year
2016, which was the previous high, as the chairwoman noted
previously.
So, anyway, that is sort of a round-about way of answering
your question.
Ms. Granger. Thank you.
Ms. DeLauro. Thank you very much. Thank you.
Congresswoman Roybal-Allard. You are recognized.
Ms. Roybal-Allard. Well, I am going to deviate a little bit
from the questions that I had because all the reports that we
have gotten, the travel advisories and others, is that violence
has, in fact, increased in the Northern Triangle. And I just
want to give an example about why some people are coming here,
and it has nothing to do with loopholes or anything else in our
immigration laws.
In visiting one of the detention centers, I visited with a
gentleman whose daughter was separated from him, had no idea
where she was. And he had been in detention for some time. And
we asked him, is knowing what you know now, that you would be
held in detention and that your daughter would be taken away
from you and you would not even know where she was at, would
you still come to the United States?
And his response was, ``Congresswoman, you don't
understand. My daughter was threatened with rape and murder if
she did not become the girlfriend of this gang member.'' He
said, ``Yes, I would come again because at least I know she is
alive.''
So we can't put all the different reasons that people come
to this country into one basket.
So, with that, I was asked by the American Psychological
Association to submit their letter for the record, and it talks
about the impact of detention on children and need to keep them
together.
Ms. DeLauro. Without objection.
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Ms. Roybal-Allard. Ms. Brane, first of all, thank you for
your efforts to reunite children who are suffering from these
reprehensible policies and practices of this administration. In
June of 2018, the President issued an executive order that
shifted its immigration policies from family separation to
family detention.
Family detention facilities, as you know, lack the support
and care that children require in crucial developmental years.
And as chair of the Homeland Security Subcommittee on
Appropriations, I included funding to expand the Family Case
Management Program as an alternative to family detention.
Although this is outside the jurisdiction of this
committee, can you speak to the benefits of the Family Case
Management Program and why detention is never an appropriate
option for a child?
Ms. Brane. Thank you.
Yes, I have done extensive research and monitoring for
family detention centers and thought about this for a long
time, and I can tell you that we have struggled in finding
humane ways to detain families in an effort to keep them
together and have not been able to find them. Inevitably, the
detention of children is harmful to their development and their
physical and mental health.
I could go on for a very long time about the problems of
family detention. They parallel what you heard today about
detention and custody of children generally, but what is really
frustrating is that there are options. There are alternatives
that work.
The Family Case Management Program that you mentioned was
implemented under the Obama administration and was very
successful by all accounts in ensuring appearance to both court
and ICE appointments, but also for removal. So in the period
that this program was operational, not very many cases went to
the end of their case because of these delays that we all hear
about. But in several cases, families, after meeting with
attorneys and representatives, decided that they were not going
to win their case and actually left voluntarily.
Ninety-nine-point-eight percent of the people in that
program complied with all of the requirements put on them, and
this was a finding consistent with the Office of the Inspector
General, ICE's own report on the program, and the contractor's
report on the program. So it is a very successful program and
much more affordable than detention.
Ms. Roybal-Allard. And yet it was ended. Why was it ended?
Ms. Brane. The Trump administration ended that program in
the summer of 2018. They terminated the contract early. They
gave no explanation. But it is very much in synch with their
then separation under the claim that they had no option if they
wanted to ensure appearance.
Ms. DeLauro. Mr. Moolenaar.
Mr. Moolenaar. Thank you, Madam Chair.
And I appreciate the witnesses' presentation this morning,
and you know, it is clear to me that from the testimony we have
heard we have got a very untenable situation where men, women,
and children are making a dangerous journey to the United
States, just from start to finish.
And you know, there is a number of circumstances, and I
think you have identified a lot of those, and some are escaping
dangerous situations in their countries. Some are hoping to
join family members here in this country, but all are coming
because in this country, we have freedom. We have got the rule
of law, and it has made our country a desired location.
And you know, right now, our Nation's success and the
prospect of being here has also attracted people who would do
harm here, have created a whole market for people who are doing
harm to the victims who are coming here. And you know, the
cartel violence, and I am horrified to hear these stories of
families affected by that, that violence can also fall on this
side of the border.
And the drugs that are coming across, the heroin, meth,
fentanyl, I mean record numbers, and I am hearing more and more
about that in my own district in Michigan, in the Fourth
Congressional District. Over 100 people die across the country
every day from opioid overdoses, and that is coming through the
ports of entry, through the miles of border between those
ports.
And for the women and children, it is very clear--who make
that journey--it is a perilous trip. It involves drug
smugglers, human traffickers, and those who are harming women.
You know, the 30 percent number in the journey is incredible.
You know, I am not an expert in our legal process of coming to
this country, but my understanding is, you know, we would want
people to come to the ports of entry to come to the country
legally, especially when it comes to asylum claims.
You know, I think in this room, we could agree that it is
important to have a secure border. At the same time, parents
who break the law and enter the country illegally, I think it
makes sense that they would remain with their children while
the judicial system works.
And we have heard a lot about that today, although I do
recognize that it is difficult to with certainty identify that
they are, indeed, safe even in that situation. You know, my
hope is that we can use our resources to make the border a
safer place for people coming here, protect the American people
from drugs and violence, and use best available technology.
You know, I have been talking to border agents in my
office. You know, they need the cameras and sensors, more
border agents, and they are taxed in terms of their resources
at the border. And I do believe that we need a physical
barrier. I don't see how anyone could say that that doesn't
make sense.
But it is really unfortunate that these larger solutions
aren't even being discussed. It is like each people are making
their point on some issue, and unfortunately, the issue doesn't
get solved on a comprehensive way. And so my hope is that we
could move forward on this, and this committee could be part of
that.
My grandfather came to this country as an immigrant, was a
laborer, farm laborer across the country, and then saved up
money to buy a farm. And that is what I hope, you know, other
people who would want to come. But he came legally, and I think
we need to improve our system to encourage legal immigration
because this truly is a great country, and we want to make it a
welcoming country for people.
I am very concerned, though, that we are--you know, we have
critiqued different policies. One of the policies I think is
disastrous is a policy that creates false hope for people, that
tells people if you can just get to the border, you are going
to be here. And it is creating these caravans and people who
are harmed along the way and even at our border.
And somehow we need to send a message, whether it is, you
know, working with Northern Triangle countries to improve the
situation there or somehow work with Mexico, but I just think
this is an untenable situation. And I have learned a lot today,
and so I appreciate your testimony. I don't have a specific
question, but I very much appreciate your testimony today.
Thank you, Madam Chair.
Ms. DeLauro. Thank you very much, Mr. Moolenaar.
Mr. Pocan.
Mr. Pocan. Thank you very much, Madam Chair, and thank you
to all the witnesses for being here.
I do have to admit I am disappointed that ORR is not here.
I understand they were invited, and they said they couldn't
prepare it in time. I am looking forward to--I would have liked
them to have heard from the witnesses here. I think it would
have been really powerful for them to have heard from that.
Mr. Mulligan, one of the things you said that I really
appreciated was, as you mentioned, many of us have tried to go
down to the border, and you said a trip to the border isn't
going to give us the full knowledge we need. And I totally
acknowledge that.
I think we visited four facilities when we were down there.
One of them was the Super Walmart detention center that, you
know, 1,500 kids. They get out 2 hours a day out in the
sunlight. The sleeping area they had was 6-by-10 that is
allocated for them. A supermax prison cell is 8-by-12.
You know, when you are--if you lose your parents in a mall,
it is traumatic. If you are there for days or weeks or months,
you can fully imagine the type of trauma that is created in a
facility like that.
We talked to the people. They had just hired 860, I think,
new staff for another facility, but they couldn't hire 90
mental health staff they needed that were bilingual for the
current facility, and that was part of the experience.
But you know, clearly seeing that, it is not a situation
that is going to provide any kind of decent environment for the
children who are there. And again, we are doing it to ourselves
by doing that.
And I have to admit, I thought it was a rather strange and
false comparison to say the conditions in Baltimore or St.
Louis are worse than these countries. Quite honestly, Mr.
Arthur, I thought that was s disservice to your testimony. I
enjoyed much of your testimony, but that was so bizarre and so
not based in reality.
I have been to El Salvador and been to these neighborhoods.
You know, to try to compare it, you know, I don't think did you
a great service.
I think my question specifically would be for folks to
think about if ORR was here, since you are the professionals
who deal with this the most, what would be the question you
would have for them? Whether it be a question about policy, a
specific case you want to highlight, whatever that specific
question is, when they get here, I will be glad to ask your
questions because you are the ones dealing with this every
single day.
And I would just be curious what questions you have.
Although just while you are thinking about it, I will add, you
know, one of the problems I have with the MOA and why I am glad
that we got the language that we got in there, I have been
waiting 138 days on a Freedom of Information Act request with
ICE, and they won't even tell me about 79 people that were
arrested in my district, what they were arrested for.
They released 4 of the names of the 83. They were people
that should be deported. But I know of people in my district
that have done nothing that supposedly is the criminal element
they are going after that were apprehended on that. So I could
certainly understand the situation why that would be a
deterrent for families to want to even go in, knowing how ICE
is operating under this President.
But let us start with you, Mr. Mulligan, what is a question
that you would like to ask ORR that I can ask for you?
Mr. Mulligan. Well, I appreciate you bringing it back to
ORR because I think we sort of lost track of what we are
talking about here. This is the Committee on the Health and
Human Services. It has nothing to do with building a wall, with
drug smugglers. There is nothing about that that HHS has any
jurisdiction over.
And so while we are throwing out these red flags about
those issues, we are losing sight of the fact that there is
over 10,000, 12,000 children detained in this country right
now, many of them in facilities. I mean, the Homestead facility
is an old Job Corps building that has just been refurbished as
a warehouse for kids. Like I said in my testimony, this is
about human dignity of the children.
Mr. Pocan. So I do appreciate that, and thank you for
bringing us back to that.
Mr. Mulligan. Yes, right.
Mr. Pocan. But I have got about 20 seconds a person, if I
can?
Mr. Mulligan. All right. So the question I would ask for
ORR is why can you not reunite someone with a sponsor, and why
are we holding these children in these conditions?
Mr. Pocan. Okay. Next, Ms. Podkul.
Ms. Podkul. Thank you.
I would ask them about prioritizing the resources that you
all have given them. You know, they are spending a lot of money
on these influx facilities to hold children for very long
periods of time, and how can they be better prioritizing how
they are spending their resources. You know, reducing detention
times, using cheaper facilities, and increasing more services
and post release services for the children.
Mr. Pocan. Great. Thank you.
Ms. Brane.
Ms. Brane. Similarly to that regarding prioritization of
resources, I would ask them about efforts to license and get
into compliance the facilities that are not and why it is
taking so long. Why an emergency influx facility is open for
over a year, for example. And what is being done about post
release services and legal services for children that we know
are really critical in both ensuring their appearance for court
procedures later and their general well-being?
Mr. Pocan. Okay, thank you. Mr. Arthur, you got enough time
before. So let me go over to Ms. Stewart since I have 3
seconds.
Dr. Stewart. Well, as the person on the panel probably with
the least understanding of what their official role is in this
process, I cannot give you a specific question, but what I can
ask you to think about asking is related to the obvious trauma
that children experience in these settings. How trauma-informed
is everything that they plan in terms of services and supports,
on the reunification aspects, on the what is happening while
they are here with us aspects, what kind of staffing, training
for that staffing, other resources? What kind of clinical care
is available for these children as they are going through
whatever their process is?
Mr. Pocan. Thank you all very much. Appreciate it.
Ms. DeLauro. Mr. Harris.
Mr. Harris. Thank you very much, and thank you, Madam
Chair, for calling this hearing.
Let me just start with just a question about the Women's
Refugee Commission. Are you aware that it opposes America's
efforts to cut funding to Palestinian agencies that support the
rewarding of Palestinian terrorists that killed Jewish children
with lifelong pensions, and their families get paid for that?
Are you aware that your commission does that?
Ms. Brane. That is not part of the area that I am
responsible for. So I am not going to get involved in that----
Mr. Harris. Okay. So do you disagree with the commission on
that, or do you think that the United States should be funding
Palestinian terrorists who kill children just because they are
Jewish?
Ms. Brane. It is not my area of responsibility and not
relevant----
Mr. Harris. Okay. Again, I just find it interesting that
you come and testify on children's--you know, the benefit of
children, and here you are, you know, with an agency that
actually opposes U.S. efforts to stop Palestinians from paying
their terrorists who kill children. I just--I just don't get
it.
Anyway, Judge Arthur, and I do want you to comment on
Section 462 because I know you said you might bring it up
later. But the unaccompanied children is what bothers me
because unaccompanied children by definition are not separated
by us at the border anywhere. I mean, the bottom line is they
come in unaccompanied.
And I assume some of them are sent by a parent to the
United States, presumably for a better life, maybe to live with
relatives. But that seems like--it seems like that our policy
should be actually to discourage as much as we can
unaccompanied children coming to our border by whatever means
necessary in order to keep them united with their families that
they are leaving. Am I missing something here?
Judge Arthur. A couple good points there, Dr. Harris. One
is with respect to who pays for them. If we are talking about
children of tender years, and I think about 72 percent of these
people are between 15 and 17, of the UACs, I could pretty
safely assume that they are not paying for the journey
themselves. So, logically, someone in the United States is, and
all the anecdotal information that I have ever seen has
indicated that that is exactly what is happening.
That the parents are or the relatives are paying the money
to bring these people to the United States. There was a big New
York Times article about that a few months, talked about an
individual and his uncle.
But with respect to that, and this sort of goes to the
danger that these people--that, you know, are faced in these
countries. Imagine, you know, you are a father, I am a father.
That we, you know, had a situation so perilous where we lived
that we had to escape it. Would we leave our kids behind?
I mean, that sort of would indicate, too. You know, it says
in the Book of Luke, what father if asked for a fish by his son
would give him a snake or if asked for an egg would give a
scorpion?
If the danger is really that keen, logically, you would
bring the child with you, or alternatively, you would not make
the journey yourself. And so, you know, it sort of does go to
the danger that they face.
With respect to, you know, again, money flows from these
individuals into the pockets of the smuggling groups, the
cartels. It just goes to fund more crime.
Mr. Harris. Sure. So, because Dr. Stewart did mention--and
it is good to be in a room with another physician--did mention
the idea of how traumatic a separation is. And just to, I mean,
an unaccompanied child has always been separated from their
adult family. Am I correct? That is the definition of a UAC,
right?
Judge Arthur. Absolutely. And----
Mr. Harris. So our policy objective should be to not
encourage separations, I imagine, right, because it is
traumatic. So we should pursue policies by whatever means to
discourage, and apparently, we didn't do that, right, because
we had a surge of unaccompanied children. So I would imagine
that that is--you know, that is true.
And I was just going to give you the last minute because
you said something about Section 462, you hoped we would bring
it up. So this is your opportunity.
Judge Arthur. Thank you so much.
I was actually in the room when we passed this, and I
really don't even know why ORR was given the responsibility.
There wasn't a whole lot of debate.
6 U.S.C. 279(g)(2) defines unaccompanied alien child as a
person not lawfully present in the United States not 18 years
of age, with respect to whom there is no parent or legal
guardian in the United States or no parent or legal guardian in
the United States available to provide care and physical
custody.
But we know that 58 percent of these kids are reunited with
parents and legal guardians. So my question becomes----
Mr. Harris. Let me just interrupt you there for a second.
We know that that is the claim made. Because I understand, we
can't even test the families to see--and look, as a doctor, I
know. You do a swap, you know, 2 days you got a test of whether
that person really is a relative or not. My understanding is we
can't even test for that.
Judge Arthur. Well, one of the most egregious things is we
don't fingerprint children under the age of 14 by policy. So,
quite frankly, you could recycle the same child over and over
again if you want to get to the United States and be released
as a family member. I don't really even know why we have that
policy.
Mr. Harris. Thank you very much. Yield back.
Ms. DeLauro. I just might add that the point of this
hearing is that by law we take in unaccompanied children. We
have to deal with that, and it is about what Mr. Mulligan said,
the conditions that these children are being held in and
whether or not we believe that those conditions are such that
we condone, that we believe are the right way to treat
children.
It is not about the separation. The separation only added
to the list of unaccompanied children by virtue of the policies
of this administration. Let us keep our eyes on the focus of
the jurisdiction of this committee, which is to protect the
welfare, the child welfare of these children that we take in as
unaccompanied. No one is talking about immigration law,
immigration policy, as Mr. Mulligan pointed out, but we are
charged with taking care of these children.
Congresswoman Bonnie Watson Coleman.
Mrs. Watson Coleman. Thank you, Madam Chairman, and thank
you for having this hearing.
And let me associate myself with what you said about this
being child abuse, and that is exactly what it is.
A major concern of mine has been the use of private prisons
in our criminal justice system, where private companies make
money performing the public function of incarcerating people.
And I have introduced legislation to end that practice.
So it is even more horrific that there are for-profit
companies getting rich off of detaining immigrant children, and
that is exactly what is happening in Homestead where
Comprehensive Health Services, Inc., charges $750 a day to
detain children, which is triple the cost of the typical
nonprofit facilities that HHS normally uses. And I am not even
speaking to the conditions at the HHS facilities.
Seven fifty a day sounds more like the cost of a luxury
hotel rather than the detention camp you described, Mr.
Mulligan. In fact, they make so much money their parent company
cited this administration's immigration policies as reason for
``significant growth.''
Mr. Mulligan, first, I want to thank you for the work that
you are doing trying to protect these children. From your visit
to the Homestead facility, do you see any evidence that this
tremendous amount of money we are spending on this for-profit
facility is really going to ensure the best care of these
children rather than just making stakeholders rich?
And are you also aware of the article that came out about
the 4,500 and some sexual abuse allegations that these children
have apparently been exposed to?
Could you put your mike on?
Mr. Mulligan. Yes, thank you for the question,
Congresswoman.
So the first question, in terms of my visit to Homestead,
because it is a temporary facility and it was an old Job Corps
site, there was a cost of millions of millions of dollars to do
buildouts, to build tents. You see these huge air conditioning
units pumping in air conditioning relentlessly. They have told
me, and I think the physicians could answer this better, but
they said cold temperatures, really cold temperatures stops the
spread of germs and bacteria. So the kids are freezing all day,
but apparently, they are not getting sick, I guess. I don't
know.
But I do not see that money going to the kids. I see it
going to making what was a Job Corps office building into a
place to house children temporarily, but it is not temporary
anymore. And I am sorry----
Mrs. Watson Coleman. Because Job Corps tend to be
residential in nature, too.
Mr. Mulligan. The one half of the campus is residential,
and the other half is just the office buildings. Where the 17-
year-olds were housed is the office buildings, and that has
required buildouts for bathrooms, showers, everything.
And I am sorry. Your second question again was?
Mrs. Watson Coleman. Yes, there was an article on the news
just last night about thousands of allegations of sexual
misconduct and sexual abuse of the children that are detained,
and I think it highlighted Homestead?
Mr. Mulligan. Yes. We have heard of allegations for
Homestead as well. We haven't----
Mrs. Watson Coleman. I need to know who--it is very
important that we do have the Government officials here to talk
to us about what is happening, what they are doing about that.
And Dr. Stewart, you discussed how traumatizing family
separation can be for these kids. Can you further discuss the
importance of proper after care, after they have been separated
and how the conditions at Homestead and Mr. Mulligan described
exacerbates children's trauma?
Dr. Stewart. Thank you.
Mrs. Watson Coleman. Would you turn your mike on? Thank
you.
Dr. Stewart. Thank you for that question, Mrs. Watson
Coleman.
I think the most important thing is what I suggested
earlier, that any facility where children are being housed who
have been through these kinds of traumas has to be trauma-
informed in the care and support that they provide. That means
up and down the chain from the leadership understanding how not
to create policies and practices that retraumatize, to the
staff being trained and understanding and being aware of how to
recognize the symptoms, how to address those problems, how to
understand behaviors that are trauma-related but that express
themselves in aggression, fighting, reckless behaviors of some
kind, challenges to authority. These are manifestations of
children who are expressing their traumatic illness.
Mrs. Watson Coleman. Excuse me, but does anyone know
whether or not there is that kind of personnel on staff all the
time at Homestead?
Mr. Mulligan. So what we were told was that there is 19
clinicians--or sorry, 19 children for every 1 clinician. And to
speak with a clinician or mental health person, you are in a
room with 20 other people at the same time. And so--at the same
time. So you are not sharing your intimate stories, your
traumas in a safe space. You are sharing it in a room, a small
room with very basic cubicles. The clinicians have cubicles
where someone is sitting next to them, and they are conducting
their mental health intakes with them in that way.
Mrs. Watson Coleman. There is so much more we need to know.
Thank you.
Ms. DeLauro. Congresswoman Barbara Lee.
Ms. Lee. Thank you very much.
I want to thank all of you for being here and just have to
say that, first of all, this is the most despicable policy this
administration and any administration that I have seen in a
long time. Secondly, I am reminded that this is the 400th year
of the first slave ships coming to this country from Africa,
where children were snatched from their parents only to learn
of generational DNA changes which are still with us in many
ways.
And so this is a violation of children's human rights. It
is child abuse, it is kidnapping, and it is downright morally
wrong. And it is something that as a mother and a grandmother
that it is something that is hard to even fathom, and being an
African American.
And so--and I am a clinical social worker by profession,
Dr. Stewart. So I wanted to drill down just a little bit about
this. First of all, we are learning of the sexual assault of
these children and the trauma that this adds to the trauma that
they have experienced.
Secondly, I want to ask you just in terms of treatment
modalities, I mean, you know an intake, one or two sessions,
just as a clinician, I know this is a going to take a heck of a
long time for these children to recover, if ever. And so I
wanted to ask you kind of with trauma-informed care, what is
the treatment process?
Also how does anger fit into this? Because I swear I am
concerned about these kids growing up being angry at the United
States for doing what they did, for us doing what we have done
to them. And so how does anger fit into this, and what does a
treatment modality look like in terms of trauma-informed care?
Because this is really something that it is another stain on
this country.
Someone said it was ``a stain.'' It is another stain. And
so we have to get to the bottom of this and stop it as soon as
we can and take care of these kids and change these policies.
Dr. Stewart. Well, thank you for that question, Ms. Lee.
Let me start with trauma. It is a specialized area of
treatment. Not every mental health professional treats trauma
or is trained to recognize and provide treatment for trauma,
and not every trauma treatment specialist has the level of
criteria--of qualifications that I do as a psychiatrist.
The National Center on--the National Center for the
Traumatic Stress Network trains hundreds of clinicians and
other people around the country specifically to work with
children and adults who have been exposed to some level of
trauma. What we are talking about in terms of trauma-informed
care can run the gamut. It can be along a continuum.
There are evidence-based treatments like trauma-focused
cognitive behavioral therapy, which is very structured. Twelve
weeks of very structured, clearly defined, evidence base of
well-researched and studied and validated across multiple
populations and with multiple kinds of exposure to trauma that
is very effective in working with children of a certain age.
There are trauma-informed treatments that have more
effectiveness with younger populations. There are treatments
that are available to families.
The bottom line is that there are a range of treatments
that can be made available depending on the need, depending on
the severity, depending on the willingness and responsiveness
of the individual or the family to engaging in those treatments
with the treating professional.
The anger that you describe is very often a manifestation
of how that trauma in the young child especially can be
expressed. Children, while they are adaptive and resilient, do
reach a point where enough has gone too far. And when they are
at that point, they no longer have the neurological capacity to
continue to take in the trauma. It has to come out. It has to
be expressed.
And what we see often, and I am assuming--I have not made a
visit to any of the facilities. But what I would assume is that
some of what has been described as aggressive behavior, hostile
acting out, crying and being uncontrollably able to stop that,
and not being able to be comforted even when comfort might be
around, has to do with the level of trauma that they have been
exposed to and the fact that there is nowhere to take it.
They have no one to comfort them that they are familiar
with and can trust. They don't recognize what is going on--
everything from sights and sounds and smells and people
approaching you and how they talk can trigger these kinds of
behaviors. These are normal responses to abnormal situations.
Ms. Lee. And God knows how they are going to react as
adults.
Dr. Stewart. What we know about trauma and especially about
Adverse Childhood Experiences is that as an adult--in fact, the
original work to study this was done decades ago by two
doctors, Vince Felitti at Kaiser Permanente and Bob Anda at the
CDC, who were looking at adults who were recounting experiences
from their childhood and began to put the pieces together and
say there is a connection here between what happened then and
what is going on now. And they connected those things to
chronic medical problems, to mental illness, to domestic
violence, to a range of things.
So we will be able to see the manifestations of untreated,
unrecognized and untreated Adverse Childhood Events, serious,
intense trauma in these children as they age.
Ms. DeLauro. Congresswoman Clark.
Ms. Clark. Thank you, Madam Chairwoman, and thank you to
the panel for coming today.
Mr. Mulligan, I would like to start with just a baseline
legal question. Is it a crime to enter this country seeking
asylum?
Mr. Mulligan. No.
Ms. Clark. Anywhere that you enter, seeking asylum?
Mr. Mulligan. Well, I believe the Trump administration
tried to make it a crime for a while and not allow you to apply
for asylum if you were not applying at a point of entry. But
that has been an injunction by the courts.
Ms. Clark. That is right. So, currently, it is not a crime
to enter this country seeking asylum?
Mr. Mulligan. That is correct.
Ms. Clark. Are you aware that children at Homestead who are
staying in this influx center, when they turn 18 are being
shackled and sent to Federal prison?
Mr. Mulligan. Yes. As we were told, that is their birthday
present.
Ms. Clark. And that this applies to both, you know, girls,
boys, turn 18, you are sent to Federal prison. Why would that
be if there is no crime of illegally entering this country?
Mr. Mulligan. In my understanding that there is nowhere--
there is no transition facility. When someone turns 18, they
are considered an adult under the law, and so they go to an ICE
detention center.
Ms. Clark. Dr. Stewart, you were just talking about trauma-
informed care, and I know that you are not ORR. But do you have
any sense of the quality of counseling, given the expertise
that is needed to treat these children for the trauma that we
have inflicted upon them in these--at Homestead or throughout
the ORR system?
Dr. Stewart. I have no specific and direct knowledge, only
what has been reported from people who have made visits, who--
the American Academy of Pediatrics and who talked about that.
The original person who wrote one of the letters identifying
the challenges facing these children was--is a psychiatrist in
Louisiana, and she--she identified some of the problems with
the kinds of services that were being provided. But I have no
personal knowledge of that.
Ms. Clark. Do you happen to know if ORR in the past was
able to manage the unaccompanied children through the use of
nonprofits? Has it always been such a private, heavily private
industry?
Ms. Brane. I can say that, generally, it has been operated
by nonprofit or not-for-profit institutions. But the focus has
been on locating facilities that are shelter-like, home-like
environments in the past. That was the focus, and I think what
we have really shifted to now is these large institutional
settings that, as you heard, have very large profit margins and
are not focused on the well-being of children and are not
licensed.
I am very concerned about the licensing, including that
some of these facilities, ORR does not consider them permanent,
and therefore, they don't even fall under the requirement for
Prison Rape Elimination Act audits, which goes to this issue of
safety.
Ms. Clark. And not only is there a startling number of
sexual assaults reported from staff members, but also child-on-
child assaults, which goes to your very point and the need for
licensing and regulation.
Do you have any understanding from ORR what they are doing
to improve the background checks of the staff at these
facilities?
Mr. Mulligan. Well, we have talked with people in the FBI,
and apparently, background checks do not take 1 month or 2
months or 3 months, as they are taking now. When we visited the
Homestead facility, they actually conducted background checks
on us before we could talk with the kids, and they finished
that within the same morning. So I don't know what ORR is doing
in terms of why the background checks take so long.
Ms. Clark. Yes. Words fail me at how we are failing these
children and these families. And I do want to ask you, just
briefly, with the Flores decision, 1997, has been around, what
was the point of that--of that decision? Was it to make sure
that children were cared for and released as quickly as
possible to family members?
Mr. Mulligan. To be clear, it is not a decision. It is an
agreement between the Federal Government----
Ms. Clark. That is right.
Mr. Mulligan [continuing]. And the children detained. So
the Federal Government agreed to this. It is not like a court
enforced them to it. The Federal Government entered into this
contract and said we will treat children in this way, and there
has been various court decisions interpreting it since then,
but it is still a binding settlement agreement on the Federal
Government.
Ms. Clark. And do you believe that this agreement is
responsible for increase in human and drug trafficking across
our Southern border?
Mr. Mulligan. I don't. I don't think we can blame legal
protections for migration. I mean, if we go down this line, at
some point, we are going to be saying the Constitution is
attracting people to our country, so let us not apply that to
undocumented immigrants. It is a slippery slope, and I hope we
don't fall down that.
Ms. Clark. Thank you. Thank you, Madam Chairwoman.
Ms. DeLauro. Thank you very much.
I am going to try to move quickly through some questions. I
just want to mention to you that, Dr. Stewart, that the--I have
been pleased at really the National Child Traumatic Stress
Network is really fantastic. What we did in the last bill was
$4,000,000 for the fund specifically to work with children who
were separated from their families. And we have tried to
increase the funding in that program every year, and we are
going to continue to try to do that this time.
So thank you very, very much for your comments and your
testimony in this area. I have got to tell my friends at Yale
Child Study, my God, you guys are great.
I want to, just a couple of things. Ms. Brane, Mr. Arthur
discussed the dangers of traveling to the U.S. border. Your
testimony, you noted the administration's termination of the
Central American Minors Program. Was this an opportunity to
apply for asylum without undergoing a dangerous trip to the
border? Just very briefly, what was the Central American Minors
Program?
Ms. Brane. So the Central American Minors Program allowed
children to apply for relief for entry into the United States
from outside of the United States and from their region. So
from their home country or close by. And the point of it was
exactly to prevent children from having to make this dangerous
journey because one thing that has not come up today is that
there is really very--there are very few options for children
who are fleeing violence to get here.
Ms. DeLauro. Is there more violence now in some of these
countries? Mr. Arthur doesn't think so. You think so?
Ms. Brane. There is. We have seen--since 2012, the Women's
Refugee Commission has been looking at this issue, and we have
found increases in violence in each of those countries that are
very much in synch the increased arrivals.
Ms. DeLauro. Well, we know they did away with case
management. They did away now with Central American Minors
Program. So opportunities to be able to alleviate and relieve
the system they have put aside because the issue is about using
this as of enforcement. That is it.
So you take away and strip away all of the opportunities to
create a more efficient way of proceeding, which was being done
by the past administration, but to make it much more difficult.
Mr. Mulligan, a couple questions here. Is the Trump
administration using influx shelters to get around the 20-day
maximum mandated in Flores? What other ways is the
administration disregarding the protections mandated in the
Flores settlement? Should we codify Flores?
Mr. Mulligan. Several questions, Congresswoman. First, yes,
we have heard several arguments. There is an exception in the
Flores settlement agreement for influx or emergency facilities.
But there is no exception, importantly, as I say in my written
testimony, for self-created emergencies or fabricated influxes.
And so they are using the Homestead facility as a way to get
around the Flores settlement and saying it doesn't apply to
that facility, and it absolutely does.
And I am sorry, your second question was?
Ms. DeLauro. Does it appear the administration is
disregarding the protections mandated in Flores?
Mr. Mulligan. Absolutely. And it is not just this
administration, but since 2000--we filed a motion to enforce in
2015, 2017, 2018, and the----
Ms. DeLauro. I frankly don't care what administration it
was--
Mr. Mulligan. Yes.
Ms. DeLauro [continuing]. If we are obligated to abide by
Flores.
Mr. Mulligan. You are absolutely--yes, the Federal
Government is--it is a contract. No matter what President Trump
as an individual does with contracts, the Federal Government
does abide by contracts, and it needs to.
Ms. DeLauro. Should we codify Flores?
Mr. Mulligan. The Flores settlement agreement has a
stipulation that it will go out of force once there are
regulations that are promulgated that are consistent with the
letter and the spirit of Flores. The Trump administration last
year tried to implement regulations on the Flores settlement
agreement that had nothing to do with the Flores settlement
agreement. So it should be codified, but with the spirit and
letter of the law as it----
Ms. DeLauro. Of the law. Okay.
Let me then just ask Ms. Podkul, just briefly, the
appearance rates of unaccompanied children who are placed with
sponsors. Do most of them show up to the hearings?
Ms. Podkul. When children are represented by attorneys,
they overwhelmingly are showing up because the attorneys can
explain to them what are the requirements? What is it that they
have to do?
And let me be clear. A question came up about are the
courts adjudicating their claims? Are they not showing up? The
majority of children are applying for humanitarian protection,
and those applications go to USCIS. So the courts are kind of
managing the cases to maintain and see what is going on with
the children, but it is USCIS who is ultimately oftentimes
adjudicating the child's claim for protection.
Ms. DeLauro. There is the suggestion that children choose
to leave their homes and travel to the U.S. because our
policies are too lenient. Are our policies too lenient? Why are
people being driven to do what they do?
Ms. Podkul. Look, the kids that I have talked to, they know
how dangerous the journey is. They know they could die on the
journey.
They know when they get here, they are going to be thrown
in what is called ``an icebox.'' They know they are going to
be----
Ms. DeLauro. We have all visited--some of us have visited,
and it is freezing cold.
Ms. Podkul. Right. I mean, some of these families and these
children knew they were going to be torn away from their
parents, and they are still coming. So if the risk of death,
you know, on the journey is not enough to stop them, no
deterrence that we can do is going to be worse than what a lot
of them are facing in their home country.
Ms. DeLauro. Thank you.
Congressman Cole.
Mr. Cole. Thanks very much, Madam Chairman, and I want to
thank all of you for your testimony, too.
Judge Arthur, since, you know, you litigated a lot of these
cases, does somebody automatically have the right to come to
the United States for economic advancement?
Judge Arthur. No. And actually, the question was raised
before whether illegal entry into the United States is a crime.
Illegal entry into the United States actually is a crime under
Section 275(a) of the Immigration and Nationality Act. It is a
misdemeanor punishable for up to 6 months. So, no, you don't.
Mr. Cole. Okay. And would you automatically have the right
to come to the country for family reunification purposes?
Judge Arthur. If you get a lawful visa, and we do have a
very generous lawful visa program. More than a million people
enter the United States as immediate relatives every year. You
can take advantage of that and come to the United States.
Also with respect to the Central American Minors Program,
which I think was raised before, I believe that President Trump
had offered to reinstate the Central American Minors Program in
exchange for funding for barriers along the border. But in
fact, I believe this committee rejected that request.
Mr. Cole. And I am not casting aspersions on anybody here,
but if I wanted to come to the United States, I would probably
try to figure out what are the ways that legally they are going
to accept me, as opposed to if I have a motive that is
different, I don't think I am going to volunteer that motive
and say I am really here.
So this idea that these statistics actually reflect what
the motive is, I think is a pretty flimsy idea. In your
experience, you mentioned you litigated 1,000 of these cases.
Are people always honest with why they say they are coming to
the United States, or do they try and tailor testimony toward
things that they think will give them the legal right of entry?
Judge Arthur. Again, the plural of anecdote is not data,
but I can tell you right now, Mr. Cole, that in every case that
I ever decided, I would make a credibility determination. In
many, if not the majority of those cases, that was an adverse
credibility determination. I have no recollection of any of
those adverse credibility determinations being overturned by
another court.
Mr. Cole. Okay. Let me ask this, and I will address this
more widely to the group. You know, this isn't a new problem,
and we did deal with this surge before. And as has been
suggested, the demographics of the population have changed, and
that has made it difficult to have the appropriate facilities.
You know, the last administration confronted this, and then
in full disclosure, I worked with Secretary Burwell to try and
make sure she had the resources to deal with this. But did they
leave anything in the way of permanent facilities, permanent
infrastructure, or did they pretty much, as we have seen in the
past, create--and I had one of these in my district--create a
center for a period of time and then, when the flow came down,
because people had either been placed and we were not--just let
it all collapse back down again?
So we are in the position of sort of constantly reinventing
the wheel. Has that--has that been our experience as a country?
Ms. Brane. It is hard for me to know exactly. I mean, I
will say that ORR has gradually--they have certainly tried to
attempt--tried--tried to increase the number of facilities, and
they do have more facilities in place now than they used to.
But they did open and close some of these large influx
facilities. There were several that were open in 2012----
Mr. Cole. Again, and I am not throwing rocks at the last
administration. I think this actually gets back to a point that
Judge Arthur made. The demographics of this population have
changed, and that is straining the physical capacity. It is
straining the personnel that you would need. You know, one of
our great problems in mental health is we just don't have
enough people, period.
I mean, the idea that if we were--that we would have these
kinds of people available in sufficient numbers here,
particularly on an on/off kind of basis. And you know, I think
it was a telling point when you said at the beginning of the
Trump administration the flow came down. Just largely because
you thought you couldn't get in probably, I would assume.
And then once it became evident, no, the structures are
still in place that make it I wouldn't say attractive to run
this risk because I don't think it is attractive for anybody to
run the kind of risk of a 2,000-mile journey. I mean, people
don't undertake that sort of thing lightly any more than, you
know, 300 years ago they undertook lightly traveling across an
ocean and coming to the United States. That is a big life
gamble for somebody, and you have to feel like there is some
big upside at the other end because you are running a risk.
So, you know, given that, I mean, it seems to me what are
the sorts of things we can do--because we know it is risky--
that would discourage that? It seems to me, Madam Chairman,
that is beyond our jurisdiction, and I am certainly not
critical of that. But a lot of this gets back to stabilization
inside these countries, which I know my friend Ms. Granger
worked on, and frankly, which we tried to address recently in
the spending package where we put a lot more money again into
these three particular countries.
Ms. DeLauro. The Central American triangle.
Mr. Cole. Yes.
Judge Arthur. Mr. Cole, one thing that I would like to
correct. Before I think when you were asking me, I said that
2016 was the high year for UACs. It was actually 2014, 68,631.
We are on track for about 60,000 this year. But as this graph
will show you, we are not actually in prime travel season yet.
So I can't guarantee you that we are not going to see many more
people come to the United States.
Mr. Cole. Yes. I will close just with a quick comment, just
because I remember again having this discussion with Secretary
Burwell. And literally, each month them wondering how many
people were coming in. They don't have a very reliable way to
predict that.
And so it is extremely difficult for any administration to
plan, have the people in place, and the resources.
Thank you for your indulgence, Madam Chairman.
Ms. DeLauro. Thank you.
Ms. Roybal-Allard.
Ms. Roybal-Allard. Just very quickly, Ms. Podkul, what
challenge do you and your colleagues face when trying to unify
a separated child, and what would you recommend to make
tracking of children and their families more accurate and
efficient?
Ms. Podkul. Specifically for the families who have been
separated by CBP?
Ms. Roybal-Allard. Yes. Because there have been some
reports that we have lost track of where the children are and
where the parents are.
Ms. Podkul. Right. And you know, the Government is
reporting that they have made changes to improve the tracking
of the separations. I can tell you just a few weeks ago, my
colleague met a child who had been separated from his father,
and that was not indicated in any of the paperwork that the
Government gave us, and the attorney was not notified. The only
way we found out was by talking to the child.
So I think what we need to do and suggestions that you have
offered before in the past of having child welfare
professionals in CBP facilities helping decide which children,
you know, if a child ever needs to be separated, make sure that
it is a child welfare who is making that decision, and that
tracking starts in that moment for the reasons why.
So both the child and their attorney can understand, but
also the parent. Because sometimes, you know, the decision was
made in error, and the parent should have the right to
challenge that so they can reunify with their child as quickly
as possible.
Ms. Roybal-Allard. So would you recommend along the lines
of a shareable, a family unit tracking number?
Ms. Podkul. Absolutely. There should be a family unit
tracking number that follows both the child and the parent. And
I would suggest that that happens not only just when a child is
separated from their parent, but from any family member that
they might be traveling with, right?
So you could have a child who is being cared for by a
grandparent their entire life. And if they are being separated
at the border because they don't fall into the definition of
family, we need to know, and the child's attorney is going to
need to know that. It is often the adult who is going to have
the information about the child's case, have contact phone
numbers, have documents that are going to be necessary.
And so it is really important for that child to always be
able to find and have contact with any family member that they
have been separated from at the border.
Ms. Roybal-Allard. I guess it would also be helpful, it is
my understanding there is no standardized protocols or systems
between the different agencies that come in contact with these
children?
Ms. Podkul. Exactly. Exactly, yes, thank you.
Ms. Brane. If I can just add finally that they also really
need to look at the final piece of that on potential
reunification after investigating what the reasons for the
separation were, right? There was a story that came out about a
woman who--a mother who was separated from her infant child
because they thought a criminal conviction had come up on her
case. It turned out that that was a mistake. She had no
criminal conviction, and nothing was ever done to rectify that
situation.
If you really are concerned about the welfare of the
children, you should be following up on, you know, how to
reunify them ultimately or resolve the situation.
Ms. Roybal-Allard. I believe there have been several
reports about ORR grantees reporting errors and referrals from
CBP and ORR, including incorrect gender, age discrepancies. So
that also adds to the issue of not being able to identify them.
Ms. DeLauro. Will the gentlelady yield for 30 seconds?
Ms. Roybal-Allard. Oh, of course.
Ms. DeLauro. Are we still separating children and rendering
them----
Ms. Podkul. Yes.
Ms. DeLauro. We are still separating children, rendering
them unaccompanied children, and adding to the system. So even
though there has been a court order that says no, it is still
happening in contravention of the court order?
Ms. Podkul. Yes. Not only is it still happening, but most
cases we don't know why it is happening.
Ms. Roybal-Allard. That was going to be my question. What
reasons is DHS giving?
Ms. Podkul. Sometimes we will get vague--there will be
vague indications in the file about why. They may say there is
a criminal history, but we don't know what that means. Does
that mean that was a forged check and that parent poses no
danger to the child? Is it a reason because they have a concern
about the veracity of the relationship between the child and
parent? That is very important information.
So whenever a separation happens, we need to know why, and
all the information has to go to all parties.
Ms. DeLauro. Is it mostly on immigration things, violation
of immigration?
Ms. Podkul. We don't know.
Ms. DeLauro. You don't know. Last on this piece, before--we
now know that there was separation happening in 2017. Again,
rendering--I want to focus on the jurisdiction of this
committee, which is unaccompanied children. However, there has
been no accounting. There are thousands of children that the
IG--this is not me--that we listened to, thousands of children
that were--came into custody, if you will. Some were
discharged. But we have no idea who was accompanied and who was
separated.
And we may--well, we are going to get a full accounting of
that effort. So, thank you.
Mr. Harris.
Mr. Harris. Thank you very much, Madam Chair.
Mr. Mulligan, I guess you are an attorney. I am just
curious, you said, ``what President Trump does with
contracts.'' Do you know something we don't know about
contracts?
Mr. Mulligan. I think that is a hearing downstairs,
Congressman.
Mr. Harris. Or just what you read in the fake news? I don't
understand. I mean, you are an attorney.
Mr. Mulligan. Right.
Mr. Harris. I would think you would speak more carefully
than that. Unless you have personal knowledge of contracts. Do
you have personal knowledge of contracts the President has had
that you think may have been violated?
Mr. Mulligan. Just what is reported in the news.
Mr. Harris. Okay. That is what I thought, okay.
Judge Arthur, we got a real problem in Maryland, it is
called MS-13. As you know, we are the second most active State
for MS-13 only behind California, whose population is, my God,
I don't know, 10 times Maryland, whatever it is. A lot more.
When you have an unaccompanied child come across, and I
mean the ones who cross the border as UACs, not the ones who
become, you know, through the fact that something happens that
they are UAC, but the ones who cross, you know, I don't--I
probably wouldn't be good at guessing age at a carnival. But I
have seen some pictures of people who come across claiming they
are like 15, 16, may not really be--I imagine some come without
any papers, no proof.
I mean, look, if I were going to cross the border illegally
as an MS-13 member, I sure wouldn't bring my ID card. So that
brings up two things. One is how difficult is it? Because I
really don't want MS-13 members coming more in Maryland. We
have plenty. You know, maybe some other States will take them.
God bless them. I don't want any more in Maryland.
It has got to be hard to tell who they are, and I would
like you to address how difficult it is to determine who is
actually a criminal, who is not, who is coming here for
nefarious purposes, who is not, and who is not a subject of
human trafficking. Because that is another thing I am worried
about.
And I just want you to address very briefly, you know, the
allegation that somehow we are shackling people when they turn
18 with no--with no basis because I am not sure that anybody
does that. But what is the basis for someone turning 18 and, in
fact, becoming subject to a different set of laws that do
require detainment?
Judge Arthur. Let me start at the end. The TVPRA and
Homeland Security Act both actually talk about minors under the
age of 18. And for that reason, you actually enter into the
adult system when you turn 18. And so, you know, a different
set of laws applies to you, simply.
Mr. Harris. Excuse me. And that is not just true with
illegal--with immigration.
Judge Arthur. Right.
Mr. Harris. I mean, when you turn 18, there are things you
are charged differently with?
Judge Arthur. Absolutely. And----
Mr. Harris. All right. So we are not separating out
immigrants saying we only do this to immigrants. We do this to
anybody who turns 18, right?
Judge Arthur. My son turned 18 not that long ago. I don't
have access to his medical records any longer.
Mr. Harris. We fight that battle all the time, but go on--
as a parent. Go on.
Judge Arthur. Yes, with respect to determining the age of a
person, it is actually very difficult. TVPRA does provide some
guidelines, some guidance to identifying the age. But the fact
is somebody shows up without documents, we don't know who they
are unless we can figure out who they--unless we have some
record, and we probably don't.
With respect to determining the purpose for which they
come, we really don't have access to their criminal records
back in their home countries. We don't know what their
affiliations are. I will note that it was the Obama
administration that designated MS-13 as a significant
transnational criminal organization, and they noted the fact
that one of the things that they do is they raise money in the
United States, and they send it back to El Salvador.
So we have talked today about the crime that takes place in
El Salvador. I know that Ms. Clark I think it was talked about
how dangerous--Mr. Pocan talked about how dangerous it was. The
funding for that crime actually comes from--some of it comes
from here in the United States. We had a horrible incident in
Kensington, and we are so gerrymandered, I don't know whether
you represent Kensington or not. But involving a young girl who
had been sex trafficked to the United States who was beaten
with a baseball bat 23 times by MS-13 members because she
failed to perform adequately.
They didn't hit her in the face because they didn't want to
damage the merchandise that they had, but it was a horrible
case. Not reported.
With respect to MS-13, it is all anecdotal, and in fact, I
would note that the White House put out--nope, Homeland
Security, unaccompanied alien children and their family units
are flooding the border through the catch and release
loopholes. But they talked about UACs providing fertile
recruiting ground for violent gangs.
A 2017 review of UACs in the custody of HHS found 39 of
138, or 28 percent, were involved in gangs, with the vast
majority of those involved voluntarily. And again, we know that
these gangs recruit unaccompanied alien children in our home
State of Maryland. We know that they go--that they do it in the
high schools there.
But again, there is no bar code that somebody has on them
that you can scan that is going to tell you what their intent
to come to the United States is.
Mr. Harris. Well, my time is up. Just a comment on human
trafficking, how hard is it for us to detect when human
trafficking is occurring?
Judge Arthur. Human trafficking is very difficult, and let
me just define the difference between the term. Trafficked
people are involuntarily moved. Smuggled are voluntarily moved.
But again, identifying human trafficking, and I would see
it in my own court, I would see these women who had been picked
up, and I would say did anybody tell--did anybody force you to
come to the United States? And they wouldn't break. They would
not tell me. And I said, look, I could help you if you tell me,
and they wouldn't tell me.
Mr. Harris. Thank you very much.
Ms. DeLauro. Coming to the end of the hearing, and I wanted
to say to my colleague, the ranking member, I would love to
have you make any final comments or ask any additional
questions that you might have.
Mr. Cole. I have no additional questions, Madam Chair. I
want to thank all of our witnesses. Frankly, both your written
and your personal testimony was compelling and extremely
helpful, and I appreciate it. Because I think this is such a
many-sided problem, and I think it has changed in ways that
probably we didn't fully grasp at the beginning of this back in
2014 and 2015, both demographically and what that does in terms
of the facilities we need, the personnel we need, frankly, the
policies that we need. And you have helped all of us come to a
better understanding of that.
Madam Chair, I want to thank you, too, obviously again for
the IG briefing that we had 2 weeks ago and for assembling this
panel and focusing interest on this. Sadly, I think we are
going to have this problem for a long, long time, and you are
helping us begin to understand the dimensions of it, grapple
with it, and see what the appropriate ways to proceed are.
And that is a real contribution, but again, my friend the
chair is the one that made that possible. We wouldn't be here
if she hadn't held the hearing, and so I am again grateful to
my friend for that, grateful for your time and your
professionalism and your expertise.
And with that, Madam Chair, I yield back.
Ms. DeLauro. Thank you so much, and thank you very much. We
worked together these last several years and will continue to
do so because in so many instances, we see the difficulties
that are there. And the goal for yourself and for myself is how
do we address the issue? How do we try to solve what we can
solve?
Again, I want to just say thank you to you for what is
powerful testimony. As Congressman Cole pointed out, both your
written testimony and your presentations here this morning.
There are many questions still to be answered. I come away with
and I just want to repeat over and over again, we on this
subcommittee cannot afford to get sidetracked with issues that
people want to bring up which may obfuscate the issue at hand,
which is what ORR's mission is.
It is a human services agency. That is what its mission is.
It is not an immigrant enforcement agency. It is not an
extension of ICE, and that is why ORR needs to focus directly
on that mission. No one in the past has tried to change that
mission in the way over the past 2 years that this
administration has tried to change that.
I can't make them up. There is a memorandum of agreement on
data flowing. There is the hold-up of fingerprinting and which
they had to stop because they were so overwhelmed. And we had
the largest release of 4,000 detained children to safe havens.
That is what we are about here.
So that we need ORR to care for children, place them in a
safe home with a family. Unfortunately, as I said, that has not
happened, and the administration is trying to divert that
mission. I have said on many occasions, and I will repeat it,
from day one when I got involved in this issue, that I believe
what we have looked at over the last 2 years is Government-
sponsored child abuse. And we can't have that on our watch in
this subcommittee. That is not where we are.
Family separation, memorandum of understanding, influx
facilities like Tornillo and Homestead, disregarding Flores or
trying to upend Flores, children spending months in Federal
custody, and we are spending, which comes under our
jurisdiction, millions and millions of dollars being spent
without any accountability.
We have tried. We both have tried to get accountability. We
just keep hearing the more resources that you need, and we are
not afraid to provide resources. But as I said in my opening
statement, we are not going to throw good money after bad for a
continued--a failed policy that this administration has engaged
in. And it is about keeping children in detention. It is a
policy failure. This is a manufactured crisis.
We are committed, I am committed, as I said at the outset,
to continue to do oversight of this effort. The more you probe
into it, the more avenues there are to be able to look at. We
will call witnesses from HHS. We will call others to address
this because we need to get to the answers because, you know,
it can't continue like it is, and we have to fix it.
We have to stop what is going on now, and we have to fix
it, and there are models all over the country. Most recently, I
heard of children who age out, that there is a model for
dealing with them. I want to know how many are there? Where are
they? In what facilities are they? What is the difference with
today I am 17, middle of the night, at midnight, I am 18. I am
picked up and taken somewhere else--What is the story about
that?--with less services.
There are many avenues to probe. We will continue to do
that.
I want to thank my ranking member for his cooperation, and
I just want to say again thank you. Thank you for the great
work that you are doing on behalf of the children who come to
us seeking help.
Thank you very much, and I want to just bring the hearing
to a close.
Thank you very much.
Wednesday, March 6, 2019.
PROTECTING STUDENT BORROWERS: LOAN SERVICING OVERSIGHT
WITNESSES
BRYON GORDON, ASSISTANT INSPECTOR GENERAL FOR AUDIT, DEPARTMENT OF
EDUCATION OFFICE OF INSPECTOR GENERAL
JOANNA DARCUS, MASSACHUSETTS LEGAL ASSISTANCE CORPORATION RACIAL
JUSTICE FELLOW, NATIONAL CONSUMER LAW CENTER
SHENNAN KAVANAGH, DEPUTY CHIEF OF CONSUMER PROTECTION DIVISION, OFFICE
OF MASSACHUSETTS ATTORNEY GENERAL MAURA HEALY
PRESTON COOPER, RESEARCH ANALYST IN HIGHER EDUCATION POLICY, AMERICAN
ENTERPRISE INSTITUTE
COLLEEN CAMPBELL, DIRECTOR, POSTSECONDARY EDUCATION, CENTER FOR
AMERICAN PROGRESS
Ms. DeLauro. The subcommittee will come to order.
Good morning. Let me welcome everyone to the Labor, HHS,
and Education Appropriations Subcommittee, the oversight
hearing on student loan servicing.
Our ranking member, Congressman Cole, is doing double duty.
He is at the Budget Committee, and he will be here shortly.
But we can go forward because we have both sides
represented, and then you can move forward with the hearing. So
it is not out of balance.
I want to say a thank you to our distinguished witnesses.
We have two excellent panels this morning. The first panel will
feature Bryon Gordon, who is Assistant Inspector General for
Audit in the Office of the Inspector General at the U.S.
Department of Education.
The second panel will feature Joanna Darcus, Massachusetts
Legal Assistance Corporation Racial Justice Fellow at the
National Consumer Law Center; Shennan Kavanagh, Deputy Chief of
the Consumer Protection Division, Office of the Massachusetts
Attorney General Maura Healy's office; Colleen Campbell,
Director of Postsecondary Education at the Center for American
Progress; and Preston Cooper, higher education research analyst
at American Enterprise Institute.
So I thank each of you for offering your testimony this
morning. And we will do, obviously, one panel at a time and
then call folks up for the second panel.
It will surprise no one to say that there is a student debt
crisis in our country. Forty-four-point-seven million people
owe $1,500,000,000,000 in Federal student loans, more than
credit card debt or car loans. But less well known is this. We
are facing a student loan servicing crisis.
Servicers are a critical link between borrowers and
lenders. These intermediary companies manage accounts. They
process monthly payments, and they help borrowers who are
suffering financial hardship find the right repayment plan. In
short, they are paid by the Department of Education to serve
our students, but we are increasingly seeing evidence that they
do not.
A new report by the Inspector General found that these loan
servicers are failing, even potentially cheating borrowers, and
the Department of Education is asleep at the wheel. According
to the Inspector General's report, the servicers fail to tell
borrowers about all of their repayment options. They
miscalculate how much the students should be paying through
income-based repayment.
Two servicers, Navient and the Pennsylvania Higher
Education Assistance Agency, also known as PHEAA, put borrowers
into forbearance without first informing them of other less-
costly options, which can possibly put students on a path into
default, ruining their credit ratings, and exposing their
income to being garnished.
Julie Roberts is a 52-year-old woman fighting Stage 4
breast cancer. She owes $80,000 in student loans and asked for
a cancer deferment, which the Congress mandated by law through
the Labor, HHS bill last year. However, her loan servicer told
her no.
The servicer said the bill had not passed. It had passed.
And that she did not qualify. She did. And it was only after
she went to the press did the servicer comply with the law.
So this is a serious problem, and as the IG indicated, it
is not an isolated incident. The Inspector General found that
between 2015 and 2017, most, 61 percent of the recorded
interactions were out of compliance with the law. As the
subcommittee that provides funding for the Department of
Education and student loan servicers, we have a duty to address
this issue.
Why? In fiscal year 2019, we provided $1,700,000,000 for
student aid--for the student aid administration. Of that
amount, almost $1,000,000,000 went to servicing contracts,
$700,000,000 went to salaries. And that budget has increased by
over $500,000,000 in 5 years while other education priorities
have been flat or even eliminated.
So it is imperative that we get to the bottom of these
issues. Of particular concern to me is what the IG deemed to be
inconsistent oversight at the Department of Education.
According to the Inspector General's report, and I quote, ``FSA
management rarely used available contract accountability
provisions to hold servicers accountable for instances of
noncompliance.''
And secondarily, ``By not holding servicers accountable for
instances of noncompliance with Federal loan servicing
requirements, FSA, the Federal Student Aid, did not provider
servicers with an incentive to take action to mitigate the risk
of continued servicer noncompliance that could harm students.''
So as a result, ``Taxpayers might not have been protected
from improper payments.''
The Department of Education let servicers off the hook. The
worst offenders continue to get loan portfolio. In fact, the
Department's performance metrics for these companies does not
take compliance with the law into account. They don't have to
comply with the law. You could be breaking it and continue to
get contracts.
I will also note that right now borrowers do not have a
choice with regard to their loan servicing company. They have a
choice of a college, of their college on the front end, but
they do not have options for loan servicers when they leave
school. That takes away their leverage and the incentive for
servicers to try and keep their business.
Now the Department of Education has claimed that they are
fixing these problems. However, there is a lack of
transparency, so we cannot simply take their word for it. We
have an oversight responsibility.
Secondarily, the problem goes even further than what the
Inspector General has uncovered. That is because Secretary
DeVos is preventing States from stepping in to help. States
have enacted student loan bills of rights. My home State of
Connecticut was the first State to do so.
But Secretary DeVos is claiming that the Higher Education
Act preempts States from enforcing those consumer protections
for students. In a March 2018 statement of interest in the
Federal Register, the Secretary said in a quote, ``The
servicing of direct loans is an area involving uniquely Federal
interests that must be governed exclusively by Federal law.''
In other words, not only do States have no business trying to
protect individuals within their boundaries, they are
prohibited from doing so by Federal law.
Let me just say that is false. Nothing in the Higher
Education Act even suggests that Congress intended to curb
State law on this issue. Nothing in Federal law gives the
Secretary of Education the authority to broadly supersede State
law in this area. And I will note it is written into the loan
servicer contracts that they uphold State law.
I do not believe I need to preach the merits of contract
law or federalism to my colleagues. The courts have dismissed
Secretary DeVos' interpretation--California, Massachusetts,
Washington, Illinois, and Pennsylvania. And the Secretary's
actions have drawn bipartisan rebukes from the National
Governors Association, State bank regulators, Republican and
Democratic Members of Congress, and a large bipartisan
coalition of attorneys general, including Colorado, Illinois,
Kansas, Kentucky, Montana, Tennessee, Texas, and many more.
It is our duty as the subcommittee which funds the
Department of Education to ensure that we are supporting
Americans in their quest for higher education and solid footing
in the middle class. Secondarily, we must ensure that programs
that we have in place to do so are serving public, not
corporate interests.
I am looking forward to hearing from our witnesses on the
extent of the problem, how we can make the loan servicing
system and the Department's oversight and policies work for our
students.
I now would like to turn it over to my good friend from
Oklahoma, the ranking member of the subcommittee, Mr. Cole, for
any opening remarks that he cares to make.
Mr. Cole. Thank you very much, Madam Chair.
And let me begin by apologizing to you and the committee
for being late.
Ms. DeLauro. You don't have to apologize.
Mr. Cole. I was testifying at the Budget Committee. So I
raced here as fast as I could.
Ms. DeLauro. A noble cause.
Mr. Cole. A noble cause. And an often hopeless endeavor.
[Laughter.]
Mr. Cole. We are at least trying.
Ms. DeLauro. Amen. Amen.
Mr. Cole. But again, I want to thank you, Madam Chair.
I think this is the first time this subcommittee has held a
hearing on the topic before us today, and I want to commend the
gentlelady for her interest in oversight on the loan servicing
program. I think it is a real contribution, and I am glad this
committee is going to take a hard look.
The subcommittee provides nearly $1,000,000,000 a year to
the Department of Education to pay for servicing of Federal
student loans. The policy behind the program is outside our
jurisdiction, but I do agree we need to ensure accountability
and proper program performance using appropriated funds.
Federal student loans are complicated and confusing for
many borrowers. They rely on the Department of Education and
their loan servicers to help them navigate the system. I
understand the Department is currently attempting to modernize
and upgrade the way it communicates with borrowers through the
NextGen initiative. And frankly, I want to commend the
Department for tackling a problem you clearly didn't create,
but you inherited. And I think it is important we continue to
make progress.
I am hopeful that efforts like this can increase borrower
satisfaction and choice, as well as make efficient use of
taxpayer dollars. I look forward to hearing the testimony, as I
enjoyed reading the testimony, quite frankly, and learning
about ways we can make the loan servicing system work better
for both borrowers and taxpayers.
And with that, Madam Chair, I yield back the balance of my
time.
Ms. DeLauro. Thank you very much.
Let me just set some ground rules and a little housekeeping
here for the moment. We will be calling on Members based on
seniority of the Members that were present when the hearing was
called to order. We will alternate between the majority and
minority.
Each Member is asked to keep their questions to within the
5 minutes per round. We will conduct one round of questions for
the first panel and then turn to the second panel, and I am
advised to tell witnesses to please turn on the microphone.
So, again, let me thank our distinguished panelists for
being here. I will introduce the witness for our first panel
and then wait and do the introductions for the additional
witnesses before we begin panel two.
And first, we have Mr. Bryon Gordon, who is Assistant
Inspector General for Audit in the Department of Education's
Office of the Inspector General. He has more than 15 years'
experience in auditing Federal education programs and
previously served for 23 years at the Government Accountability
Office. Mr. Gordon led the recent audit on student loan
servicing that we are here to discuss today.
Mr. Gordon, please begin your testimony. Thank you.
Mr. Gordon. Chairwoman DeLauro, Ranking Member Cole,
members of the subcommittee, thank you for inviting me here
today to discuss the U.S. Department of Education Office of
Inspector General's recent audit of the Federal Student Aid
office's oversight of student loan servicing. The objective of
our audit was to determine whether FSA had established policies
and procedures to mitigate the risk of servicers not servicing
federally held student loans in accordance with Federal
requirements.
To help manage the over $1,000,000,000,000 Department-owned
student loan portfolio, FSA contracted with nine companies
called servicers as of September 30, 2017. The servicers
collect payments on loans, advise borrowers on resources and
benefits to manage their student loans, and respond to customer
service inquiries. When performing this work, these nine
servicers must comply with all requirements of servicing
federally held student loans.
At the time of our audit, FSA had several processes in
place to oversee the work of the servicers. We examined those
activities, as well as FSA's policies and procedures.
We found that FSA's oversight policies, procedures, and
activities did not collectively provide reasonable assurance
that the risk of servicer noncompliance with Federal
requirements for servicing student loans was being mitigated or
reduced. Specifically, we found that although it regularly
identified instances of servicer noncompliance, FSA did not
track all instances of noncompliance. In addition, FSA
management did not analyze the information it did have to track
and identify trends and recurring instances of noncompliance at
each servicer and across all servicers.
We found that FSA identified servicer noncompliance in 210,
or about 61 percent, of the 343 monitoring reports that we
analyzed. These monitoring reports disclosed recurring
instances of noncompliance primarily in two areas--consumer
protection, where representatives were not sufficiently
informing borrowers of the available repayment options, and
income-driven repayment, where servicers were incorrectly
calculating payment amounts.
Additionally, we found that FSA management rarely used
available contract accountability provisions to hold servicers
accountable for instances of noncompliance and did not
incorporate a performance metric relevant to servicer
compliance into its methodology for assigning loans to
servicers.
For example, FSA identified just four instances totaling
about $181,000 over a 5-year period where it required servicers
to return funds for failure to comply with Federal
requirements. We also found that FSA employees did not always
follow policy when completing their evaluations of the quality
of servicer representatives' interactions with borrowers and
that FSA did not provide reports of failed calls to servicers
during a 10-month period from June 2016 through March 2017.
Because FSA's oversight policies, processes, and activities
do not collectively provide reasonable assurance that the risk
of servicer noncompliance was being mitigated, FSA did not have
reasonable assurance that servicers were complying with Federal
loan servicing requirements when handling borrowers' inquiries.
Borrowers might not have been protected from poor services, and
taxpayers may not have been protected from improper payments.
Because it was not holding loan servicers accountable for
instances of noncompliance, FSA did not provide servicers with
an incentive to take action to mitigate the risk of continued
servicer noncompliance that could harm students. We made six
recommendations to address the weaknesses that we identified.
FSA disagreed with parts of our findings but agreed with all of
our recommendations and stated that it was already implementing
corrective actions.
I would like to also mention that we reissued the report
yesterday with a few minor corrections, none of which affects
the findings or the conclusions of the report.
After issuing our report, additional information was
brought to our attention regarding an FSA review of Navient
that we discussed in our report and the reason that Oklahoma's
Student Loan Authority was required to repay funds to FSA. In
response, I ordered a full review of the supporting
documentation for the entire report, which resulted in the
identification of one other minor correction.
In closing, the OIG is committed to working with FSA, the
Department, this subcommittee, and the Congress to help improve
Federal student aid programs and operations so that they meet
the needs of America's students and families and ensure that
the vital tax dollars that fund these programs are protected
from waste, fraud, and abuse.
I would be happy to answer any of your questions. Thank
you.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. DeLauro. Thank you very much, Mr. Gordon.
We will start with the questioning. Mr. Gordon, Federal
Student Aid maintains a database where you track servicer
noncompliance. Audit reports said the database may have been
incomplete, as FSA chose to leave out evidence of noncompliance
as long as the servicer promised to remedy the situation, the
problem.
Do you think that FSA's approach to essentially take the
servicer's word for it is a sound approach to protecting
students and taxpayer dollars, and did FSA go back and check to
make sure the servicer followed through and implemented the
remedy to the noncompliance problem?
Mr. Gordon. So as we state in our report, FSA was not
tracking all instances of noncompliance. During their reviews,
if the servicer corrected the noncompliance, FSA would not
track it. FSA would only track the instances that were not
addressed during the review.
Ms. DeLauro. So that, in fact, it was--we don't know--they
didn't lay out the full scope of the problem?
Mr. Gordon. Right.
Ms. DeLauro. Okay. What is the impact of FSA not
thoroughly tracking all compliance--noncompliance issues?
Mr. Gordon. So this is a key finding of our report where
we feel that FSA should be tracking all instances of
noncompliance, analyzing that information, and using that to
identify trends in noncompliance either of particular servicers
or across all servicers. By not collecting all that information
and analyzing that, they did not have the information they
needed to hold the servicers accountable.
Ms. DeLauro. So, in fact, that puts the borrower at risk
and costs the taxpayers for servicers who were potentially not
following compliance efforts?
Mr. Gordon. Correct. FSA would work to address the
individual instances of noncompliance in its reviews, but by
not identifying trends and correcting the underlying causes and
working to address those, then potentially other borrowers
would be affected----
Ms. DeLauro. Be affected.
Mr. Gordon [continuing]. If those problems weren't
corrected.
Ms. DeLauro. Another question. In your testimony on the
audit, you highlight examples of FSA's noncompliance with
Federal law and how the noncompliance was readily apparent in
your review of call monitoring reports. As these reports only
review a sample of calls between borrowers and servicers, is it
possible that there were other examples of noncompliance that
were not captured by FSA? And in addition, are the recorded
phone calls that FSA reviews provided by the servicers
themselves?
Mr. Gordon. Yes, the calls are provided by the servicers
to FSA. In terms of correcting additional problems, as I
mentioned, FSA typically focused on the individual instances of
noncompliance that they found in the reviews. They rarely went
beyond those to see if there were additional instances of
noncompliance beyond those particular calls that they
monitored.
Ms. DeLauro. So, in fact, the servicers pass on the calls
to FSA. So they make--they decide what to pass on. Is that
somehow a conflict of interest here?
Mr. Gordon. We do not specifically address that as part of
our report. FSA requests a sample and would review a sample of
calls.
Ms. DeLauro. But in fact, you know, I do the call, and
then I pass on the information. There is no additional
oversight with regard to that call and that we have no other
examples of noncompliance that may not have been captured by
what happened. And in terms of performance, as I understand
it,--they don't have to deal with requirements of the law in
terms of what they are obligated to do.
Let me just ask another question. I have got about a
minute. Did you want to say something?
Mr. Gordon. No, no.
Ms. DeLauro. FSA management rarely used available contract
accountability provisions to hold servicers accountable for
instances of noncompliance. FSA has required servicers to
return just $1,700,000 to the Federal Government for
noncompliance.
This subcommittee most recently--we provided $1,700,000,000
in both fiscal years 2018 and 2019, $1,000,000,000 carved out,
as has been pointed out. That means, $1,700,000 penalties
servicers had to pay only--that accounts for less than 12
percent of the money that Congress provided.
What more can FSA have done to hold servicers accountable
for noncompliance? What tools are at their disposal that they
are not using?
Mr. Gordon. As we pointed out in our report, there are two
primary tools. One is they do not have to pay servicers if they
are noncompliant in providing the services. So they could
request those funds back when they determine that there is
noncompliance. The other tool that they do not utilize is they
do not factor in compliance into their allocation formula for
allocating loans among the servicers. So they do have two tools
at their disposal that they could use.
Ms. DeLauro. Have they denied payment of any of the
servicers?
Mr. Gordon. As our report points out, over a 5-year
period, FSA was only able to identify 4 instances where they
required servicers to return funds for just $181,000 over that
5-year period.
Ms. DeLauro. Thank you. My time is up.
Congressman Cole.
Mr. Cole. Thank you very much, Madam Chairman.
Mr. Gordon, could you give us a quick history lesson? When
did the system that we have now come into being and whereby we
manage this incredibly large portfolio?
Ms. DeLauro. 1998?
Mr. Gordon. Yes, FSA became a performance-based
organization in 1998.
Ms. DeLauro. Does he have his mike on?
Mr. Gordon. I am pushing the button. It is not going on.
Mr. Cole. Could you just pull the other mike over?
[Pause.]
Mr. Gordon. My apologies. So the current system where FSA
relies on servicers, on Title IV Additional Servicers, that
started, the initial contracts were let for those in 2009,
where FSA primarily uses a performance-based approach to
managing those servicer contracts. At the initial time, there
were four TIVASs. After then, some not-for-profits were added,
and the not-for-profits are--as of the time of our report,
there were five not-for-profits for a total of nine servicers.
Mr. Cole. Since this system has been in operation since
2009, is your audit the first time we have really gone and
looked at it? And again, I want to commend the gentlelady for
holding this hearing.
Mr. Gordon. No, we have looked at oversight, FSA's
oversight of its contractors on multiple occasions. That
continues to be an area that we highlight as a management
challenge for FSA and have made recommendations. GAO has also
done the same. Numerous reports have identified issues with
FSA's oversight.
Mr. Cole. And how much success have you had in your
recommendations being accepted and adopted by FSA?
Mr. Gordon. So we have a good track record with FSA
accepting and adopting our recommendations. Yet we continue to
find instances or evidence where there are problems with
oversight on both contractors and program participants.
Mr. Cole. Again, we have been told there is a new program
being put in place program, this--I always want to say
``NextGen,'' but MyGen program. Have you had a chance to look
at that and see whether or not it is making any material
difference in some of the concerns you have expressed in the
audit?
Mr. Gordon. We have not looked at that specifically. They
are still early on in the planning for that. They have made
indications--in the response to our report, they indicated that
they felt that that would enable them, put them in a better
position to address some of the issues that our report
identifies.
Mr. Cole. Can you tell us when you would expect to have
another look to see whether or not this has actually made a
difference?
Mr. Gordon. So we will follow up on the recommendations
that we made and work with FSA as they propose specific
corrective actions, and then, ultimately, they will be
responsible for implementing those corrective actions.
Mr. Cole. Okay. In your written testimony, you mentioned
that the Federal aid programs are complex and inherently risky
because of the numerous entities involved in administering
them. Can you elaborate on that? Describe specific complexities
and share with us how many different types of entities are
actually involved?
Mr. Gordon. So the student loan programs that FSA
administers, they rely heavily upon the servicers that we are
talking about today. They still also have an outstanding
portfolio of guaranteed student loans that were left over from
the old FFEL program. They are responsible for overseeing the
6,000 institutions that participate in the Title IV programs
and administering all the laws and requirements under the Title
IV programs.
Mr. Cole. Okay. And finally--and this is probably an
unfair question--but you look at a lot of different agencies. I
am just trying to sort of in the spectrum of things that you
look at, where would you rank FSA? I mean, are they worse than
most public entities in terms of administering, better,
average?
Mr. Gordon. I am not really in the position. I am just
with the Department of Education OIG. So we primarily focus on
the Department and FSA in our audit work.
Mr. Cole. Well, that was a tough question. So I certainly
understand that.
Thank you, Madam Chairman. I yield back the balance of my
time.
Ms. DeLauro. Mr. Pocan.
Mr. Pocan. Thank you, Madam Chairman.
And thank you very much for being here today. I appreciate
it.
I had a question. In the report when you are reviewing
servicer noncompliance, mostly oversight was around monitoring
phone calls, and presumably, that is the way the servicers are
choosing to reach out to folks. With your oversight
responsibilities, would it be easier if borrowers were
permitted to interact with the servicers over email and they
had a written record to review?
Specifically, you know, given some of the legal cases and
things we have had to deal with, wouldn't that give a record
for people trying to be able to address some of these issues?
Could you just address that?
Mr. Gordon. I believe they can interact by email with the
servicers also.
Mr. Pocan. But it looks like you exclusively refer to
phone calls. Did you also review emails?
Mr. Gordon. We did not. We reviewed FSA's tools that they
use to monitor the servicers. The call monitoring is one of the
key ways that they monitor how servicers are interacting with
borrowers.
Mr. Pocan. Okay. So they don't--do you know if they
actually do a review of the emails as you did your----
Mr. Gordon. So, so we discuss several different kinds of
reviews in our report. They also do onsite reviews of the
servicers where they review borrower records, the interactions
with the borrowers. We also cite findings from those reviews in
our report.
Mr. Pocan. And do you know, I mean, roughly a percent of
what is done via phone versus email by the servicers?
Mr. Gordon. I do not know that.
Mr. Pocan. Okay. This would be an interesting area to know
because, you know, it is a lot harder over a phone call to be
able to do that kind of monitoring versus something that you
have a paper record, and the actual consumer would have a paper
record would certainly be helpful.
So you highlighted some pretty interesting examples of some
of the abuses, and there has been some talk in some of the
media articles about what happened. Could you highlight just a
couple to give an example of what kind of abuse has gone on and
what we are hoping to address?
Mr. Gordon. So in our report, we have highlighted several
different types of noncompliance that FSA found during its
reviews. In particular, one of the most frequent areas that we
highlight was the fact that servicers were not providing
information on all the available options when they were working
with borrowers on making adjustments to their payment plans,
which is a key requirement of the program.
And by providing that kind of information, that would allow
borrowers to make informed decisions and understand what their
options and the consequences of the option that they choose are
relative to the other options available to them.
Mr. Pocan. Were you able to tell if that was done by
omission or by intent?
Mr. Gordon. So, no, we do not look at that. We looked at
and relied on the reviews that FSA did.
Mr. Pocan. Did the FSA do reviews to see if it was by
omission or intent?
Mr. Gordon. FSA's reviews generally focused on the actual
noncompliance and correcting the noncompliance. Again, one of
our key recommendations is that we think by analyzing and
reviewing all the evidence across servicers, FSA would be
better positioned to get at the potential causes behind why
that noncompliance is occurring, whether it is on purpose or
whether it is just by lack of clarity on what is required.
Mr. Pocan. And I am sorry if I am not being clear, but
were you able to tell by doing that review that they actually
do that, or did they just see if there was noncompliance, or
did they see how it occurred?
Mr. Gordon. That was one of the key recommendations of our
report is that they should do that, yes.
Mr. Pocan. They don't--gotcha. And then there is something
in the--there is an article in Forbes about the Department of
Education's loan default unit is in disarray. Specifically, it
addressed the Department's default resolution group and the
debt management and collection system. Did you look
specifically at those two, and if so, did you make
recommendations to the agency to address those?
Mr. Gordon. No, we did not look at those issues. What I
will say is we are currently about to begin our annual work
planning process, and that is an issue that we could take under
consideration as we look to develop new audit work for the
future.
Mr. Pocan. Yes, that would be, I think, great. Just from--
based on the work you have done, sometimes it is nice to find
the other areas, and there certainly seems to be a couple areas
that would be worth looking at.
I yield back, Madam Chairman.
Ms. DeLauro. Thank you.
Mr. Harris.
Mr. Harris. Thank you very much.
Let me just ask a question. Before 2010, how big was the
portfolio that FSA dealt with?
Mr. Gordon. So in----
Mr. Harris. It is now over $1,000,000,000,000.
Mr. Gordon. Yes, it is over $1,000,000,000,000.
Mr. Harris. What was it then?
Mr. Gordon. I believe it was--I believe it has about
tripled since that time.
Mr. Harris. Tripled, that is a lot. I mean, as you said,
it is one of the largest financial institutions in the country.
Mr. Gordon. Yes.
Mr. Harris. And it grew that way in only 8 years. So
unlike the other financial institutions that handle
$1,000,000,000,000 worth of things have been around 50, 60, so
they had a lot of time to kind of figure out how this thing.
And the law has changed since then, right? I mean, we changed
it. The regulations changed.
So I guess the approach you have is I understand the IG
does this audit. And you know, you do an audit of any
Government agency, you are going to find some places where they
don't--where things don't comply. But my understanding is that
the FSA kind of agreed with the six recommendations and said
they were going to do it. And that is 5\1/2\ months ago. Is
there any data that they haven't been doing it in the past 5\1/
2\ months?
Mr. Gordon. No, we have not reviewed anything specific to
the actions that they discussed in the report.
Mr. Harris. Okay. So we did the investigation. We found
some areas, and by the way, it is not that the current
administration hasn't taken any action. My understanding is
they have taken action. Even in the report, they have taken
some actions to get the money back from these servicers that
aren't doing the job. I get it, and we, you know, hire some
other servicers to do the job better, or these servicers will
figure it out.
But, so is there a problem ongoing? I mean, what is your
perception? And you might say, look, I don't know. We studied
it over 5 months ago was our report. What is your perception
now?
Mr. Gordon. So I think it is a good thing that FSA agreed
with our recommendations and reported back that they will take
action. After we issue a report, we will work with the
Department to look specifically at what those actions are, and
we will review those actions. And then once we are okay with
that, then it will be up to them to implement those actions.
Mr. Harris. Sure.
Mr. Gordon. So, yes, I do think that is a good thing that
they were responsive to the recommendations and have agreed and
reported back to us that they have already taken action on
those.
Mr. Harris. That is kind of what they are supposed to do,
right?
Mr. Gordon. Correct.
Mr. Harris. When was the previous audit this extensive,
when was it undertaken of FSA? Ever?
Mr. Gordon. So we are always looking at various aspects of
FSA.
Mr. Harris. Do you understand my question?
Mr. Gordon. Yes.
Mr. Harris. This extensive an audit of FSA, has it
occurred since 2010? No, right?
Mr. Gordon. I don't think so. I would have to get back to
you on that.
Mr. Harris. Okay, probably not. So let me see. You have a
new program. You triple the size into a $1,000,000,000,000
mechanism. Hopefully, maybe next time we will talk about the
increasing cost of college because that is really what is the
underlying problem.
You found some problems. The agency said they are going to
fix it. Why aren't we waiting until your next audit to
criticize the agency for noncompliance? I mean, the bottom
line, this is the way the Government is supposed to work,
right?
Mr. Gordon. Yes.
Mr. Harris. Okay. I just thought I was missing something.
Thank you very much. I yield back.
Ms. DeLauro. Ms. Bustos.
Mrs. Bustos. Thank you, Madam Chairman.
And also I want to thank our chair, Congresswoman DeLauro,
for being a truth seeker in everything you do, and I don't
think it is our job up here to protect the Secretary of
Education.
So I just got on the phone before I came here with one of
my sons. My husband and I have three children, all college
educated at different levels. One is a graduate of community
college, one a private college, and one a public university.
And one of my sons--and I am not going to say who because he
wouldn't be happy if I called him out by name--still has a six-
figure debt after graduating in 2010. He started out in a job
where he made $30,000 a year. So you think about how that
delays your life.
So to the other line of questioning. At the end of every
single one of these violations that you said the two biggest,
consumer protection was one of the biggest violations. Number 2
was the incorrect--you didn't use the word ``deciphering,'' but
I will say incorrect deciphering of payment amounts.
And so at the end of every single one of those violations
is a human being, is one of our kids or grandkids who went to
college and now are having to delay their lives. Maybe they
can't invest in a home. Maybe they put off getting married, all
of that.
So this question is kind of a big one, but right now, let
us look at the freshmen who will be graduating, let us say, in
4 years. In the next 4 years, what is it going to take to clean
up this mess? What do you need from us, and what is the game
plan to clean up this mess so our children aren't continuing to
be ripped off by the system?
Mr. Gordon. Thank you for the question, and I apologize,
my mike has gone off again.
Mrs. Bustos. I don't think that is your fault.
Mr. Gordon. So I think where this committee and Congress
can help with this, I think the recommendations that we make in
this report are really central to better positioning FSA to
address the underlying issues of noncompliance. If they were to
do a better job of analyzing the noncompliance and taking
actions ultimately to reduce noncompliance, then that should
decrease the likelihood that your son or daughter would
experience problems in the future.
So anything that this committee can do to support the
recommendations, either by asking FSA to report on their
progress or on the outcomes of what they do in response to our
report, I think would be helpful to reinforce that with them.
Mrs. Bustos. Well, it is kind of difficult, it seems to
me, when we have got Secretary DeVos, who has come forward
saying that Federal law trumps State efforts when it comes to
oversight of these companies.
So I come from Illinois, and we are one of the States that
is actually trying to fix this. And I think that is part of the
problem when we have basically a Secretary who is overseeing
all of education who doesn't seem to want to work with us in
making this better for our children.
Just another follow-up question. In your testimony, you
talked about failed calls, and can you explain what is a
``failed call?'' If you can describe what that means, how that
looks to the person on the other end of the line.
Mr. Gordon. So FSA would review the calls. They would take
into consideration about 25 percent of what they look at is the
actual greeting and the information that they provide the
servicer on--or provide the borrower on the call. And then the
remaining 75 percent of the review would be related to what the
servicer works through with that borrower on that call. They
would basically score whether they accurately provided the
service to the borrower, and any score below 85 percent would
be deemed a failed call.
So failed calls could be just based on the greeting itself,
or it could be--also include compliance issues that FSA found
during its review of the call.
Mrs. Bustos. Okay. Thank you very much for being here with
us today. Thank you for your efforts to make things right.
And with that, I yield back the balance of my time.
Ms. DeLauro. I thank the gentlelady.
And response to Congressman Harris' query and just as a
point, the Federal Family Education Loan Program, that is FFEL,
that was prior to the Direct Loan Program, was riddled with
widespread fraud, waste, and abuse. In fact, the GAO and
Education OIG highlighted those issues in a 2003 semiannual
report.
You should also know that in July 2018, the Government
Accountability Office released a report, entitled ``Federal
Student Loans: Further Action Is Needed to Implement
Recommendations on the Oversight of Loan Servicers.'' The
report reviewed the Department of Ed's efforts to implement
previous recommendations that it had made improving that.
The performance audit was conducted in 2000--April 2018 to
July 2018. And in that report, GAO stated the Department of
Education had only implemented two of the six recommendations
GAO made to the Department improving its oversight of student
loan servicers in both 2015 and 2016, which means that FSA had
over 2 years to implement GAO's recommendation, but in fact, it
chose not to.
Mr. Moolenaar.
Mr. Moolenaar. Thank you, Madam Chair.
Thank you for your testimony today and for your overview of
what you learned in this process.
I wanted to understand how was the objective of the audit
determined, and what prompted that back in what year was it
that it started?
Ms. DeLauro. 1998.
Mr. Gordon. This audit?
Mr. Moolenaar. Was it 2015?
Mr. Gordon. Yes.
Mr. Moolenaar. Okay. So 2015, in January of 2015. And what
prompted the audit, and what determined the objective of the
audit?
Mr. Gordon. So as I have mentioned, oversight by FSA has
been a management challenge area for us. That is always an area
of focus. The actual objective itself was derived to take a
broad look at FSA's overall system of controls over
noncompliance, what they were doing to ensure that servicers
were complying with the requirements.
Mr. Moolenaar. So, in 2015, you determined there was a
management challenge at FSA or that----
Mr. Gordon. It has been a management challenge for years,
going back a little over a decade, yes.
Mr. Moolenaar. Okay. So who at the time was the Secretary
of Education in 2015?
Mr. Gordon. That would be the prior administration.
Mr. Moolenaar. Do you remember who that was?
Mr. Gordon. There was some change. I would have to double
check, yes.
Mr. Moolenaar. So there was some transitioning going on in
the prior administration, and at that time, you felt it was
worthy of this investigation because there were problems that
were being identified?
Mr. Gordon. Yes. These problems span multiple
administrations. As we point out in our management challenge
report, these are large, complex programs. FSA has a lot of
responsibility, oversight, and this is an area that we continue
to focus on in our audit work.
Mr. Moolenaar. Okay. So then with the transfer and into a
new administration, you presented the findings of your report,
and then the new administration, I understand there were some
disagreements on maybe whether the policies were in place or
not. Is that correct?
Mr. Gordon. They disagreed with the overall conclusion of
the report.
Mr. Moolenaar. Okay.
Mr. Gordon. The main finding that they did not have
adequate controls to ensure that servicers were complying, they
disagreed with that. However, they did agree with all the
recommendations and did report back to us the actions that they
either had taken or were planning to take.
Mr. Moolenaar. Okay. So I guess that gets to the point
that Dr. Harris was raising, too, is so this was brought to the
attention of the Secretary or the Director of the FSA. They
agreed with the recommendations and now are in the process of
implementing those. Is that your understanding?
Mr. Gordon. Correct, correct. Yes, we will work with them
on their actual corrective actions. They will present to us
formal corrective actions in response to our recommendations.
And once we are okay with that, then it is up to them to
actually implement and address the issues that we found.
Mr. Moolenaar. Okay. And will you come back to the
committee and report on that at some point?
Mr. Gordon. I would be happy to.
Mr. Moolenaar. Okay. I am assuming that the chair would
permit that? I would be interested in hearing that.
Ms. DeLauro. I would be absolutely willing to do that.
There was also, I guess, some disagreement with some of the
recommendations, but that you are taking into consideration.
They did disagree with some of your recommendations?
Mr. Gordon. They disagreed with the overall conclusion of
the report.
Ms. DeLauro. Conclusions, okay.
Mr. Gordon. The recommendations themselves, they did agree
on.
Ms. DeLauro. Okay. Fine, thank you for that clarification.
Mr. Moolenaar. Were there areas where your conclusion was
that there needed to be a policy in place, they may have
disagreed and said that there was a policy in place? Is that
the kind of----
Mr. Gordon. Our conclusion was that they did not have
procedures in place to provide reasonable assurance to ensure
that there was not noncompliance by the servicers.
Mr. Moolenaar. Okay.
Mr. Gordon. They felt that all the oversight mechanisms
that they had in place did provide them with that. But we felt
it was really important, not just the oversight that they were
doing, but making use of the information on noncompliance,
analyzing that, and using that to reduce noncompliance in the
future. That was really the disagreement that we had with them.
Mr. Moolenaar. Okay. And then just so I understand, when
there is noncompliance, is there consequences for
noncompliance, and is that part of the policy you are referring
to that----
Mr. Gordon. So under the contract that FSA has with the
servicers, they can take action against the servicers if there
is noncompliance. They do not have to pay the servicers for
servicing the loans that are noncompliant.
Mr. Moolenaar. And has there been action taken on any--
with respect to any servicer?
Mr. Gordon. So as we highlight in our report, there were
only 4 instances in the 5 years prior to the end of our audit.
What they reported back to us is that they had assessed about
$2,000,000 in penalties subsequent to our audit.
Mr. Moolenaar. Okay. Thank you, Madam Chair.
Ms. DeLauro. Thank you.
Ms. Lee.
Ms. Lee. Thank you very much, Madam Chair, and thank you
for giving us a chance to drill down on this really outrageous
action that these servicers are taking. And the report, of
course, not surprising, it is shocking. But this lack of
transparency and accountability is really unacceptable.
And what is worse, when you look at the fact that borrowers
of color disproportionately take on more debt and owe more on
their Federal student loans. I am looking at, what, 77 percent
of African-American students, nearly 50 percent of African-
American students the borrowers defaulted and 75 percent of
those who dropped out of the for-profit colleges.
Now your report, I believe, covered a sample of the abuses
only that the servicers commit. So I am wondering if we looked
at the rest of the data from the student loan borrowers, would
there be more examples of the Department's lack of oversight
and servicer error or not? Or do you use these samples to kind
of estimate what types of errors are there?
And then, secondly, let me just ask you about, and you can
answer all in one response, who are these servicers? How do
they get these contracts? You said in your testimony there are
4 servicers responsible for 93 percent of the
$1,000,000,000,000. Do you have any minority-owned contractors
who are doing this?
I mean, what is going on with this business, and how are
they allowed to do this if it is a contractual arrangement? And
who are they?
Mr. Gordon. So in terms of your first question on the
sampling, we reviewed the reviews that FSA did, both call
monitoring reviews and other reviews that they did of the
servicers. During those reviews, FSA would rely on sampling to
assess compliance. We did not go beyond that.
FSA, as we say in our report, generally did not go beyond
the noncompliance that they found in those samples, which could
be as few as 30 students during--30 borrowers during those
reviews.
In terms of the servicers----
Ms. Lee. Wait a minute.
Mr. Gordon. Sure.
Ms. Lee. Are there any statistical formulas that could
give us a better picture of what the real deal is?
Mr. Gordon. So we did not look at that specifically as
part of our review. FSA does rely on a sampling approach to
test compliance as they do the reviews. We were focused more on
what they did once they identified noncompliance and how they
addressed that and, again, how they used the information that
they had on noncompliance.
Ms. Lee. Well, do you believe you have enough data to make
these conclusions and recommendations off of their sample?
Mr. Gordon. In our report, yes. Yes. Yes, we believe
based--the conclusions that we draw in our report, we believe
we have enough information to do that.
As far as the servicers themselves, we provide that
information in the report. The four main TIVAS servicers, which
I was referring to earlier, they were brought in----
Ms. Lee. Who is that again?
Mr. Gordon. The Title IV Additional Servicers.
Ms. Lee. Okay.
Mr. Gordon. There is four of them--Nelnet, Navient, PHEAA,
and Great Lakes. They are the ones that account for over 90
percent of the servicer fees, and then there are five
additional not-for-profit servicers that also participate in
the program. The number of not-for-profit servicers has varied
over the years. Current, as of the end of our audit, there was
an additional five.
Ms. Lee. Are any minority owned? Are any--and then,
secondly, are they penalized for these errors?
Mr. Gordon. Generally, no, they are not penalized.
Ms. Lee. Well, why not? This is taxpayer money. I mean,
come on. I had a business for 11 years, and if I didn't comply
with my requirements, I would get penalized.
Mr. Gordon. And that was a key recommendation of our
report is that FSA does have the authority to take action in
instances of noncompliance and that they should make more use
of the authority that they have to hold the servicers
accountable.
Ms. Lee. Yes, but that is prospectively. What about
retrospectively? Are they going to be penalized, fined, kicked
out of the program? Why are they still there?
Mr. Gordon. We did not get into that.
Ms. Lee. Well, could you get into it for us, please? I
mean, this is outrageous. And they shouldn't be there. And then
I want to know how many are minority owned, too.
Mr. Gordon. I don't believe----
Ms. Lee. With so many minority students being affected by
this lack of accountability and transparency and rip-offs, I
mean, come on. I would think some minority vendors could maybe
help these other--help FSA understand.
Mr. Gordon. I am not aware if any are minority owned. I
could get back to you on that. Just----
Ms. Lee. Would you get back to us and find out why there
are no minority-owned servicers, given the fact that African-
American and Latino students are 75, 80 percent of the
borrowers?
Mr. Gordon. Yes.
Ms. Lee. Okay. Thank you.
Ms. DeLauro. Ms. Frankel.
Ms. Frankel. Thank you, Madam Chair.
And thank you for your testimony.
I am new to the committee. So I just have really some very
basic questions.
Can you, first of all, explain how are these service
providers, how are they selected, and what is their main
purpose?
Mr. Gordon. So the main purpose of the servicers is to
basically service the loans for the borrowers. So they provide
information, collect payments from the borrowers, advise the
borrowers on alternative payment options, help them through
periods where they have difficulty making payments by, again,
discussing the options that they have available.
So they are basically--they are the face that deals with
all the borrowers, all the student loan borrowers.
Ms. Frankel. And how are they selected?
Mr. Gordon. So the initial four contractors, the TIVASs
were awarded in 2009. The not-for-profits, when they were
brought into the program, that was mandated under law. When
that mandate was removed, FSA still continued to include some
of the not-for-profit as part of the program.
Ms. Frankel. Were they permanently selected, or is there a
contract?
Mr. Gordon. There is a contract. The initial contract in
2009 was a 5-year contract, and they were re-awarded in 2014.
Ms. Frankel. So it will be up this year?
Mr. Gordon. It was a competition. I believe, yes, the
contract--the contract should be up this year.
Ms. Frankel. So is there going to be, do you know, any
consideration as to compliance whether they will be reselected?
Mr. Gordon. The FSA is currently going through, as was
discussed earlier, a major new initiative, the Next Generation,
where they are planning to basically revamp how they provide
servicers and how they work with the loan servicers.
Ms. Frankel. Can you give specific examples of how
noncompliance actually affects the borrower?
Mr. Gordon. So in the examples that we talk about in our
report where a servicer does not provide a full set of
information when a borrower comes in and seeks an alternative
repayment, that borrower may select a payment plan that may not
be in their best interest. They may not understand the
consequences of that plan or the alternatives that would be
available.
The other, in terms of the income-driven repayment options,
if those payments are miscalculated, the borrower could either
be over or under assessed payments.
Ms. Frankel. Are the service providers given specific
information on how to answer questions, or is it left to their
own devices?
Mr. Gordon. The provision in the contract requires the
servicers to comply with Federal requirements. In some
instances, FSA gives very specific directions. In other
instances, they may not. That is one of the areas of feedback
that we have received from servicers related to our report is
they may not have received specific information on what they
need to do.
Ms. Frankel. Okay.
Ms. DeLauro. Will the gentlelady yield for one second?
Ms. Frankel. Yes.
Ms. DeLauro. Because to follow your line of questioning, I
think in terms of noncompliance and the effect on the borrower,
I think you need to let Congresswoman Frankel know about the
issue of forbearance and moving borrowers into forbearance and
what that means. And that, in fact, that is the basis of a suit
against one of the servicers, which is Navient.
Mr. Gordon. Sure. If they are improperly moved into
forbearance or make that decision based on being provided
incomplete information, they would continue to accrue interest
and ultimately end up with a larger loan debt as a result of
the period that they spend in forbearance. So, yes, it can have
a direct financial consequence on the borrower.
Ms. Frankel. Are there any incentives for the providers to
be in compliance, number one? And number two, is there any
competition? Do borrowers have any options who they can work
with?
Mr. Gordon. So the borrowers are assigned to a specific
servicer. So, currently, no on that. As far as competition
among the servicers, the loans are allocated based on a formula
that is primarily driven by the extent to which they keep
borrowers in a current payment status.
Ms. Frankel. And are some doing better than others?
Mr. Gordon. Yes.
Ms. Frankel. Yes, okay. And are there any incentives for
compliance?
Mr. Gordon. So that is actually the key part of our report
is that this loan allocation formula, because it does not
include compliance, does not really provide incentive to
increase compliance on the part of servicers.
Ms. Frankel. Thank you. I yield back.
Ms. DeLauro. Thank you.
Mr. Graves, it is my understanding that you have no
questions. So what we will do is to complete this panel but say
a very big thank you to you, Mr. Gordon, for the work that you
do, for the impartiality of the work that you do and the
independence. Because, in fact, the work of the Inspector
General across departments and the Federal agencies provide us
with important information.
And as you pointed out that your recommendations, which
were laid out, and we would, you know, want to see those and
obviously see whether or not they are being--there are changes,
corrective actions being made. But our job is to take a look at
the data, the material that you put forth and then take it from
there.
So we are very, very grateful for your testimony this
morning. Thank you so much.
Mr. Gordon. And thank you.
Ms. DeLauro. Now the second panel to move forward, and we
are going to--we are sorry about the microphones, Mr. Gordon.
But they are going to take just a very few minutes to please
come on up, but they are going to fix the microphones so we
won't run into this again.
Thank you.
[Pause.]
Ms. DeLauro. Thank you. I will do brief introductions for
the witnesses who are on this second panel.
We have first Ms. Joanna Darcus, who is the Massachusetts
Legal Assistance Corporation Racial Justice Fellow at the
National Consumer Law Center. Joanna represents low-income
student borrowers of color using advocacy and litigation to
address predatory education and lending practices.
Next we have Ms. Shennan Kavanagh, Deputy Director of the
Consumer Protection Division at the Massachusetts Attorney
General's office, where she oversees a variety of consumer
protection matters relating to student loans, auto finance,
mortgages, and debt collection. She is also the head of the AG
office's enforcement initiative on student loan servicing.
Then we will hear from Preston Cooper, research analyst in
higher education policy at American Enterprise Institute, who
focuses on the economics of higher education with a particular
emphasis on higher education policy at the Federal level.
And last, we will hear from Ms. Colleen Campbell, Director
of Postsecondary Education at the Center for American Progress.
Her work focuses on providing accessible, affordable
postsecondary options for underrepresented communities and
adult learning.
Please everyone note that your full testimony will be read
into the record, and we will deal with 5-minute presentations.
Ms. Darcus.
Ms. Darcus. Chairwoman DeLauro, Ranking Member Cole, and
members of the committee, the National Consumer Law Center
thanks you for this opportunity to testify before you today.
For the past several years, I provided free legal help to
student loan borrowers, first as a civil legal aid attorney in
Philadelphia and now from Boston with the National Consumer Law
Center as a member of our Student Loan Borrower Assistance
Project. I offer this testimony on behalf of our low-income
clients.
It is based on our experience representing them, as well as
our work providing technical assistance and training to other
advocates and attorneys who are also assisting student loan
clients nationwide. Often, their clients' experiences mirror
those of my clients. Simply put, when servicers fail to provide
effective service, borrowers suffer.
When the Department of Education's Office of Federal
Student Aid fails to identify and correct servicing errors or
fails to hold servicers accountable, more borrowers suffer.
Currently, borrowers are the only ones being held accountable
when something goes wrong.
Servicers have been systematically failing to keep
borrowers current. People routinely fall behind because of lost
or improperly processed paperwork. Borrowers struggle to make
unaffordable payments because servicers routinely fail to
inform them about income-driven repayment, and borrowers miss
out on program benefits like public service loan forgiveness as
a result.
Servicers compete for the task of shepherding borrowers
through repayment. They seek out this responsibility and assert
that they are capable. We pay student loan servicing companies
handsomely to advise borrowers of their options and help them
understand the features of their student loans. We desperately
need that investment to pay off for borrowers and for other
taxpayers.
My low-income clients, the distinct majority of whom are
people of color, took out student loans because it was their
best option to fund an education that promised to put them on a
path to financial security. Borrowing was supposed to make
higher education not just accessible, but affordable. Yet many
of my clients worry about how they will repay their loans and
how long it will take.
They are doing the math and wondering when education will
equal opportunity for them. Yet servicers' errors, delays, and
misinformation tack on additional costs and time in repayment
for many of them. Because there is no statute of limitations on
the collection of student loans, fear and anxiety often mount
along with interest and fees.
The vast majority of my clients have not only experienced
delinquency but have fallen into default. Occasionally, I will
work with a borrower who is still current or who is delinquent.
As we review their National Student Loan Data System report or
I decode it for my clients, I help them understand what it
means and often find that there have been serial forbearances
and other red flags.
For instance, last month I met with a 2017 graduate, a
college graduate, first in her family to go to school, who is
pursuing a public service career but on a graduated repayment
plan. Those two things will never work out for her. That plan
will not get her where she wants to go, which is forgiveness.
There is more we can do before default, but that doesn't
mean that borrowers who haven't experienced default haven't
also been harmed. But unfortunately, for my clients, they need
an attorney to help them access the features and benefits of
the program. But no one should need an attorney to help them
manage their student loans.
The demand for student loan legal assistance far outstrips
the supply right now, and in addition to the services offered
by legitimate companies, student loan attorneys, nonprofit
financial organizations, a vast debt relief industry has
cropped up, taking advantage of these borrowers in distress.
Servicing failure and Federal Student Aid's failure to
address those issues contributed to the explosive growth of
this market. Corrective action and system change is imperative.
Anything less would continue to do a disservice to the student
loan borrowers who should be able to rely on the servicers they
pay for, both as student loan borrowers and as taxpayers.
Since it is tax season, the story I shared about a tax
offset, a single father raising twins who lost $7,000,
including the earned income tax credit, is far from an anomaly.
We need to make these stories a thing of the past. Borrowers
can't wait for change. Just like Ms. H, the retiree, who needed
her Social Security to pay her mortgage so she could save her
house.
Thank you for your attention to these issues and the
opportunity to testify today. Borrowers need your attention,
and they need change now.
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Ms. DeLauro. Thank you.
I might note, and my colleague Congresswoman Lee noted
this, that student loans can't be discharged in bankruptcy as
well. So they face additional pressure there.
Ms. Kavanagh.
Ms. Kavanagh. Chair DeLauro, Ranking Member Cole, and
members of the subcommittee, thank you for inviting me to
testify today on the issue of protecting student borrowers by
oversight of loan servicers. On behalf of Attorney General
Maura Healy, I appreciate the opportunity to speak on this
issue and to share our work advocating for student borrowers in
Massachusetts through enforcement actions, investigations, and
direct borrower assistance.
I am here today to reinforce the serious concerns expressed
by the Department of Education's Inspector General and to urge
this committee to hold the Department accountable to the
students and families we all serve.
Loan servicers are a key player in the student loan system.
They perform the day-to-day management of loan accounts and are
borrowers' primary point of contact for information about their
loans. Notably, despite the critical role that loan servicers
play in borrowers' financial lives usually over the course of
decades, borrowers do not get to choose which company services
their loans. This reality impedes borrowers' ability to
effectively advocate for themselves in the face of servicer
misconduct and provides a disincentive for servicers to hold
themselves to high standards of borrower service.
There is widespread misconduct in the student loan
servicing industry undermining borrowers' ability to repay
their debts and to pursue careers of their choice. Every day,
our office hears directly from student borrowers seeking help
from us when their loan servicers have failed them.
A single instance of servicing noncompliance with State or
Federal law can have a ripple effect for borrowers, permanently
getting them off track with successful loan repayment. Everyone
has an interest in ensuring this does not happen--the students,
their families, their schools, and the taxpayers.
This is a national problem with a significant local impact.
When students cannot afford to repay their student loans, they
cannot make long-term investments in their local communities,
such as buying homes. When graduates who wish to pursue public
service careers as police officers, nurses, teachers, or social
workers, are improperly denied access to Federal programs
enacted to enable them to manage their student loan debt,
communities lose highly skilled and educated public servants.
It is, therefore, imperative that the Federal Government
perform strict oversight of its loan servicers. The Department
of Education must enforce the obligations to which servicers
agreed and hold them accountable when they violate State laws
and Federal laws and regulations that govern the programs in
which borrowers' loans are made. This problem will continue
indefinitely if left unchecked.
State agencies like attorney general's offices are playing
a crucial role in filling the gap and protecting borrowers when
their servicers fail to comply with the law. Attorney General
Healy is a leader in this effort and has devoted a significant
amount of resources to advocacy and enforcement initiatives.
Through our work, we have uncovered many instances of systemic
noncompliance with State and Federal law by loan servicers and
have obtained significant relief for borrowers.
For example, our office has obtained refunds for thousands
of borrowers nationally who were overcharged by their servicer.
Notably, the servicer refused to refund the overcharges for
over a year, despite knowing that it had improperly billed the
borrowers.
We secured a $2,400,000 payment from one servicer for a
variety of violations of State and Federal law, including
failing to properly grant eligible military members an interest
rate cap to which they are entitled under the Service Members
Civil Relief Act; overcharging late fees to borrowers on
Federal income-driven repayment plans; misreporting the status
of borrowers' loan accounts to the credit reporting bureaus;
and failing to timely process borrowers' applications for
income-driven repayment plans.
In addition to our enforcement work, our office created a
designated Student Loan Assistance Unit to assist individual
borrowers by bridging the communication gap with their
servicers. In 2018 alone, the Student Loan Assistance Unit
fielded over 3,000 telephone calls to its hotline and generated
over $1,000,000 in savings and recoveries for student loan
borrowers in Massachusetts.
The volume of borrowers the Student Loan Assistance Unit
assists and the breadth of the issues the unit handles exhibits
the significant need for local resources to help borrowers.
These are just some examples of the work the Massachusetts
Attorney General Maura Healy is doing to protect student
borrowers. They illustrate the need for loan servicer oversight
at both the State and Federal levels.
Thank you very much.
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Ms. DeLauro. Thank you.
Mr. Cooper.
Mr. Cooper. Good morning, Chairwoman DeLauro, Ranking
Member Cole, and members of the subcommittee. Thank you for the
opportunity to testify today on servicing the Federal student
loan portfolio.
My name is Preston Cooper, and I am a research analyst in
higher education policy at the American Enterprise Institute, a
nonprofit, nonpartisan research organization based here in
Washington, DC. My comments today are my own and do not reflect
the views of AEI, which does not take institutional positions
on issues.
Federal student loans are one of the most complex consumer
financial products that exist in the United States. The loan
program has several different repayment plans, ranging from the
10-year standard plan with level payments to extended plans, to
income-based repayment plans. There are also multiple and
overlapping loan forgiveness programs, each with different
requirements and timelines, as well as numerous opportunities
for borrowers to avoid paying their loans. It is no wonder that
student loan borrowers, staring down all this complexity, are
confused.
To manage its $1,200,000,000,000 student loan portfolio,
the Department of Education contracts nine servicers, which
have received plenty of blame for the loan program's problems.
But while there is always room for servicers and the Department
of Education to improve, the best way to help borrowers
navigate our complex student loan program is to simplify the
system.
I will discuss two aspects of Federal student loans where
complexity has led to suboptimal loan outcomes and borrower
frustration, forbearance and public service loan forgiveness. A
recent Consumer Financial Protection Bureau lawsuit alleges
that loan servicer Navient improperly steered its borrowers
into a loan status called forbearance.
Forbearance allows borrowers to pause payments on their
loans for any reason for up to 3 consecutive years. Interest
accrues during that time, with the typical borrower who stays
in forbearance for 3 years racking up $4,500 in additional
interest costs.
Without question, the use of forbearance is excessive.
Sixty-eight percent of borrowers who entered repayment in 2013
used a forbearance at least once, up from just 39 percent from
the 2009 cohort, despite an improving economy. This is well
above what we would expect if borrowers were only using
forbearance to get through temporary hardships as intended.
Many put the blame for this on servicers, but the more
important question is why the Federal Government allows student
loan borrowers to stop making payments for up to 3 consecutive
years with no questions asked in the first place.
The complexity of the Federal student loan program has also
led to considerable confusion among borrowers regarding what
they need to do to earn public service loan forgiveness, or
PSLF. As of September 2018, over 41,000 unique borrowers had
submitted an application for PSLF, despite Federal data showing
that fewer than 1,800 were even close to making the required
number of qualifying payments.
While some claim that servicers or the Departments are
blocking borrowers from PSLF, these statistics show that tens
of thousands of borrowers believe they qualify for forgiveness
when they actually do not. This is because there is a long list
of stipulations regarding what counts as a qualifying payment,
which borrowers do not always fully understand. Borrowers must
have the right kind of loans, must be in the right repayment
plan, and cannot be in deferment or forbearance when they make
their payments, among other things.
A simpler student loan program would improve borrowers'
experiences and reduce the chance that borrower or servicer
error leads to a suboptimal outcome. For example, one potential
simplifying reform would limit discretionary forbearances to 3
consecutive months, down from the current limit of 3 years.
Even if the servicer does improperly steer a borrower into
forbearance, the consequences of that mistake will be minimal
if the maximum forbearance is only 3 months.
Since its beginning in 1958, the Federal role in student
loans has grown ever more expansive and complex. Decades of
accumulating reforms have led to a sprawling program, which is
very difficult for either the Federal Government or servicers
to administer effectively. The path to a better loan program is
simplification.
That concludes my testimony, and I look forward to
answering your questions.
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Ms. DeLauro. Thank you, Mr. Cooper.
Ms. Campbell.
Ms. Campbell. Thank you for having me here today.
I want to begin on a positive note. Starting in the Obama
administration and continuing over the last 5 years, FSA has
been pursuing a complete re-imagining of the servicing system.
It is now called the Next Generation Financial Services
Environment, or NextGen, and it modernizes FSA's
infrastructure, allows for better performance monitoring, and
most importantly, promises borrowers a single website through
which they can manage their loans. It is a sure win for
borrowers.
But it has been stuck in limbo, thanks to never-ending
protests and lawsuits brought by servicers and debt collectors
who want to protect their bottom lines and the status quo.
While we wait, borrowers are also stuck with a complex system
that consistently lets them down. It is time to reform the
repayment system, and Congress can take steps now to fix the
mess that we are in.
First, Congress can provide FSA with additional oversight.
Too often, FSA prioritizes efficiency over outcomes. Efficiency
means funneling borrowers into less labor-intensive benefits.
It means cutting corners on compliance monitoring because more
findings mean more work. It means giving up on severely
delinquent borrowers because compensation is too low.
This is not what borrowers deserve. FSA has shown that it
is unable to balance its priorities, and Congress must make
clear that borrowers come first.
To ensure FSA refocuses on its true mission, Congress can
mandate that the Consumer Financial Protection Bureau reclaim
its past supervisory and enforcement roles. These duties were
stripped from the CFPB by Secretary of Education Betsy DeVos,
who severed the memorandum of understanding that gave the
Bureau this authority. The CFPB wouldn't merely be a cop on the
beat but would be a resource and partner for FSA, alleviating
some of the cost and burden of contractor oversight.
Second, this committee can restructure how a servicer's
performance is measured. Currently, servicers are ranked in
comparison to one another, then allocated a share of new
accounts based on their rank. Instead, servicers should be
expected to meet a high standardized baseline of performance so
that all borrowers can expect the same quality of service.
And servicers should be measured on more than borrower
outcomes. Performance metrics should include other objective
metrics, such as rates of enrolling delinquent borrowers into
an income-driven repayment plan, providing appropriate and
accurate counseling, correctly calculating repayment and
interest amounts, and processing benefits and paperwork in a
correct and timely manner.
Federal law should also prohibit specialty servicing, a
practice in which FSA allocates all accounts of a single type
to one servicer. For example, FedLoan Servicing or PHEAA
receives the account of every borrower who indicates interest
in the Public Service Loan Forgiveness Program, even though
PHEAA has performed worse than every other servicer in FSA's
most recent evaluation.
Specialty servicing ensures that poor performers continue
to receive accounts and discourages other servicers from
directing borrowers toward benefits that will cause them to
lose an account and, therefore, revenue.
Finally, Congress can provide FSA with flexibility around
default. As my written testimony details, I recommend that
Congress puts an end to student loan default. I realize that
default is defined in the Higher Education Act and is,
therefore, beyond the jurisdiction of this committee. But you
do have the opportunity to take the first steps in turning the
system around. There is not currently a hard line between
servicing and collections. Though HEA defines default at 270
days of nonpayment, servicers are not required to transfer
those accounts to debt collectors until 360 days of
delinquency.
Congress could open up some authority for servicers during
that 90-day period, such as allowing them to automatically
enroll borrowers into an income-driven, excuse me, repayment
plan. This could help prevent the lowest income borrowers from
facing default.
Automatic IDR enrollment would require additional data
sharing between the Departments of Treasury and Education.
Thankfully, the authority to share these data already exists.
It was clarified during the Obama administration and has
remained a priority for the current administration, even
showing up in last year's executive office budget.
Improving FSA oversight, amending servicers' performance
metrics, and building flexibility into late-stage delinquency
would be a terrific start to moving the repayment system in the
right direction. Though NextGen should help improve things for
borrowers, it is by no means a silver bullet. The new system
will take years to get off the ground. It has already been 5
years since we embarked on this process.
We cannot afford to wait any longer. Borrowers are being
harmed right now, and it is up to Congress, and in particular
this committee, to provide FSA with the necessary direction and
resources to get things off the ground.
I look forward to discussing these proposals and your
questions during the Q&A.
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Ms. DeLauro. Thank you all very, very much for your
testimony.
Let me begin the questioning, and let me begin with you,
Ms. Campbell. You know FSA is a performance-based organization
tasked with achieving certain goals and efficiencies for
students and taxpayers. It was established as a PBO in 1998. It
was the first one, as I understand it, and it granted FSA great
flexibility in the administration of student aid programs.
In light of the testimony heard today by Mr. Gordon about
the failures of FSA in managing and overseeing student loan
services, do you believe that FSA is fulfilling its statutory
mandates as a PBO? And there is a section, Section 141, in the
Higher Education Act, which lays out the performance-based
organization for the delivery of Federal student financial
purposes, why it was established, what its purposes are, and it
lists a number of those purposes, (a) through (g).
I won't go through all of them, but my question is, are
they fulfilling the statutory mandate of a PBO? Are they
adhering to principles, which ones maybe they are and which
ones are not?
Ms. Campbell. Sure. So in the HEA, it lists a number of
priorities, as you mentioned, and the first one is borrower and
student satisfaction with the aid programs. However, it also
discusses managing costs of the programs. Now when costs are
balanced with students' well-being and priorities, those are
often at odds, and especially in an agency and especially in
the times that we are in where kind of Federal agencies are
expected to be cutting costs and running as efficiently as
possible, what often happens is that FSA acts in the interest
of saving money and kind of efficient--most efficiently
operating rather than putting the needs of borrowers first.
So when the PBO was initially put into place, I think that
it did a lot to improve Federal student aid, but I think that
it is time that we re-evaluate how FSA has complied with that
edict in the first place.
Ms. DeLauro. Let me also ask you, the Congress provided
$9,000,000,000 in student aid administration from 2014 to 2019.
Other programs were zeroed out, flat funded, while students
defaulted on loans. The FSA saw an increase of over
$500,000,000. In 2019 alone, Congress gave $1,700,000,000 to
FSA.
You testified here about the mismanagement and the abuses
of the servicers. If we know that servicers are doing a poor
job in helping our students, this was something that Ms. Lee
was talking about, why do they continue to receive lucrative
contracts?
Ms. Campbell. I think one of the really important aspects
of this is transparency. There is very little transparency into
how FSA puts together its contracts, the policies it makes kind
of behind the scenes. And often, these policies are made in
conjunction with servicers and debt collectors themselves.
Because of the way that FSA is structured with the
performance-based organization system, what ends up happening
is that a lot of--FSA is given a lot of authority to do things
on its own. It can put out contract procurements in order to
kind of get into these situations with servicers in the first
place.
When that ends up happening, you are leaving the public out
of the decision-making process, and you know, you frequently
hear from folks that we need more data on student loan
borrowing and on kind of what is going into these contracts and
into compliance, and that is absolutely right. I think if the
public had more say in these processes and if there was more
data available so that we could better evaluate these programs,
then we would be able to consistently shed light on what is
going on at FSA rather than kind of relying on audits and kind
of oversight activities in order for these things to come out
and then try to fix them retroactively.
Ms. DeLauro. Will money alone fix the process?
Ms. Campbell. I think that money alone will not fix the
process.
Ms. DeLauro. I am going to yield back my time. I know the
ranking member has to be somewhere.
Mr. Cole. Thank you very much. I appreciate that, Madam
Chair.
Let me begin just--and this is a little off topic, but I am
just curious about your opinion. We have appropriately focused
on the FSA and on servicers and the Department of Education.
What about, you know, how many, in your opinion, of these loans
should have never been made in the first place? That is,
students up front didn't get the appropriate advice that either
this career path won't take you where you can repay this, or
this is the wrong thing?
And it seems to me a lot of--they are not getting very much
help in making initial decisions from the colleges and
universities or trade schools or what have you. Is that a fair
assumption to make? And if you have a solution, I would love to
hear that, too. Yes, please.
Ms. Darcus. It is certainly the case that many students
would be better served by grant aid instead of loans. Because
this program is designed to make college affordable, we really
have to look at what affordable means and whether folks will
ultimately have the ability to repay loans.
So when we are thinking about our investments in higher
education and future generations of workers of all kinds and
citizens, we should really think about prioritizing grant aid
so that we don't wind up saddling folks with debt that they
can't afford to repay.
The other thing we need to do and another area where there
is an intense need for oversight is of the schools that are
program participants with the Department of Education. We have
seen predatory for-profit schools who are essentially fueling--
siphoning taxpayer dollars through students to their investors
while students are suffering without being able to complete
their credentials because of poor education or high costs. And
also without the kind of credential then that would enable them
to get employed in a way that would free them to repay their
loans while still feeding their families.
Mr. Cole. Same question to everybody. So----
Ms. Kavanagh. Yes, I agree with what Ms. Darcus has said.
Oversight of the education industry in general to make sure
that when students are making decisions about higher education,
they are getting the opportunities to go to schools that are
going to provide them with the opportunities to get the degrees
they need in order to be able to repay their loans.
My office has been very active in enforcement initiatives
over for-profit schools, the predatory for-profit schools who
defrauded students or who closed, and is also continuing to be
very active with students in obtaining group discharges of
their loans when they have the ability to do so and individual
discharges on a daily basis.
Mr. Cooper. So the Department of Education estimates that
in fiscal year 2018, 25 percent of the loans made to
undergraduates will end up in default at some point. And the
strongest predictor of default or one of the strongest is
whether the student actually finishes college and actually gets
a degree or credential.
And it makes sense that if you go to college either you get
ripped off or you can't finish, you say why should I pay this
if I didn't get anything out of it? So I would definitely say
while this is a problem that is not easy to solve, it can start
with stronger accountability for colleges to make sure that
they are not taking in students who are not prepared for
college and will drop out and then default on their loans.
Mr. Cole. Thank you.
Ms. Campbell.
Ms. Campbell. And to the point that Mr. Cooper made
earlier about simplification in the system, I think that
regardless of if a student finishes college or not, they should
have the opportunity to repay their debt, that the system
shouldn't be so complex that it is difficult to figure out how
to repay.
I also think that we can't really be thinking about this in
terms of students not feeling like they shouldn't have to repay
their loans if they didn't finish college. I think that when
they are not receiving the benefits of a credential, those
earnings kind of benefits, it can make it really difficult to
live and to pay for other expenses, and a student loan will
often come last kind of on their list of priorities.
I will absolutely say that allowing students to go to
school debt free is a huge priority, and that it would prevent
a lot of the outcomes that we see, particularly for borrowers
of color and low-income students who are disproportionately
affected by default.
Mr. Cole. Well, I thank all of you for your comments. I am
going to have to leave, but just to wrap up my time here, you
know, what concerns me the most is it is almost as if nobody is
thinking about what is best for the students. And that includes
the colleges, profit and nonprofit alike.
There is a big difference between your chances of repaying
the cost being a 16th century French major and a petroleum
engineer. I mean, one I would go into debt for. The other one,
I would like to do, but I probably wouldn't go into debt for.
And students need to know that kind of thing up front. I don't
think the colleges do a very good job, nor do I think--I mean,
all of your testimony has been very persuasive about the
problems we are having with the servicers.
And particularly this idea that a number of you mentioned
that students get an opportunity to choose what college they
want to go to or what they want to do, but they have no choice
in the provider. And we have no way of interjecting some
competition there where the student might have an opportunity
to go with somebody that is going to service them better.
So, again, I commend you, Madam Chairman, for holding the
hearing. It has been a very good one, and I thank all of our
witnesses.
Ms. DeLauro. Thank you very much, and I thank you. I know
you have to be off to manage a bill.
So, and I want to say a thank you to Congresswoman Frankel
for hanging in there. Congresswoman Frankel.
Ms. Frankel. That is what I am here for. Thank you.
First of all, I want to thank you. You all answered my
original questions, Mr. Gordon. So thanks for that.
There is another basic question, though. How do these
service providers make their money?
Ms. Campbell. So they are compensated based on the
borrower's status in repayment. So they are paid the most for a
borrower who is in a current repayment status and the least for
a borrower who is in kind of a late-stage delinquency. The
amount that they are paid per month for a current borrower is
$2.85.
Ms. Frankel. And how many borrowers do each of them have?
Ms. Campbell. So I have those numbers here. The servicers,
the largest services have in excess of 6 million accounts. So
that is, for example, Navient, and then the not-for-profits end
up being much, much smaller.
Ms. Frankel. Okay. So I think someone is here from
Massachusetts, right? Okay. Now I think I read or somebody said
that there is a new rule that doesn't allow the State to be
involved with this. What is the status of that?
Ms. Kavanagh. There isn't any rule or new rule that
preempts State consumer protection laws. There has been an
effort over the last several years to argue in various
litigations in various courtrooms that the States don't have
authority under their consumer protection statutes to hold
servicers accountable for various violations of State law.
So far, those efforts, the servicers have lost on those
legal arguments in the various cases that are out there like
the ones against Navient and our office's case against PHEAA.
Ms. Frankel. Okay. I am going to ask two questions, and
you can all take a shot at it. The first question, the next
question I have is apparently women--I don't know if this is
true, but it is written here. So maybe it is. That women hold
two-thirds of the outstanding student loan debt in the United
States. I would like you to comment on that, if you have a--
know why.
And secondly, I think some of you have not--could you give
me your recommendations on what kinds of things we can do to
make this whole situation better that we have been talking
about?
Ms. Campbell. Sure. So women tend to hold more student
loan debt because women enroll in college at higher rates. Your
staff did a good job at pulling those numbers for you. And you
know, what we end up seeing is that----
Ms. Frankel. That is right because more women are in
college.
Ms. Campbell. Exactly. Exactly.
Ms. Frankel. Okay. All right.
Ms. Campbell. And so because women enroll at higher rates,
they tend to, you know, enroll in school and borrow more. Women
are also disproportionately those who are students enrolling in
college who have children, and so those students are also ones
that borrow a lot. In fact, about 25 percent of undergraduate
defaulters have a child when they enroll in college. So this is
really a problem that is affecting families, not just people.
In terms of recommendations for the entire system, I think
that one of the most important things that this committee can
do is to require a consistent set of servicing standards across
the board. I also think that this committee can require that
the Office of Federal Student Aid implement some of these
actions before the NextGen system is rolled out.
That process has been going on for years now and will
continue to be delayed, I am sure, if servicers and debt
collectors have any say in it. And so I think that we can't
wait for these changes, that they have to happen now and that
you can compel the Department of Education to do them right at
this moment.
Ms. Frankel. We will just go down the line.
Mr. Cooper. So one of the, I think, most important things
that Congress can do is we currently have 7.2 million borrowers
in default, and barring a radical transformation of our loan
system, I think that a number like that is going to remain the
case for the foreseeable future.
So I would say what can the Department of Education do to
help those borrowers get out of default, and how can they make
the process for getting out of default clear, make sure that
the fees are not punitive and that the fees are transparent,
and make sure that borrowers, once that they are in this hole,
they could climb out of it.
Ms. Kavanagh. We agree with the recommendations that the
Inspector General's office made in its audit report. And in
particular the one where to require servicers to track issues
of noncompliance and also to do--when they discover an issue of
noncompliance, to do a deep dive and see if that is systemic
and affects a large group of borrowers versus just being a one-
off situation.
We have learned in our enforcement work, oftentimes we will
get a complaint from an individual borrower, and we have the
tools to dig down deep and find out whether that has happened
to more people. And oftentimes, we do find out that it is a
systemic issue. So without that pressure on servicers to take
everything is something to take serious and do a deep dive,
then there is going to be a lot of noncompliance and consumer
protection issues that affect large groups of people that
either go unnoticed or unremediated.
And in addition, holding servicers accountable by
penalizing them in using whatever the tools the Inspector
General's office has with respect to making them pay back money
or not giving them loans, but in addition, from the State's
perspective, enforcing our right to get civil penalties against
servicers when there is widespread and intentional and knowing
misconduct.
And also from the State's perspective, not having the
servicers have the ability to challenge our authority or the
support from the Department to consistently challenge our
authority to enforce our State consumer protection laws, which
are historically our laws to enforce and are not preempted by
the Higher Education Act.
And lastly, not being prevented from obtaining information
from loan servicers. There has been a lot of problems with loan
servicers hiding behind the Department of Education and not
sharing information that we would be entitled to get either
through our subpoena power or civil discovery or otherwise in a
collaborative relationship that we could use to assist
borrowers and identify problems and get them corrected quickly.
Ms. Frankel. Madam Chairman, I just had one more minute.
Ms. DeLauro. Okay. Go ahead.
Ms. Frankel. Before our next witness, I want to just ask
you a question. Because you are recommending more of a deep
dive by the service providers in terms of helping--getting
compliance from the borrowers, if the service providers are
only getting, what did you say, $2----
Ms. Campbell. It is $2.85 a month for----
Ms. Frankel. A month. So what is really the incentive to do
a deep dive if you are only getting $2.85? I mean, they might
as well just say, no, I will go on to the next one.
Ms. Kavanagh. Well, the incentive would be to keep their
contract in order to be able to continue, you know, making
money doing this business. Because the alternative would be to
lose their contract. But you know, whether or not the servicers
are making an enormous amount of profit or enough profit to
keep everybody in business isn't an excuse for them to fall
down and fail to do their job.
Ms. Frankel. No, I am not giving an excuse. I am just
saying maybe the system is not right because the incentive
doesn't sound too good. That is only because there is not, I
guess, compliance. There is not enforcement.
So either you have to have a system, I think, where there
is maybe a better way to incentivize compliance before you have
to actually penalize. I don't know. I am just throwing that out
there, but what is your next--what is your suggestions?
Ms. Darcus. I share your desire to ensure that it is not
just borrowers who face penalties. That it is imperative that
this committee continue to do the work of ensuring that the
taxpayer dollars are spent well, whether that is by our
investment in servicers who are responsible for helping
borrowers succeed in repayment or the money that we are
spending on private collection agencies that Federal Student
Aid also oversees, or on other kinds of investments, like end
for-profit schools.
And one of the things that you have heard is that default
is a critical problem for borrowers, and we have got to prevent
it from happening. If servicers can't do the job, then we also
need to look at redefining default, removing acceleration,
ensuring that people can still live full lives, and by full
lives, I mean keep the roof over their head, get to work, and
take care of keeping the utilities on.
And I will just note that this is the first year in which
borrowers are facing offsets of their Social Security
retirement and Social Security disability benefits because they
are in default, are left with fewer dollars than recipients of
Supplemental Security Income. These borrowers live on $750 a
month now. SSI recipients get $771. We need to do something
about the consequences of default, and I hope that you all will
work with your colleagues to reauthorize the Higher Education
Act in a way that ensures that borrowers who are not well
served by our system, while our system is still being revamped,
are not unfairly penalized.
Ms. Frankel. I just have one more follow-up, which is I
think one of you, well, more than one of you said that one of
the biggest problems is defaults. Then I guess they get
ignored. Is there anything in the system where there is another
entity that looks at the defaults and goes in and tries to
help?
Ms. Campbell. When loan borrowers default, they are taken
from the servicer by the Department of Education and assigned
to a private collection agency.
Ms. Frankel. That is it?
Ms. Campbell. And that is it. So, essentially, the goal of
those private collection agencies is to collect dollars. And
typically, the way that they do that is through wage
garnishment, tax garnishment, Social Security, things like
that. We pay almost the same amount for debt collectors as we
do for them to basically manage 7 million borrowers--it is
about $1,000,000,000 a year to manage 7 million borrowers--as
we do for loan servicers, which manage 34 million borrowers.
So, clearly, there is a little bit of a cost discrepancy
there. Debt collectors receive about $1,700 per borrower that
they get out of defaults through one method. That is compared
to, you know, that $2.85 a month that servicers receive for
keeping a borrower current. And so there is definitely a
disconnect between collections and servicing, and I think that
that is something that would be very important for Congress to
look at.
Ms. Frankel. So, Madam Chair, maybe there is a--maybe there
is a--maybe there is something, there is a gap is missing. You
have servicing, and then you have debt collection. But it
doesn't sound like anybody is really trying to help see if
there is a way to help these folks who are going into default.
Ms. Darcus. I think that is right. There is a point at
which you have heard servicers do the math, and they decide
whether it is worth it to spend resources trying to make--
trying to help delinquent borrowers stay out of default. Even
though that is their job, they have to--they make that
financial decision about whether they are going to help that
borrower.
And then once that borrower does transition to a private
collection agency, that is usually when they come into my
office. Nobody wants calls from debt collectors, and they don't
know whether to trust that debt collector who started
contacting them.
The other thing that happens is the accounts once placed
with a PCA, they stay at one PCA for a little while, then they
move on to the next one. They move on to the next one. So you
might get contacted within a relatively short amount of time by
multiple entities, and you never know whether they are
contacting you about the same thing. You don't know it is about
your student loan. It is very, very confusing, and I do hope
that you all will take a look at post-default collection
activity and at the way that we use private collection
agencies.
The National Consumer Law Center, we have called for an end
to the use of private collection agencies because of the
unfortunate--the unfortunate way in which borrowers are
increasingly harmed by the debt collection activity they face
and the inability of the private collection agencies to help
them resolve their defaults.
Borrowers also need more chances to get out of default, and
you all can give them more opportunities to do that through
reauthorization of the Higher Education Act.
Ms. DeLauro. Thank you. But addressing one comment to my
colleague, it is $2.84, but you are multiplying that by
millions. So they are doing--they are doing well. They are
doing very, very well. The incentives are----
Ms. Frankel. But they don't have any incentive to help
somebody.
Ms. DeLauro. Well, and they are not--they do not get
overseen by anyone. They are pretty much independent based on
the way that they have been determined as a PBO. They are
there. I also might just add that it would be useful in terms
of what financial instruments people are being told to take on
that the CFPB be brought back into the picture here in order to
be able to oversee that and take a look at whether or not
people are being--they are being steered in the wrong direction
and how they can be steered in the right direction.
Let me just ask Ms. Kavanagh, let me--there are several
attorneys general now who are suing the student loan servicers
over violations of State consumer protection law. Why do
States, you know, have an interest in protecting borrowers from
servicers? What work is your office doing, the AG's office done
to deal with, you know, the harms that are the result of poor
servicing?
Ms. Kavanagh. So the States have a unique interest in
ensuring that their student residents are able to repay their
debt and to take advantage of Federal programs available to
them in order to pursue careers, if they so choose, in public
service. It is a great benefit to the general welfare of the
States to have residents that are participating in their local
communities and that are able to manage their debt, buy homes,
and raise families.
So we saw in Massachusetts, and I think based on the
activity in other States as well, a big hole in between
students being able to successfully repay their debts and
access Federal programs and the actual ability to do so because
the student loan servicers were not performing their jobs and
giving borrowers information, either accurate information or
any information at all about the plans that are available to
them.
So we got active, and we have our consumer protection
statute, which is the one of the strongest statutes in the
country, and the tools at our office's disposal to investigate
and to enforce our consumer protection laws for the benefit of
students. And we opened up a Student Loan Assistance Unit, and
when we did that, we heard from thousands and thousands of
borrowers. We have been fielding calls and questions and
complaints from borrowers, and we have worked with student loan
servicers. And when we are unable to get results or we see
problems that are systemic, then we have used the tools to go
forward and enforce our laws against them and hold them
accountable for it.
Ms. DeLauro. It would appear that more and more States
attorneys general are reflecting the kind of work that you are
doing, and it is also my understanding that Secretary DeVos has
been thwarted in a number of courts on the reinterpretation of
what the statute says or the false interpretation of what the
statute says.
I wanted to make a comment. I have a couple more questions
for people, and then--we will wrap it up. But now on the Public
Service Loan Forgiveness Program, which has been mentioned,--it
would appear that there are 423 applications who have been
approved by servicers, and there are 206 borrowers who had
their loans discharged. So that our efforts in this area to--we
provided $700,000,000. That $350,000,000 in 2018 and 2019 to
help borrowers put in the wrong repayment plan, but who paid no
less than they would have under the correct plan.
In other words, we are not utilizing the funds that we
have. And I don't know if it is slow walking. I think it is an
area to find slow walking, people who are eligible for public
service loan forgiveness, which is something that I think think
that we ought to try to explore as well.
I have a question from Congresswoman Lee, if I might? And
let me just--and this is for anyone on the panel. A 2016 report
from United Negro College Fund found students at historically
black colleges and universities, HBCUs, borrowed loans at
greater amounts and encountered more obstacles in repaying
loans despite HBCUs having lower tuition costs.
Students of color are forced to take on more debt due to
lack of household resources, lack of adequate grant aid, and
lack of adequate State investment in higher education. What
suggestions would you provide to help borrowers better finance
their education and repay their loans? What more can we do to
help this group?
So anyone who wants to----
Ms. Darcus. I will start. I will mention again that grant
aid is a really vital way to make higher education affordable
for low-income groups and people of color who do have fewer
resources to draw on due to historic discrimination and its
legacy that persist to this day.
I will also add that institutions that have historically
served people of color, like HBCUs, have suffered the same
disadvantage. They are underfunded chronically, and also they
have smaller endowments that leave them with fewer
institutional resources to help defray the cost of the
education, the investment that their students then have to
make.
Those are systemic problems. They are the legacy of racism
and discrimination in this country. If you are serving folks
who don't have a lot of money, then they don't have a lot of
money to give you at the end of the day to make higher
education more affordable for the next generation.
So I know that HBCUs are calling for more fair funding,
more Federal investment in HBCUs so that those institutions
have the resources that they can pour back into students so
that students aren't on the hook for debt when they are going
to schools that serve them best.
And I will also add this is another place where holding
for-profit schools accountable is really important because
enrollment is a challenge at every school. And there are
schools that have historically served students of color, and
they have done it well. Those are HBCUs and others. There are
for-profit schools who claim to serve students of color, but
the statistics don't bear that out.
Students of color who attend for-profit schools
disproportionately experience defaults and also are less likely
to complete their education. So many students of color would be
better served by going to a school like an HBCU. So we have got
to make sure that those predatory schools like predatory for-
profits are not getting access to Title IV funds anymore and
that we give more money to the HBCUs.
Ms. DeLauro. Well, you will be happy to know that next
week on the 12th, we are doing an oversight hearing on the
predatory for-profit schools.
So anyone else on this question that Ms. Lee--go ahead.
Ms. Campbell. Yes. Just briefly, we have responded to the
Senate's request for some information on how to assist
borrowers of color. So this is something that I know that they
are looking at addressing in the Higher Education Act. But I
also think that it is important to note here that what little
information that we do have about the outcomes of borrowers of
color has only been--come to light recently, and that is
because of some work that is done by the National Center for
Education Statistics in publishing sample surveys. The
Department of Education doesn't currently collect any
information related to the race of borrowers, and so the
Department of Education is really unable to assess the outcomes
of the portfolio in this sense, and so, you know, I think that
it is worth considering if there is a way for the Department of
Education to collect this information and to evaluate how
borrowers of color may be differentially affected by programs.
And that way, outreach can be better targeted for those
communities.
Ms. DeLauro. I have a quick question for you, Ms. Darcus.
You talk about Federal Student Aid's response to service area
abuse or deception hurts borrowers. You talk about how they
deserve to be made whole. In your experience, are your clients
ever made whole?
Ms. Darcus. The short answer is no. They are made better,
though when errors are found, it is very important that they be
corrected. That takes a whole lot of time and energy, but the
Department can't retroactively adjust balances and give credit
for months of--toward forgiveness that borrowers lost out on,
although they claim that is very difficult.
So the angst, the anxiety, and the juggling of budgets and
expenses and the management of time, that can't be given back
to my clients. So we need to make sure that they don't
experience delinquency, default, and servicing errors along
their way to repay their loans.
Ms. DeLauro. I am going to--I want to say really thank you
from all of us for the testimony, there is clarity, there is a
description of the difficulties and the complexity, and I hope
that we can continue to be in touch with you about as this
committee to take some opportunity for redressing some of these
issues and what the Inspector General spoke about. So if you
don't mind, we will be back in touch with your remedies. I
can't guarantee we can do it all, but I can guarantee you that
you can help to set us on a road to addressing what is a very,
very serious problem.
And I also want to be clear in closing that everyone has
described this system as complex. It is very complex, and the
servicing system has had its difficulty from the outset. This
is not about pointing fingers. But there was, I might add,
after several years, there was a formidable plan to correct
this in the waning days of the last administration. And that
was the Mitchell--the Ted Mitchell memo, which I have read, and
I will want to reread because it seems that there was the
understanding that there were serious consequences that had to
be addressed.
And it also appears that at the behest of the loan
servicers that what Secretary DeVos did or she thought she had
to do was to scrap the Mitchell memo, jettison it and its
recommendations. Just recently, what the Department has done is
they have awarded a $577,000,000 contract to Accenture for its
NextGen--it is a digital portal to streamline student loan
interactions.
And you know, people want to take a hard look at that.
There may be some good things. But I also may--and this is--I
have had experience with Accenture in the past. It is known for
its use of tax shelters, for its outsourcing practices, and a
long list of failures with Federal contracts. But even then,
the servicers are in court with the NextGen solution that the
Department has. This is astounding.
And in the meantime--so the Secretary felt that she had to
accept what they said about the Mitchell memo. They have now
proposed this NextGen. The servicers don't like NextGen, and
they are suing the Department for this effort. And in the
meantime, in the meantime, it is the borrowers who are on the
hook. They suffer countless violations of consumer protections.
And you know what I found, and my colleague Ms. Frankel
will find this outrageous as well, as the self-assessment of
the servicers, the COOs, the Chief Operating Officers, they get
bonuses. They reward themselves on a self-assessment basis that
they are doing a good job and they should then be rewarded
financially through the agency's own internal assessment.
So I think what you have demonstrated, what the Inspector
General has demonstrated, that this is an issue that needs
continued and vigorous oversight. We owe it to students. We owe
it to the taxpayers. It falls under our jurisdiction, and we
are going to continue that. And we are going to follow up with
the Inspector General both on whether or not there are
corrective actions at the FSA, in addition to which the new
directions that they are going on and their investigatory work
on what may be some violations.
So, with that, I want to say thank you to you very, very
much for your testimony, and also I want to thank my colleague
Ms. Frankel for hanging in there all this time.
Thank you. [Laughter.]
Ms. DeLauro. Thank you all very, very much, and we will
call this hearing to a close.
Thank you.
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Thursday, March 7, 2019.
ADDRESSING THE PUBLIC HEALTH EMERGENCY OF GUN VIOLENCE
WITNESSES
ANDREW MORRAL, PH.D., SENIOR BEHAVIORAL SCIENTIST, RAND CORPORATION
DANIEL WEBSTER, SC.D., DIRECTOR, JOHNS HOPKINS CENTER FOR GUN POLICY
AND RESEARCH
RONALD STEWART, M.D., FACS, DIRECTOR OF TRAUMA PROGRAMS, AMERICAN
COLLEGE OF SURGEONS COMMITTEE ON TRAUMA
JOHN LOTT, PH.D., PRESIDENT, CRIME PREVENTION RESEARCH CENTER
Ms. DeLauro. The subcommittee will come to order. Good
morning. Glad to be joined by my colleagues and our ranking
Member, Congressman Cole, and by our chair of the
Appropriations Committee, Congresswoman Nita Lowey.
So I want to welcome everyone to the Labor, HHS, Education
Appropriations Subcommittee and this is a hearing this morning
to address the public health emergency of gun violence.
Let me say a thank you to our distinguished panelists for
being here: Dr. Andrew Morral of the RAND Corporation, Dr.
Daniel Webster of Johns Hopkins, Dr. Ronald Stewart of the
American College of Surgeons, and Dr. John Lott of the Crime
Prevention Research Center.
I will introduce each of them before their remarks.
Gun violence is a public health emergency. Since 1968, more
Americans have died by gun violence than in every American war
combined. In 2017 alone, guns killed nearly 40,000 Americans.
That same year, opioid overdoses killed 47,000 Americans.
We have dedicated immense public dollars, especially in this
subcommittee, to addressing and examining one and not the
other.
It is time that we support public research of gun violence
as well. We did, until the Dickey Amendment in the 1990s. It
did not ban the Centers for Disease Control and Prevention from
researching.
However, it had a chilling result, severely discouraging
it. Congressman Jay Dickey, with whom I served, came to regret
his actions in this regard. Later in his life he worked closely
with Dr. Mark Rosenberg, the former director of the CDC Center
for Injury Prevention and Control, with whom he clashed in the
1990s.
They subsequently worked together to address gun violence.
Congressman Dickey passed away in 2017. But as his ex-wife,
Betty Dickey, and his friend, Dr. Rosenberg, said in their
statement to this subcommittee today, and I quote, ``Jay Dickey
evolved his thinking as a former Congressman, member of this
subcommittee, and sponsor of the Dickey Amendment, to ardently
believe that research can make a difference.'' And also, and I
quote, ``If Jay were alive he would want to appear as a witness
at this hearing to tell you in his own words that Congress
should appropriate funding for this important research that has
the potential to save lives and to reduce disability.''
And I ask unanimous consent to insert their full statement
into the record.
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Ms. DeLauro. Jay Dickey came to believe that research can
make a difference. Certainly this Congress must as well. We
know that the Centers for Disease Control and Prevention can do
this research.
As HHS secretary, Alex Azar said last year, and I quote,
``My understanding is that the rider does not in any way impede
our ability to conduct our research mission. We are in the
science business and the evidence-generating business and so I
will have our agency certainly working in this field as they do
across the broad spectrum of disease control and prevention.''
CDC Director Robert Redfield agrees. Last year, he said,
quote, ``We don't have any restrictions to do the research. We
just need a funding mechanism. We are poised to research in
this area if Congress chooses to give us additional funding.''
There is so much more that we need to know, and as our
witnesses will attest, the 20-year gap in CDC research has left
a vast void in our understanding of how to prevent gun
violence.
CDC is the nation's public health agency and, therefore, it
must be involved. For example, we need to increase research
intervention to reduce suicide by firearms. Suicide by firearms
account for nearly 24,000 deaths in 2017 and firearms suicide
rates have risen steadily since 2006.
We need to be looking into this, and comprehensively,
especially with regards to our veterans. They are twice as
likely to die by suicide as the general public and two-thirds
of those veterans who died used a gun.
Earlier this week, President Trump announced an executive
order--a roadmap to empower veterans and end a national tragedy
of suicide. It establishes a task force that includes Veterans
Administration, Defense, Health and Human Services, and
Homeland Security.
Let me just read what Secretary of the Veterans
Administration Robert Wilkie said: ``We will bring the best
medicine, the best social science, in addition to going to the
Congress and asking for grants and money to give our states and
localities so that they can help us in this fight.''
A senior administration official said that the order will
also task agencies with developing a national research strategy
in coordination with public and private stakeholders in order
to have a more complete picture of the challenges facing
veterans once they exit the service.
This committee has jurisdiction over the CDC. The CDC must
be involved. And also, we have jurisdiction over the research
dollars and where the research dollars go. We need to better
understand the correlation between domestic violence and gun
violence.
The initial evidence is alarming and it happens to relate
to incidents of stalking as well. As one of our witnesses notes
in his written testimony, more than half of intimate partners
homicides involve the use of firearms.
We need to help those Americans who choose to own guns to
do so in a way that helps them keep their family safe. Research
has indicated that safe storage is effective in reducing the
number of children harmed by guns. We could be examining other
common sense measures to do so.
Those are just a few examples but there are so many areas
we need to be examining and we need public dollars to do so.
Let me quote from one of our witnesses, Andrew Morral, who
said about this, and I quote, ``Many critical questions require
national data collection over many years. A concerted research
program of basic and descriptive research on gun use and
violence and applied--and policy research. Resources for a
research program of this magnitude would almost certainly
require a long-term commitment of support by the federal
government.''
Pre the Dickey Amendment we had only $2,600,000 for CDC
research. Given the magnitude of this public health emergency,
the federal research agenda must be bigger and it cannot just
rely on private money.
We need the CDC to be looking into this and the National
Institutes of Health. The NIH had a three-year initiative from
2014 to 2016 looking into the epidemic of gun violence. They
funded 14 projects.
But they chose not to extend it. We will direct the NIH to
restore that initiative because, again, we need public
research. To make strides with regards to Alzheimer's or
cancer, what we do is to dedicate public dollars to research.
We do it for opioid addiction. There are a lot of different
entities that are looking into opioids. We certainly are, with
millions of dollars. Public dollars, we understand, in this
area are critical. We can all agree to that.
Sepsis kills about as many people as gun violence,
according to a review in the peer-reviewed journal of the
American Medical Association of CDC mortality statistics. Yes,
despite similar rates of mortality, sepsis received 150 times
the research funding that gun violence has.
Also in the Journal of American Medicine, compared with
other leading causes of death, gun violence was associated with
less funding and fewer publications than predicted, based on
mortality rates.
Hernia, peptic ulcer, anemia, viral hepatitis, asphyxia,
Parkinson's disease all have a lower mortality rate but
received significantly more funding. In relation to mortality
rates, gun violence research was the least researched cause of
death and the second least funded cause of death after falls.
Drowning, asphyxia, nephritis, aspiration, penetrating
wounds, heart disease, fires, hernia, and malnutrition are all
more researched than gun violence.
We need to be providing public dollars for gun violence
research because, as Richard Berk, a professor of criminology
at the University of Pennsylvania, put it, and I quote, there
is, quote, ``no upside to ignorance.''
So to close, let me say this is about the burden and the
benefits--the burden of gun violence in our communities and its
public health implications and we need to acknowledge the
benefits of the research that we can be gathering to mitigate
it. This is a public health emergency and it demands research.
Now let me turn it over to my good friend from Oklahoma,
the ranking member, Mr. Cole, for any opening remarks that he
chooses to make.
Mr. Cole. Thank you very much, Madam Chairman.
Today, we have got a distinguished witness panel to discuss
the topic of gun-related deaths. I want to begin by thanking
all of you. I have read your works last night and extremely
valuable papers and I look forward to your testimony here
today.
I want to begin for myself by recognizing that for many
people the right of gun ownership is fundamental, rooted in the
United States Constitution. I support that view. Our Founders
knew that true freedom from despotism requires ordinary
citizens to have the means to defend themselves.
Of all the rights found in the U.S. Constitution, only
one--the right to bear arms--is included to ensure that all
other rights are upheld.
However, I fully recognize that the use of this right comes
with great responsibility. Like all Americans, I am
disheartened when I see the loss experienced by a family
because of a gun-related death but not assign exclusive blame
to the gun, let alone to millions of law-abiding gun owners.
We have in recent years seen where some of the true
culprits lie--a mental health system woefully inadequate to
meet the needs of the population, a loss of a sense of
community and family in too many American homes, a sense of
animosity towards people with opposing views, and an
unwillingness by some to accept the reality of diversity in
terms of race, ethnicity, and gender identification.
A variety of factors leads a person seeing--leads to a
person seeing the commission of a horrific crime as a viable
means of addressing his or her situation. More funding for the
Centers of Disease Control and Prevention will not by itself
solve our systemic problems.
Our response must be broader and more inclusive and it must
be a response that unites rather than divides the American
people. Looking for quick fixes or simple solutions will not
solve a problem of gun violence.
But it will exacerbate our political difference and poison
the important public discussion that needs to occur across
partisan lines and cultural divides.
During my tenure as chairman of this committee and working,
frankly, with my good friend, the current chairman, my then-
ranking member, we were able to substantially increase funding
for the NIH, the CDC, and a host of related entities that have
made it--made it clear--excuse me, and we made it clear that
nothing prevents these entities from pursuing research related
to gun violence.
And, again, as my good friend, the chairman--the chair
pointed out, Secretary Azar has made that same thing crystal
clear in his capacity as Secretary of Health and Human
Services.
But we also looked at a variety of other ways to deal with
the problem we enacted a near 50 percent increase in the mental
health block grant program. This funding goes to states and
territories and lets them fund a range of services for their
communities, especially support services for those suffering
from serious mental illnesses.
Starting in fiscal year 2018, we supported funding for
certified community behavioral health clinics. These clinics
serve individuals suffering from serious mental health and help
these individuals get the help they need to improve the quality
of their lives.
As chairman, I also supported significant funding
investments in substance use disorder prevention treatment and
recovery. Too often we find people using addictive and
dangerous substances as a way to cope with an untreated mental
illness.
I believe funding in these areas is essential to addressing
the issue of gun violence. I do not expect everyone to share my
views on responsible gun ownership and I am proud to serve in a
body that represents all Americans and many viewpoints.
We need to proceed in ways that generate broad
congressional support for scientific research and we need to be
careful stewards of our limited resources.
The money we spend needs to make a difference as opposed to
making a political point. I believe this bill has a number of
programs that have proven potential--to improve the lives of
everyday Americans and these programs come with broad
bipartisan support.
I have always said let us spend money on places we all
agree have the most value and see how much is left. Using that
approach, we have never had any money left on the table.
I know our chair cares deeply about these issues and I look
forward to working with her in fiscal year 2020, Labor H
appropriations bills to find common ground.
I would like to thank all our witnesses again for coming
and I yield back the balance of my time.
Ms. DeLauro. Thank you very much.
It is now a pleasure for me to introduce the chair of the
full Appropriations Committee, Congresswoman Nita Lowey, who
has a very, very long and committed history to wanting to
increase and provide funding for research--public health
research in the face of a public health crisis. We are talking
about funding research.
Congresswoman Lowey.
The Chairwoman. Thank you very much, Madam Chair. It is
certainly a pleasure for me to be here today and I really want
to thank my good friends, Chairman--Chairwoman DeLauro and
Ranking Member Cole for hosting this very important hearing.
And before I begin, I want to thank all those wonderful
people in the audience who are here who took time out of their
private lives and students, some moms, some dads who are
traveling the country. We see groups of people everywhere who
are tired of seeing death from guns and they are saying, let us
do something about it.
So thank you all for being with us today. By my count, this
is the first time gun injury prevention will take a leading
role in a hearing before this subcommittee since 1996, Madam
Chair, when I sat at this dais with former Representative Jay
Dickey and when Dr. Mark Rosenberg, then the director of the
Center for Injury Prevention and Control, was part of a panel
testifying on CDC appropriations.
So I want to thank you, and I want to thank all those who
are testifying before us today. This is so important.
I didn't know, frankly--I didn't know then what I have,
sadly, learned since--that that hearing was part of a
coordinated effort to dismantle federal research in gun
violence prevention.
Soon thereafter, Republicans eliminated funding for the
very research that Dr. Rosenberg had been conducting. Since
then, the federal government has sat on the sidelines,
relinquishing our role in protecting the public health while
hundreds of thousands of Americans have lost their lives.
In December, the CDC released data showing that 2017 had
the highest number of gun deaths--nearly 40,000 in almost four
decades. Forty thousand. Adjusted for age fluctuations, gun
deaths have jumped by nearly 20 percent in the past two
decades.
So, my friends, it is our duty--it is our responsibility to
investigate why. As a nation, we invested in research that
inspired seatbelts and airbags and, as a result, thousands of
lives have been saved.
As Members of Congress, particularly those tasked with
funding public health research, it is well past time that we
fund research to identify what leads to these gun deaths and,
more importantly, how to prevent them.
It is clear that the United States faces a public health
emergency, one that is breaking apart families, eroding the
safety of communities, threatening our shared future. Only by
conducting scientific research on gun injury prevention can we
better understand the causes of this crisis and develop and
implement a public health response to reduce injuries and
death.
Yet, without dedicated funding from Congress, the CDC,
which should lead these efforts, cannot move forward with this
vital work.
So, again, to our panelists, thank you very much for
joining us. For our chair, thank you so much for putting this
hearing together. I look forward to discussing the tools and
resources needed to improve our understanding of the causes,
impacts, and scope of gun violence.
Together, we can enhance our capabilities, improve public
health, and save lives. Thank you.
Ms. DeLauro. Thank you very much, Madam Chair.
It now gives me great pleasure to introduce our
distinguished panelists and, again, thank them for being here.
Dr. Morral is a senior behavioral scientist at the RAND
Corporation and leader of gun policy in America--a RAND
initiative to understand the effects of gun policies. Dr.
Morral has published dozens of peer-reviewed reports in leading
scientific and policy journals and has served as a science
advisor to the Department of Homeland Security.
Dr. Daniel Webster is a professor of American health at the
Johns Hopkins Bloomberg School of Public Health where he
directs the Center for Gun Policy and Research. Dr. Webster has
published over 120 peer-reviewed articles in scientific
journals on topics including gun policy, violence prevention,
youth violence, intimate partner violence, and suicide.
Dr. Ronald Stewart is the medical director of trauma
programs at the American College of Surgeons. For the past 20
years, Dr. Stewart has served on the American College of
Surgeons Committee on Trauma, serving as the chair of the
Committee on Trauma from 2014 to 2018 and over the past three
decades Dr. Stewart has led the development of an integrated
civilian military trauma system that serves all of south Texas.
And John Lott, the founder and the president of the Crime
Prevention Research Center. Dr. Lott has held research or
teaching positions at several academic institutions and was the
chief economist at the United States Sentencing Commission
during the 1988-1989--during 1988 and 1989. Dr. Lott is a
frequent op-ed writer and a contributor to Fox News.
If I can take a personal privilege for a moment, I want to
recognize Dr. Stewart. I believe your family is here and your
son, Jackson, is here. I don't know where--where are you
Jackson? There you are. Okay. It is really great to see you,
and let me offer our congratulations to you. Jackson has just
graduated from the Basic School at Quantico, which is where
Marine Corps officers complete six months of training.
And so this is really a wonderful achievement and thanks so
much for being here, and my understanding is that you are on
your way to flight school at Pensacola. So, again, and to the
entire family who is here as well so and thank you for letting
us borrow your father for this hearing.
Okay. Dr. Morral, go ahead.
Mr. Morral. Thank you, Chairwoman DeLauro, Ranking Member
Cole, and distinguished members of this subcommittee for the
opportunity to speak with you today.
My testimony is based on a series of peer-reviewed reports
published by RAND as part of its internally-funded Gun Policy
in America Project, a multi-year effort to better understand
what is known about gun policy in order to improve public
discussion and support the development of fair and effective
gun laws.
My remarks are also informed by having over the last month
reviewed almost 250 gun policy research proposals from social
scientists across the country as part of my responsibilities as
director of the National Collaborative on Gun Policy--Gun
Violence Research, a private philanthropy staffed by RAND.
Today, I want to make three points. First, we know too
little about gun violence and its prevention. One of the
clearest findings from our Gun Policy in America Project was
just how little research has been done to understand the
effects of gun policies.
We searched the research literature to try to find evidence
that met rigorous methodological criteria for more than a
hundred types of gun policy effects. We concluded that, at
best, there was relatively good evidence for just one policy we
investigated and that was child access prevention laws appear
to reduce childhood injuries and deaths.
We also found more limited evidence that background checks
may reduce firearm suicides and homicides, that prohibiting gun
ownership by individuals with certain mental health histories
may reduce violent crime, and that ``stand your ground'' laws
may increase homicide rates.
Importantly, though, all these findings are based on just a
handful of studies, nothing like the quality and depth of
evidence that had accumulated on the link between smoking and
cancer, for instance, by the time states started prohibiting
indoor smoking.
My second point is that we need more high-quality research
on gun policy and gun violence prevention, including on suicide
prevention, intimate partner homicide, defensive gun use,
illegal gun markets, prosecution of gun crime, and other
topics.
A lack of investment in gun policy research means we do not
have compelling answers to very basic questions like do gun-
free zones deter gun violence or do they invite them--do they
invite. How do child access prevention laws affect gun owners'
ability to defend themselves and their homes?
These are the kinds of questions for which there is strong
disagreement between policy analysts on opposing sides of the
debate. Importantly, these are disagreements about facts--facts
that are knowable in principle but that require careful study.
When there has been such longstanding disagreement about
facts that go to the heart of what constitutes an effective or
even a fair gun law, we should be investing in careful and
objective research to discover the truth.
With minimal federal investments, a small number of
investigators have continued to make progress on important
research questions with support usually from their
universities, rare philanthropic or state grants, and
occasional short-term funding opportunities like the NIH
program that the chairwoman mentioned during the last
administration.
But large-scale progress may require national data
collection over many years, a concerted research program of
basic and descriptive research applied in policy analysis
research.
A research program of this magnitude would almost certainly
require a long-term commitment by the federal government.
Finally, I will conclude by discussing three steps Congress
and the federal government could take to help improve gun
policy research.
First, Congress should consider funding a dedicated
research portfolio to support gun policy research. In 2016,
opiate overdose deaths exceeded firearm deaths for the first
time.
In 2018, recognizing the urgency of the public health
crisis, Congress appropriate $3,300,000,000 in response,
including $500,000,000 for research. An appropriation for gun
policy research even a fraction this size could lead to
dramatic improvements in our understanding of gun policy and
violence prevention.
My second recommendation is to reintroduce and expand
firearm ownership and use questions to the CDC's Behavioral
Risk Factor Surveillance System. Doing so could provide low-
cost--a low-cost approach to developing vastly superior data on
state differences and trends in firearms access compared with
the approximations that researchers currently have to use.
Third, the CDC could make an important contribution to gun
policy research by improving the reliability of its existing
injury surveillance system and expanding its data collection to
allow for state-level estimates of firearms injuries.
Thank you for this opportunity to testify and I look
forward to your questions.
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Ms. DeLauro. Thank you very much, Mr. Morral.
I was to tell you that your written testimony will be
included in the record and you were recognized for 5 minutes.
But you came in under 5 minutes. So I thank you very, very much
for that.
I am also supposed to tell everyone, the witnesses, to
please turn your mic on here so when you speak.
So, with that, our second witness is Dr. Webster. You are
recognized for 5 minutes for your opening statement.
Mr. Webster. Thank you, Chairwoman, and Ranking Member Cole
and members of the committee.
I appreciate the opportunity to speak at this hearing about
the importance of need for federal funding to research gun
violence, one of our nation's most important public health and
safety challenges.
I want to note for the record that while I am affiliated
with Johns Hopkins, my remarks today are my own and do not
necessarily reflect that of Johns Hopkins University.
Suicides by firearms account for nearly 24,000 deaths in
2017 and firearm suicide rates have risen steadily since 2006.
In 2017, 75 percent of homicides in the United States were
committed by firearms. That is a greater share of homicides
committed with firearms since at least 1981 and, I believe,
going much further back from that.
Because homicide rates are highest among young Americans,
firearm homicide represents a leading cause of premature
mortality in our nation. It is estimated that 133,895
individuals were treated for nonfatal gunshot wounds in 2017
and more than 456,000 nonfatal firearm crimes reported in the
National Crime Victimization Survey.
Yet, the impact of firearm crimes--firearm violence on
public health cannot be fully captured by data on deaths or
physical woundings. Countless individuals throughout our nation
including many young children have been mentally scarred by
their own victimization with a firearm or witnessing others who
have been shot.
I have been studying gun violence as a public health
problem for about 30 years and conducted research on virtually
every form of gun violence. I evaluated a broad range of
strategies to reduce gun violence.
I have led several studies of policy and programmatic
interventions designed to prevent gun violence, some of which
were funded by the CDC through grants through the Johns Hopkins
Center for the Prevention of Youth Violence.
Each of these studies were after the Dickey Amendment. But
while I studied gun violence and efforts to prevent it with CDC
funding, these studies did not really examine if or how access
to firearms played a role in violence nor how firearms were
acquired by individuals who used them to harm themselves or
others.
Although firearms were used in 90 percent of homicides of
young victims ages 15 to 24 years and most suicides and
intimate partner homicides involve firearms, CDC funding of
research on youth violence, intimate partner violence and
suicide has not focused on critical questions relevant to
access to firearms for more than two decades.
It is clear the CDC's reluctance to support research
examining the role of firearms in violence and strategies that
focus on firearm access has been driven by actions taken and
not taken by Congress, to the cut to the CDC's budget in the
mid-1990s by the amount that it allocated to firearms violence.
I hope you and your congressional colleagues will set a new
course by investing much-needed federal funding for research to
inform efforts to prevent gun violence.
Debates over what policies to enact to reduce gun violence
center around questions that rigorous science can help settle.
These include how do those who commit violent crimes obtain
their firearms; do various firearm laws affect ability of
individuals who might be prone to violence to obtain or use
them; do policies or programs directed at firearm access affect
suicidal behavior or the outcomes; do certain policies
negatively impact the safety of law-abiding citizens by keeping
them from accessing firearms to defend themselves.
I served as editor for two special issues of public health
journals that were devoted to firearm violence including
epidemiological reviews. There is a lot to draw from available
research to guide current prevention efforts.
For example, there is good evidence that the impact of
state firearm policies on intimate partner homicides depend on
the breadth of firearm prohibitions for violent individuals and
that handgun purchaser licensing or permit to purchase laws
reduce homicides and suicides.
But most studies designed to estimate the effects of these
firearm policies have important weaknesses, as was alluded to a
moment ago. I believe that those weaknesses are often due to
the modest levels of funding that limit the amount and type of
data that are collected and analyzed.
To build evidence that supports causal inferences between
firearm policies and violence, researchers would ideally want
to know whether perpetrators of firearm violence were
prohibited from possessing the firearms they used and, as much
as possible, they would want to know whether the paths that
firearms take to the perpetrators were disrupted. But both of
these types of data are either difficult or impossible to
obtain. Collecting data on criminal history of perpetrators is
a very labor intensive process that takes financial resources.
With rare exceptions, researchers do not have access to
granular level crime gun trace data from the ATF that indicate
whether each criminal gun possessor was the legal purchaser of
the firearm involved in crime, whether the purchaser of the gun
was--that was later used in crime purchased other guns that had
been used in crime or how crime guns that are diverted for
criminal use shortly after retail sale are distributed across
retail gun sellers within an area.
Prior to congressional actions taken in 2003--okay. I want
to note, just to conclude, that the TR restrictions in 2003
have limited access to this data. When I was available to--able
to get data from Milwaukee Police Department we were able to
discern that a problematic gun dealer in Milwaukee, the rate of
guns coming from that gun shop into the criminal use went up by
200 percent after those data were no longer available.
So, in addition to--and----
Ms. DeLauro. You have to conclude.
Mr. Webster. I am sorry.
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Ms. DeLauro. I have to turn the mic on.
Dr. Stewart, I ask you to make your 5-minute opening.
Dr. Stewart. Chairwoman DeLauro, Ranking Member Cole,
members of the subcommittee, thank you for inviting the ACS to
participate.
I am a trauma surgeon from San Antonio, Texas. I am also a
slow-talking west Texan so I will do my best to stay on time. I
am a trauma surgeon and serve as the medical director for the
Committee on Trauma for the American College of Surgeons.
For 96 years, the Committee on Trauma has worked to
comprehensively improve the care of injured patients in areas
such as EMS, trauma centers, and disaster response system and
this has resulted in dramatic improvements in care.
While we work on all these issues related to treatment, we
also--it is important to focus on prevention. For the past--for
the past five years, we have focused a large effort on
implementing a public health approach to reducing firearm
violence in order to improve the health of our patients and the
resilience of our country.
In light of the pervasiveness of firearm violence and
increasing frequency of mass casualty shootings, we believe a
comprehensive solution is necessary. We did not come to this
opinion based on our personal beliefs or political
affiliations.
We came to this recommendation following decades of study
and five years of collective effort and inclusive dialogue
regarding firearm injury.
Over the past five years we have used three guiding
principles: one, address the problem as a public health and
medical problem, not a political problem; two, implement
evidence-based violence prevention programs through our
network--implement evidence-based violence prevention programs
through our network of over 500 trauma centers; principle
number three, foster and provide a forum for a collegial civil
dialogue centered on reducing unnecessary firearm injury,
death, and suffering. This is the right thing to do for our
patient and for our colleagues.
I am going to describe each of these in a bit more detail.
At its most basic level, what does a public health and medical
approach mean? It means a commitment to the service of humanity
in basing our actions on objective scientific truth as best we
can determine it.
At its core, this approach requires research. We need
research to get it right. We need research to make firearm
ownership safer while preserving or even enhancing personal
liberty.
We need research to understand the root causes of violence
and how best to intervene to prevent the cycle of violence and
how to break the cycle of violence once it is established.
So following principle two, what do we mean by implementing
evidence-based violence prevention programs? Is it possible to
prevent or cure violence?
Well, yes, it is. This may seem a stretch for some but it
is definitely not harder than managing a complex viral
epidemic. It is possible to prevent and cure violence, but to
get this right requires the full commitment--the full
commitment--of all medicine along with partnerships of the
governmental research agencies. One of the most important of
these is the CDC.
Following the third principle of making ourselves a forum
for a civil collegial professional dialogue center, what is the
right thing to do for patients in our communities has led us to
realize that achieving the goals of the first two principles
are not as difficult as we thought in the beginning.
I am grateful to be able to meet with you and I am grateful
for what you do--all of what you do. All of what you do.
Before I tell you about the hardest thing about my job, I
want to acknowledge that your job is also difficult because
your bosses, we, the voters, send you mixed messages.
But I have learned the message is not as mixed as many may
guess. Personally, following the third principle, I have
probably talked to more people in medicine on both sides of
this debate than anyone.
I presented our approach in west Texas and in New England.
I have presented our approach in Chicago and Little Rock,
Arkansas, and I have gone out of my way to solicit all points
of view.
We have surveyed ourselves. We have surveyed other medical
organizations. We have held town halls and I can tell you that
research directed at how to reduce firearm violence is strongly
supported by a large majority and is one of the least
controversial topics.
Through many discussion I have learned that all people
across the political spectrum agree on one thing: reducing or
eliminating needless death and suffering. All agree on that.
We are asking you to make eliminating needless death and
suffering a major priority and we are asking you to do it
together, to do it together. We are asking you to do this in a
bipartisan way.
So, in summary, firearm violence is a major public health
problem in the U.S. It is a public health emergency and it
requires research, not just allowing research in an emergency.
In a critical situation in my team if there is such a thing it
requires me to both--to direct someone what to do, not just to
say I allow you to do it.
The American College of Surgery represents surgeons who
care for patients who suffer, who die, and who are survivors of
firearm injuries. The hardest thing I have to do is try to
explain to a mother of a child the very embodiment of that
family, the very embodiment of that family who was completely
normal at breakfast is now dead. It is awful. It is painful and
it is the worst. It makes me physically ill. We can do better
and we can work together.
We understand there is no simple solution to these problems
and the issues are complex. But we also know if we use the
power of medical science, technology, inclusion, and
partnership, these complex problems are completely manageable
and, yes, even curable.
We are totally committed to working with you. Thank you
very much.
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Ms. DeLauro. Dr. Lott.
Mr. Lott. Thank you very much, Chairwoman DeLauro and
Ranking Member Cole and the other members of the committee.
There is already massive resources that the federal
government is giving to these types of issues. If you look on
the four years from 2015 to 2018, over $42,000,000 was given in
grants to go and study firearms research type issues.
Over from--and there is many other resources. Tens of
millions of dollars from Michael Bloomberg. You have George
Soros and others have put together the Fund for a Safer Future
with--starting off with $16,000,000.
You have places like RAND, which are talking about having
up to $50,000,000. You have many other areas. Plus, it kind of
ignores how money comes from other areas. Professors--one of
their main jobs is to go and do research.
If you look over the period of time, only about 3 percent
of medical journal articles were funded by federal grants. Only
15 percent got funding from any type of outside grant. The
other 85 percent were done as part of your job--their jobs as
academics.
There is a couple claims out there that I think are quite
misleading. One is that research was decimated after the Dickey
Amendment. That is simply not true.
That claim comes from a report put out by Michael
Bloomberg's--one of his gun control groups where they claimed
that in the years afterwards there was a 60 percent drop in
research.
What they actually measured was firearms research in
medical journals as a percent of all medical journal research.
Research on firearms actually increased. What happened was that
there was a massive explosion in medical research in other
areas.
Whole new areas of medicine were started. Whole new
journals were started that didn't exist previously. So its
share fell but the absolute number of papers actually went up
over that period of time.
You know, another claim that we have heard frequently from
the Journal of the American Medical Association is that if you
look at federal resources being put into research on firearms,
it pales in comparisons to mortality when you compare it to
other things.
There are multiple problems with that. One is it ignores
all this other funding. It ignores that for many areas of
medical research the primary way that research is done is
through federal funding, for cancer and other things. Those are
very costly things to go and do. That is not necessary for most
firearms-related research.
And not only that, but you have--the other way they measure
it is papers published in medical journals. The problem is that
is only a tiny fraction of the research on firearms.
That completely ignores economists who have written on it.
It completely ignores the entire area of criminology and all
the journals that are there. I mean, you have dozens of
criminality journals. Well, those aren't counted in those
numbers. It ignores work done by law professors.
And so those types of claims that we are under investing in
firearms research only gets those numbers by completely missing
massive areas of research that just--are conveniently not
counted in those types of numbers.
The other problem that you have is simply the quality of
public health research and, unfortunately, it is very poorly
done. One of the most famous studies in public health is done
by a person named Arthur Kellermann where he has famously
talked about the risks of having guns in the home.
The problem is that, one, there was a simple data problem.
He simply assumed that if a gun death was--owned in the home
and somebody died from a gun death it was that gun. In fact,
about 86 percent of the deaths were from a weapon brought in
from the outside, not the gun in the home. Fixing that one
error reversed the results.
The second problem that you have is just, and this goes
throughout public health research, is they use a technique that
is useful for studying drug efficacy and apply it to social
phenomena and it just doesn't apply because you can't control
randomness in trials like you can in a drug trial.
And so, for example, you know, you go--I guess I have a
discussion in my written research. You can look at that. But,
you know, you look at so many other areas of public health
research and they are, like, 30 years behind the time in terms
of statistics.
The types of controls that they make are just not up to par
with other areas of research and so much money is wasted in
this. I could go and point out--you see grants for $300,000 to
go and put together a database on mass public shootings.
Do you know how many databases are already out there on
mass public shootings? I don't even know how you spend money on
something like that. Or $600,000 to go and look at state laws
and correlate that with homicides or suicides.
I mean, this is trivial. You have an eight-page paper that
comes out of a $600,000 grant. I mean, it is almost criminal
the way federal resources are wasted and thrown away. I mean,
and, you know, that just is only part of the problem that is
there.
But I greatly appreciate the time that you have there. This
is an important problem. Lives are at stake and it is important
that we don't waste resources--valuable resources--on studies
that don't add anything to our knowledge.
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Ms. DeLauro. Thank you very much.
As in the past, what we will do is to proceed with 5-minute
rounds. We will alternate back and forth by seniority as
members were seated at the beginning of the hearing and I just
ask everyone to be respectful of our witnesses, to try to give
them enough time to respond to the questions.
Let me begin, and this is--these are question to Dr. Morral
and Dr. Stewart. 2013 the Institute of Medicine published a
list of priority research questions related to firearm
violence. Several of IOM's proposed research questions related
to self-inflicted fatal injury, or suicide.
Dr. Morral, in your testimony you ask a similar question.
If we could prevent 100 percent firearm suicides, what
percentage of those people will still die by suicide using
another lethal means? Zero? Fifty? A hundred? Can you expand on
this research question, what can we do to better understand how
to prevent suicide?
Dr. Stewart, we spoke to a colleague of yours at the
American College of Surgeons, Dr. John Fildes, who talked about
successful interventions to reduce homicides in Nevada. He
noted that many people were surprised at their success. They
simply assumed that suicide was not preventable.
Can you talk about some of these interventions, how
important it is to expand research in this area so we better
understand how to prevent suicide?
Dr. Morral.
Mr. Morral. Thank you, Madam Chairwoman.
We have done research on this. We have done a survey of
policy experts and analysts asking them if you could prevent a
hundred suicides--firearm suicides--how many of those people
would go on to die by suicide using another lethal means, and
what we find is that there is a huge divide in belief about
this factual matter between policy analysts who prefer
restrictive gun laws and policy analysts who prefer permissive
gun laws.
So the permissive group believes that about 90 percent of
people who are prevented from killing themselves with a firearm
will go on to kill themselves with another lethal means.
Experts who favor restrictive gun laws think that number is
just 20 percent. Ninety percent versus 20 percent. It is a huge
difference in belief about what is in fact a factual matter
that could be studied better and it really matters for what you
think about gun policies that could reduce firearm suicides.
Ms. DeLauro. So it is something that we need to try to take
a look at?
Mr. Morral. We do.
Ms. DeLauro. Dr. Stewart.
Dr. Stewart. I totally agree with Mr. Morral. The--so with
respect to the public health approach to--let us talk suicide--
about suicide, is we should--we should direct our efforts to
the--to the problems based on magnitude and suicide is the
leading--the leading cause of deaths--leading cause of death
from firearms and we should--the public health approach also
involved engagement of stakeholders.
And so we--and we have done those things--engaging firearm
owners as a part of the solution rather than a part of the
problem, and there is terrific work currently ongoing with
respect to--with respect to people doing that work.
It is possible. It is doable. It is very important.
Ms. DeLauro. Let me just be--if I can put a fine point on
it. This--what was this--the intervention in Nevada and what
kinds of interventions begin to work? That is helpful to us in
terms as we go forward.
Dr. Stewart. So I think--I think Dr. Fildes is referring to
Kathy Barber's work with respect to--she calls it friends
helping friends. Friends don't let friends drive drunk.
Well, so firearm owners don't let firearm owners harm
themselves. And so they have partnered with gun retailers and
to develop programs around suicide prevention. This is a common
ground thing that could really make a difference in the lives
of America--of Americans.
And I know some people do not--do not consider suicide as
violent as homicide. It is every bit as violent and it leads to
horrible consequences.
Ms. DeLauro. I will try to see if I can get another
question in here. This is--we have research published in the
American Journal of Public Health. The presence of a gun in
domestic violence situations increases the risk of homicides
against women by 500 percent.
FBI supplemental homicide data--36 percent of murders of
young women between the ages of 15 and 29 were committed by an
intimate partner, family member. Of those murders, more than
half were committed with a gun.
I may not get all three of you into this and we can pick up
after. But, Dr. Webster, Dr. Morral, Dr. Stewart, what do we
know about domestic violence and this effort? What kind of
research or policies would we need to protect women, and men as
well, from gun violence from an intimate partner?
Dr. Webster.
Mr. Webster. Thank you. I think that is an excellent
question.
The majority of intimate partner homicides involve a
firearm. The study you referred to I was a co-author on. It
identified--if you look at among women who are in physically
abusive relationships or recently out of those relationships,
when you control for basically anything you could imagine and
measure, availability of a firearm elevated risk fivefold above
situations when there was no firearm.
But I think what we are beginning to learn is that some of
the policies do matter, as I alluded to in my testimony. They
do appear when they are adequately strong and I think that is
the critical question.
Because of a range of policies across our different states
and in federal government of how broad those restrictions are,
the evidence we have looked at and published most recently
suggests that covering as many violent people as possible does
lead to more prevention of domestic homicides.
But there is other critical things that are important to
learn.
Ms. DeLauro. Thank you, Doctor. I will come back to you on
that.
My time has run out and I have gone over. But I think it is
important for us to know what kinds of research, what kinds of
policies can work.
Ranking Member Cole.
Mr. Cole. Thank you very much, Madam Chair.
And I want to thank all of you just, again, for your
testimony and what you presented. I found it very interesting.
Now, you, obviously, don't always agree. I mean, I happened
to read back to back, Dr. Lott, your paper and then, Dr.
Morral, your paper and you guys have very different views on
the amount of available research.
And so I want to give you both an opportunity to address
that. How much research do we have in the private arena out
there? How readily available is it and how robust is it, going
forward?
So I will go first with you, Dr. Morral, and then Dr. Lott.
Mr. Morral. Thank you, Ranking Chairman--Ranking Member
Cole.
We just completed a review of a huge amount of literature
trying to--trying to look at what--you know, what evidence is
available. High-quality evidence we were looking for in
particular, meaning evidence that can really say something
about the causal effect of the policies we were looking at.
And the big takeaway from our study was that there is--you
know, the vast majority of the effects we were looking for
evidence on we couldn't find research on.
So I think that that is some evidence that there is more
work to be done for sure and I think that Dr. Lott's own
research that he reported, which says that only 3 percent of
the--of the firearms research he was able to identify had any
federal funding, you know, you could look at that and say,
great, we don't have to have federal funding for any research.
But I think the other side of it is the real--the real
story there is that the only research that can get done is
research that doesn't cost anything--you know, doesn't cost
much.
Mr. Cole. Dr. Lott.
Mr. Lott. I have done some of largest studies--I have done
some of the largest studies that have been done on crime and I
think my book, ``More Guns, Less Crime'' from the University of
Chicago Press--I don't know of any other one that has looked at
city, county, state-level in the many different ways that I
have looked at even come close.
But, you know, he talks about the lack of studies. You look
at his work on--on right to carry laws. They literally ignored
dozens of peer-reviewed studies that had been published on
concealed carry laws.
You know, I suppose if you ignore a lot of the work that is
there it will make it look like in fact there is not as much
done. They do that in other areas such as on background checks
and on other things that are mentioned.
So, you know, I look at it and there is a tremendous amount
of work that is being done. You got to count criminology and
others. I mean, these claims about--that have been made about
not enough research--looking at the Journal of American Medical
Association article--you have to count all the other funding
sources.
And I, you know, I have never had to go--even though I have
done the largest studies I have never had to go and ask for
federal money. You have a lot of data there. You can go and
hire people on your own through grants through the university
that you are working at.
I have been at Stanford, the Wharton Business School, Yale
University, University of Chicago, and I never had any problem
getting money to go and do the research that I wanted to do and
without a dime, not even a penny, of federal money that is
there.
The problem that you have with federal money is that it is
often political in terms of who they give it out to.
Politicians and the people who make those decisions I just
don't think can divorce politics from it.
And beyond that, the money is just tremendously wasted. I
mean, I look at studies. There is funding for $600,000 that
just got out to look at mass public shootings.
Mr. Cole. If I can, I am going to hold you there.
Mr. Lott. Sure. I am sorry.
Mr. Cole. No. No. I wish I had more time.
But I wanted to go back. You made a very interesting point.
I think it was you, Dr. Webster, and I wanted to ask you to
elaborate on it.
You mentioned, if I got it right, and that literally in
some cases the views of the researchers, clearly, influence
their research product. That is, people that already sort of
believed in strong firearms control were more likely to think,
okay, suicides are--we could really cut this down 90 percent.
So could you talk about--I mean, that is a real challenge
for all kinds of research and I say this as a guy that used to
be a professional historian. I mean, values really do shape the
research sometimes and it is something you really have to guard
against.
So what is your----
Mr. Webster. So it was actually Dr. Morral who made that
comment.
Mr. Cole. Oh, okay.
Mr. Webster. So I am going to let him respond and----
Mr. Cole. Thank you. I am sorry. I got confused.
Mr. Morral. Actually, the research I was referring to is
not research on how social scientists skew their findings. It
was really on what do social scientists believe and policy
analysts believe about things for which there is not good
research yet, questions like do gun-free zones make us safer or
less safe. There just is not good causal research on that
question, but we still asked policy analysts, and I am talking
about analysts at the NRA and analysts at Every Town for Gun
Safety, as well as researchers, and what we find is that there
is a huge divide on what they believe the truth probably is,
but it has not been studied yet.
Mr. Cole. Okay. Thank you very much. Thank you for allowing
me to go a little bit long.
Ms. DeLauro. Thank you. I wanted to--and I checked with the
Chair of the full committee. Dr. Morral, Dr. Lott challenged
some of your research, so I want to give you an opportunity to
respond, if you would like. If you would like to do that, I
would like to give you that opportunity.
And secondly, I would just make a comment that I am
concerned that if we do not need any Federal funding in this
area, that maybe we should, in fact, take all Federal funding
away from the National Institutes of Health and not provide any
Federal funding. Let folks go out and do it through
universities or through private philanthropies. But if you
would care to respond, please do.
Mr. Morral. Our research had certain inclusion criteria.
There were certain kinds of studies that we were looking for
that had to do with the recency of the work and the quality of
the work. Actually, we included a lot of Dr. Lott's work
because it met our inclusion criteria. But there were other
studies that were excluded because they did not meet the
criteria.
Ms. DeLauro. Congresswoman Lowey.
The Chairwoman. I do want to say, Madam Chair, that this
testimony is so interesting. I almost feel you would like to
have a debate here into----
Ms. DeLauro. We can hardly hear you.
The Chairwoman. Oh. I was just going to say that I think
this discussion is so very interesting. I would almost like to,
rather than ask another question, just let Dr. Lott and Dr.
Morral just keep debating this issue.
But in any event, there are many of us here that I know
have questions to ask. So I think I will go back to Dr. Webster
with my time.
I would really like to know, because this is an
extraordinary panel--and I want to thank you, Madam Chair, for
putting this together. Could you really tell us--and I should
say as the Chair that I have been working on this issue so long
that I sat here with Congressman Dickey, and then he withdrew
his comments; you know that whole episode.
Could you really, Dr. Webster, give us additional
information, provide examples of the types of research that
would give policymakers better data to address the kind of
terrible death? Why don't we just let you start, and then at
times someone else can challenge you, because for those of us
who have been working on this a long time, I would really like
to get the best advice possible. Thank you.
Mr. Webster. Thank you. I think that is really a central
and important question. What I would have this committee
concentrate on in thinking about this is that we know so little
about really the central questions relevant to the background
of individuals who commit violent crime with guns and how they
obtained their firearms.
Dr. Lott alluded to, well, you can do all kinds of
statistical analyses with available data and you do not need a
dime, and so on and so on. I do not believe that, but I also
think that really to get to the heart of these questions and to
move us in the direction where we can make cause and effect
inferences, you really need better, more complete data on those
critical questions about backgrounds of individuals, how they
got their guns.
And the last thing I will say here in terms of the huge
data gap is--and I think Dr. Morral mentioned this--we really
don't have good non-fatal wounding data at a state level.
Almost all of our analyses available, we can tell you about
lethal outcomes and their association with different policies
and interventions. We really don't know much at all about non-
fatal woundings.
So those are just among the most central and important
questions that I believe have been under-invested with respect
to research.
The Chairwoman. Let me say, in the past--and we have been
talking about this for a while, some of us--some of my friends
on the other side allege that CDC is currently able to conduct
gun violence prevention research. Yet CDC Director Redfield,
former Director Friedman, and Secretary Azar have said that CDC
needs dedicated funding from Congress before it can commence
this life-saving work.
Maybe, Dr. Morral, can you set the record straight? Is it
clear that CDC has done very little research into this issue
area and that direct funding is needed to reengage on the
initiative? You are going to clarify this for us, I know.
Mr. Morral. My written testimony suggests that we do need
dedicated research funding for this, but I note that there are
those who have suggested that dedicated research funding is not
inconsistent with retaining the Dickey Amendment. You could
continue to have the Dickey Amendment as a kind of----
The Chairwoman. But he said he didn't believe it anymore,
by the way. He withdrew it. But go ahead. So we can continue
the Dickey Amendment. Go ahead.
Mr. Morral. So Mark Rosenberg and Victor Dzau, the head of
the American Medical Association, have suggested this, that we
keep the Dickey Amendment as a kind of guardrail on any
research program, but that we have dedicated research funding,
an appropriation for firearms violence research so that we can
do the non-policy advocacy research.
The Chairwoman. Thank you.
Did you want to comment on that, Dr. Webster?
Mr. Webster. Yes, briefly. I do think that, yes,
technically CDC could choose to use some of its resources to
better understand firearm violence, and I wish they would. CDC
has been punished for funding things that might be sensitive
that are critical to what I was raising of how do people get
these guns, where do they come from.
So I think if we really want to see this work done,
Congress needs to send a very clear message with resources to
CDC, and I am fairly confident that they will use those
resources wisely.
The Chairwoman. Well, I appreciate, Madam Chair, both of
these responses because I hate to think that science should be
sensitive. When we appropriate money for science, you really
try to the best of your ability to get at the facts. So, thank
you very much.
Thank you, Madam Chair.
Ms. DeLauro. Thank you.
Mr. Harris.
Mr. Harris. Thank you very much.
I thank everyone for being here. Clearly, we know this is a
problem we have to deal with, especially on the suicide level,
because the Pareto diagram is that suicides are the bulk of the
handgun violence that occurs.
Dr. Webster, I assume, because you mentioned suicide, how
they got their guns is not that much of a question in suicides.
I imagine that most are legally obtained. Is that right?
Mr. Webster. Actually, there is not a lot of data on that.
I would assume you are probably correct.
Mr. Harris. Okay.
Mr. Webster. But really, we could use better data. Thank
you.
Mr. Harris. And gathering that data would not be--because
the whole question is we could earmark funds to go for this,
but that is kind of the purpose of the CDC and the NIH, is to
look at the broad overview of public health in CDC, and
science, medical science at the NIH, and decide where funds are
necessary.
Now, NIH is obviously funded in gun research, in handgun
violence research. I mean, millions and millions of dollars. So
that is a decision at NIH and CDC. I mean, we could kind of
force them to spend money on it, but that is an unusual
approach to take, to kind of force one of the institutes to
actually go down a path, because they are the experts and I
think they should decide what is spent.
You are right, Dickey is a guardrail; that is all. If they
are reticent to do it over at CDC and NIH, I think the omnibus
bill last year provided clarification to them that, in fact, it
only is a guardrail.
Let me talk about some specific testimony here, Dr. Morral,
because there are three things in your written testimony that I
have a question about.
The first one is you say that you believe the lack of
research is due to a lack of investment in scientific research
by the Federal Government. But, in fact, we don't restrict the
NIH from a certain amount of research, do we? I mean, our
Appropriations bill does not say, well, you are limited to $5
million or $10 million. They could spend a billion dollars on
it, couldn't they? With the guardrails of the Dickey Amendment,
your reading of it and understanding how NIH works.
Mr. Morral. You are right, I understand that they can
direct----
Mr. Harris. That is what I thought. So they could spend a
billion dollars. They just choose not to.
You also say on page 4, ``I would never suggest that
scientific studies need to be conducted before it is possible
to implement good policy.'' How do you know it is good policy
without a study? I mean, gun-free zones are a perfect example.
We have gun-free zones. We don't know if they are right or
wrong. Do you consider gun-free zones a good policy? Do you
personally consider gun-free zones a good policy?
Mr. Morral. We have looked at this, and there is no
evidence. There is no evidence of whether it is good policy or
not.
Mr. Harris. So you don't think it is good policy.
Mr. Morral. I am not saying it is bad policy. I am saying
there is no evidence.
Mr. Harris. So you won't answer me whether you personally
think it is a good policy. If you were the king, would you
institute gun-free zones?
Mr. Morral. I am not a policymaker. I am a social
scientist, and my research suggests that there is no good
evidence on this.
Mr. Harris. Okay. Let me go to page 5. You make a comment
from the National Academy of Science Report. ``No single
database captures the number, locations, and types of firearms
and firearm owners in the United States.'' Do you think we
should have a single database that captures that information?
Mr. Morral. Let me just clarify one thing. I am not
suggesting any kind of gun registry. I am talking about a
voluntary survey, which is the Behavioral Risk Factor
Surveillance Survey. This is a random sample----
Mr. Harris. A voluntary survey that the government
collects.
Mr. Morral. Yes.
Mr. Harris. That you are expected to answer truthfully
whether or not you have a firearm, maybe how you got it, to the
government.
Mr. Morral. You are welcome to not answer it. It is a
voluntary survey.
Mr. Harris. But if you don't answer it, then the data is
not good. You are a scientist. I am a scientist. You know that
non-responsiveness affects the quality of the data.
Dr. Webster, I am going to ask you the question. Do you
think we should have a single database for all this? Do you
personally think that we should have a single database in the
country of all firearm owners and types of firearms, number and
location?
Mr. Webster. No.
Mr. Harris. Good. I am glad to hear that, because there are
people who do think that, and I think that is the crux of the
problem. There are some researchers who think that should be
true. I have done research. Many of you have done research. You
know you guide your research toward the blinders you have on in
terms of what is done and what is not.
Now, Dr. Lott, I am just going to, very briefly, ask you,
do you know--because you make a statement that ``given the
scope of the problem and the desperate need for solutions that
do not rely on aggressive policing or wide-scale
incarceration.'' You do think, though, that aggressive policing
and incarceration of people who have committed a gun-related
crime is a good thing, I hope.
Mr. Lott. I think incarcerating someone who has committed a
gun crime is a good thing.
Mr. Harris. Okay. Are you aware of the 2012 Department of
Justice study that looked at the number of times when someone
lied on a background check, a felon lied on the 4433 NICS form?
By the way, there were 1,100 people that year who lied on it.
Eight were prosecuted and pled guilty. Do you think a good
start might be to take the other 1,100 felons who actually
tried to get a gun, lied on the form, committed perjury,
committed a Federal crime, do you think we ought to start
prosecuting some of those people?
Mr. Lott. Absolutely.
Mr. Harris. Thank you very much.
I yield back.
Ms. DeLauro. Ms. Roybal-Allard.
Ms. Roybal-Allard. Drs. Morral and Stewart, according to
the National Physicians Alliance, the United States has made
remarkable progress in other areas of injury prevention, such
as reducing death and injuries in car accidents. However, over
the same period, we have not seen parallel implementation of
safety efforts to reduce the number of deaths from gun
violence.
Dr. Lott contends that there is already ample research
being done on gun violence in general. However, my focus today
is on prevention, and public health scientists are clear that
the cost of this research paralysis on one of our country's
major public health crises has been staggering for American
communities.
Can you expand upon what data gaps currently exist in
firearm-related injury research? And given the important role
that CDC plays in public health, how could Federal funding
promote public health approaches to injury prevention?
Mr. Morral. Thank you, Congresswoman. One of the
recommendations I make in my written testimony is that we need
to improve--the CDC could improve its collection of firearms
injury data nationwide and at the state level. Right now,
almost all the research we reviewed did not have injuries as an
outcome because we don't have good injury data. So we are
limited to studying fatalities. Of course, non-fatal injuries
are the vast majority of firearms injuries.
If we could be studying both fatalities and injuries, I
think we would have much better leverage on some of these
causal questions about what the effects of different policies
are.
Ms. Roybal-Allard. And you are saying that that would be an
area of research that CDC could provide?
Mr. Morral. That would be an area of data collection that I
think CDC would be able to really help expand the
infrastructure for research.
Ms. Roybal-Allard. Also, Dr. Morral, as you know, according
to the CDC, 83 children are injured or killed every day by
firearms. Addressing the child health impact of firearm-related
injuries and deaths will need to be a major component of any
research CDC conducts in this area. We know unintentional
injuries and fatalities occur when young children find a loaded
firearm. We also know by research initially begun at CDC that
witnessing violence can have significant detrimental effects on
children and their long-term health and development.
My questions are what research do you think CDC could
support that would help us better understand how to effectively
promote safe firearm storage to prevent unintentional firearm
injuries and deaths for children? And do you think CDC research
could help us better understand and respond to the trauma and
developmental impacts that occur when children witness firearm
violence in their communities?
Mr. Morral. May I defer this question to Dr. Webster?
Ms. Roybal-Allard. Yes. Dr. Webster, of course.
Mr. Webster. So, I think one way that the CDC could advance
our understanding about childhood-related victimization,
particularly unsafe access, is to gather robust data about
where the guns came from, what were the situations and
conditions; in school shootings, how many of those incidents
involve individuals, young people who got their guns from their
own home, or are they getting it in some other way.
So again, I go back to this is a really central, important
question that could be added to the CDC's National Violent
Death Reporting system, systematic collection of the source of
the gun, where did the gun come from, and this could also be
supported with some demonstration projects to see the value and
validity and robustness of the data that could be collected on
those questions.
Dr. Stewart. I think with respect to the issue of comparing
progress made in other injury prevention endeavors, the same
approach should be applied to firearm injury. That approach
goes something like this. First of all, if it is a really
critical problem, you have to name it and you have to direct
funding to do something about it. There are structural
problems. In the National Institutes of Health, there is no
institute for trauma and emergency health care. But you name
it, and you direct the funding.
With respect to how to frame that research, I am going to
speak in very broad terms. I think you could frame that
research that could be supported by a wide portion of
Americans, and that would be to focus the efforts on addressing
the underlying factors that lead to violence, so addressing
violence, and violence is a bigger problem than just firearms.
There are 100 people who die from violent intentional injury a
day in the U.S. There are 75 other people who die from other
violent intentional injury. So it gets closer to the root of
the problem.
And the second thing would be to fund research that would
make firearm ownership as safe as reasonably possible. That is
exactly what we do for automobile safety. It is what we do for
bicycle safety. It is what we do for all those injury
prevention things. We say let's make the activity as safe as
reasonably possible, and we do that through that public health
approach which involves engaging the stakeholders who are
bicycle riders and who drive a car to help be part of the
solution.
Ms. DeLauro. Congressman Moolenaar.
Mr. Moolenaar. Thank you, Madam Chair.
I want to follow up a little bit with Dr. Stewart on some
of the comments you were just making. I thought you made some
very insightful comments, because I have been listening to the
debate, and when we talk about a public health emergency, I
think of things like opioids. I see sort of the medical public
health aspect. Ebola, when that is overseas, you think about
that. You see measles going on, you think of anti-microbial
resistance, you think of infectious diseases. When you think of
surgery, you think about how do we keep the place clean so that
people aren't going to get infected. I think of mental health.
Then we start getting into some of these areas, whether it
is murder, whether it is suicide, whether it is accidents, and
it seems to me that you start a bit of a mission creep from
where the Centers for Disease Control would be.
So I know what you were just talking about, making a
connection between injury control--and I think there is a good
point you make where we ought to think about how people can
handle things safely and how that can work. I worry a little
bit because you made the point of naming it. You know, if you
name these issues, like if someone said they died in a suicide
from a gun, one person would say gun violence, right? They
would say gun violence. Now, if it was through hanging, would
they say rope violence? They would not.
In the same way, if you said there was someone who died in
a car accident, you would say that is a car accident. If it was
an accident involving a gun, that is categorized as gun
violence. These kinds of things, I think they are important
when we talk about what kind of research we really need that
would actually add to the knowledge base, because I think you
have all made a point where we want to make policy decisions on
relevant statistics, you want to have access to data. I would
encourage all four of you to tell the committee what kinds of
data are needed, and I don't know that that is the CDC's job
because I think of some of these areas where they are taxed
already. It may be other parts of the Federal Government that
need to find these statistics. It may be in the criminal
justice area; it could be other areas.
But I think I have learned a lot from the discussion today.
Dr. Stewart, I just want to say as a trauma person, I am sure
you have dealt with these kinds of things on a first-hand
basis, and you shared a little bit, and I think all of us are
concerned. But I appreciated what your approach was where you
talked about let's find ways to build common ground because it
is a very divisive political topic, but I think all of us would
want to have our Second Amendment rights protected, and I think
we would want anyone who is using firearms to use them
responsibly and safely, and anyone who commits crimes and
breaks laws using firearms should be prosecuted to the fullest
extent.
But the question of where we are in policy, what kinds of
laws help promote that, even to the question of gun-free zones,
whether they are effective, whether they are not effective, I
hope we can add light rather than just heat to this discussion.
So, Dr. Stewart, let me just go back to you because I
thought you made an interesting comment early on about looking
for ways to prevent violence, looking for ways that may enhance
personal liberty but also restrict people who would do
violence. I don't know if you have any final thoughts on that.
Dr. Stewart. Yes, sir, I do. Thank you. Thank you very
much.
There are several questions. I will try to just answer the
issue of naming. I do hear you. There are things that do get
named, though. For example, suicide, it gets named as an opioid
overdose. So there are certain things that we name, and it
tends to have to do with the magnitude of it.
But I think I could frame the way the American College of
Surgeons has done this work. I can frame it in a way, what I
call the common narrative, that honestly I don't think requires
compromise from anyone on this panel, which goes something like
this: firearm ownership is a constitutionally protected liberty
in the United States, but we have a significant, large violence
problem, and we can address that problem by working together to
make firearm ownership as safe as reasonably possible and
address the underlying root causes of violence.
Now, with respect to the issue of an emergency, my family
is here, and they think of me as a boring person. I don't over-
use--I don't speak in hyperbole often.
Mr. Moolenaar. They are nodding their heads. [Laughter.]
Dr. Stewart. Well, that is what they tell me. [Laughter.]
So, is it an emergency or not? It is true, all those
conditions that you talked about. When I consider it is an
emergency is when you are in the trauma center and there are 50
people, more or less, in a rural church in south Texas at a
worship service, and 46 of them are shot, and 26 of them die.
That is an emergency from my standpoint.
And when you look at the context of it, a great trauma
system there--I am biased--a great trauma system, and a good
Samaritan interrupted the attack, okay? So you would say, well,
how did all that work, Dr. Stewart? Well, my community has a
few simple aphorisms. We let no one suffer or die in vain. And
when you honestly look at that, you say we have got to do more.
We have got to address the upstream factors that lead to
violence, and we have to get serious about enforcing laws, and
also about keeping firearms out of the hands of people who
shouldn't have them. It is an emergency from my standpoint.
Mr. Moolenaar. Fair point. Thank you very much, Dr.
Stewart.
Ms. DeLauro. Thank you.
Congresswoman Lee.
Ms. Lee. Thank you very much, Madam Chair. I want to thank
yourself and the Ranking Member for this very important
hearing, because in my community, like in many communities, it
has been a public health emergency for years and years and
years.
Let me take a moment to acknowledge, of course, our young
people who are here, because they are bearing witness and are
here on behalf of those who have been killed or injured by gun
violence, and also for using your voice and your presence to
prevent future senseless acts of gun violence and tragedy. So
thank you all very much for being here.
Let me say a couple of things. First of all, gun violence
disproportionately impacts communities of color, people of
color.
A couple of statistics. In 2017, 50 percent of gun-related
deaths in our country were African American men, even though
African American men make up about 6 percent of the country's
population. Four in 10 African Americans have been personally
affected by gun violence, including my own family. But the
majority of African Americans do not feel as though their calls
to end gun violence and formally study the impacts are being
heard by the public.
In my own district, for example, I hear from constituents
every day about the effects of gun violence. Four hundred
people in my district were killed in the last five years alone.
There have been three weekends this year where three or more
people were killed by guns in my district. Unfortunately, we
don't hear about what is taking place in many communities and
what we are dealing with on a daily basis.
Now, I wanted to ask you--and probably, Dr. Stewart, you
may be the appropriate witness, and I thank all of you for
being here to respond to this. But I am a psychiatric social
worker by profession. I understand PTSD. I know the signs of
PTSD. I go into a variety of communities in my district and
talk to individuals in the community who have been affected by
gun violence. The signs of PTSD, not only from individuals but
from the community, there is a community PTSD crisis.
I am wondering how we are addressing PTSD with individuals
and with communities. I mean, I can cite Census tracts where
everybody has been affected by PTSD because of the gun violence
that takes place over and over and over again. I know we have
done a lot of research on PTSD in the military, but I am
wondering in terms of funding, a dedicated stream of funding,
Federal funding to better understand the public health epidemic
of gun violence, how we can factor in and what do you think we
need to do about PTSD that is rampant in so many communities
across the country?
Dr. Stewart. So, I very much appreciate your comments.
Thank you. I think the reason why I am passionate about this is
that the data you show is accurate in that we have to do better
with respect to it. I have no doubt that PTSD is rampant in
communities, and it is probably, honestly, to some degree
rampant in trauma providers as well, to be totally honest about
it.
So when I talk, when we talk, not just me, when we talk
about violence prevention, we are talking about we need
research to understand what we can do that would make a
difference in those communities in a way that engages those
communities as well. Whenever I talk about engaging firearm
owners as part of the solution, engaging communities who are
under-served, communities of color as a part of the solution
rather than as a part of the problem.
There are very hopeful programs with respect to this. There
is the National Network of Hospital-Based Violence Prevention
Programs. There is Cure Violence. There are researchers and
practitioners in places all around the country who are making
headway.
But funding for those projects, to understand and to
achieve the right results, is absolutely critical, and it is
something that I believe could really make a difference in
under-served communities.
Ms. Lee. The long-term trauma impact, Dr. Lott.
Mr. Lott. I really appreciate your question. To me, too
much is focused on the guns, per se, and not on what is
underlying it and causing it.
Over 50 percent of the murders in the United States occur
in 2 percent of the counties. If you look in those counties, 10
blocks in those counties account for most of the murders in
those areas. It is gang violence. It is basically drug gang
violence.
What you have to do is figure out a way of taking away the
incentives for people to go and join those gangs that are
there. Just to focus on guns, you are going to be as successful
in stopping these gangs from getting guns as we have been in
stopping them from getting drugs, okay? I mean, you look at
Mexico, they have one gun store in the country since 1972. The
most powerful guns you can legally buy or own are 22 short-run
rifles. And yet they have a murder rate that is five times
higher than what we have because the gangs, the drug gangs
bring it in.
What you have to do is think of ways of taking away the
profits that the drug gangs have, and we can talk about that,
but that is a completely different conversation than----
Ms. Lee. Sure. But this is still a public health emergency,
and what we need to do is figure out how we can do the research
to document that this is a public health emergency and then
develop strategies on how to get the guns off the street.
Mr. Lott. But the point is you are going to be most
successful in thinking of ways of taking away the profits from
the gangs, and that will reduce the incentive for bringing in
the guns to protect their valuable drugs and other things they
have.
Ms. Lee. Thank you.
Ms. DeLauro. Congresswoman Frankel.
Ms. Frankel. Thank you, Madam Chair, for this hearing.
Thank you all for your testimony today.
So, I know we have a lot of policy issues that we debate on
both sides, and what I would like to ask each of you is if you
were going to have this opportunity to research, which some of
you are doing already, what are some of the most prominent
questions? If you each would tell me five questions you would
like to see answered.
Mr. Morral. Okay. Thank you, Congresswoman, for the
question. Well, we have done some research on where the biggest
disagreements are between people on opposite sides of this
debate about factual matters, and I think that is a sweet spot
for where you could do some good research. What we found is
that there are three policies--of the ones we looked at, there
are three policies where there is a large difference in
agreement about facts.
One is permit-less carry; one is gun-free zones; and the
other is stand-your-ground laws. One group of experts think
these things can make us safer, the others think it makes us
less safe. I would recommend that we study that more and
better.
Ms. Frankel. Just go down the line.
Mr. Webster. Sure. I think where I would start as a
priority is focusing on the source of guns used in violent
crime, and I think there are at least two different dimensions
to that where we need better research. One has to do with the
role of problematic licensed gun dealers and how their
practices affect the underground gun market and relevant
violence.
I think more broadly, we really need to collect systematic
data across the variety of the policy environments we have in
the United States to better understand the connections between
firearm policies and underground gun market conditions. I mean,
anecdotally, you find evidence that, for example, in New York
City, where gun laws are quite restrictive, the street price
for a relatively cheap gun might be $700 or so. The same gun
in, say, Louisville or Atlanta might be $100. But we don't have
that systematic kind of data to understand these connections
between what the policies are and--you know, I focus a lot on
mechanisms of diversion. There are a lot of important questions
and debates that we could help settle with better data and more
rigorous research.
Dr. Stewart. So I think you would probably guess that I
would say violence prevention research is key. I am going to
just mention some key points on that.
I think addressing structural factors--and by structural
violence what I mean is the way populations get put in harm's
way. If you think about it, that gets to actually the
intersection of both homicide and suicide, because when you get
to the root of those causes, we need data, we need research to
understand it. But it gets to poverty, inequity, social
isolation, stigmatization, previous trauma, and what that leads
to is a sense of hopelessness. It leads to hopelessness, which
then leads to violence.
But I don't know how much you have thought about it. That
is an intersection of both suicide and homicide. It gets to
some of those things, and it needs to be done in a non-
partisan, correct way, but I think that is an important part of
this.
The second thing, though, would be to use the same general
approach that we have used for automobile safety and for
bicycle safety, and that is research, really good-quality
research that involves the firearm-owning community, that
actually engages them as a part of the solution to develop
technology. I believe in technology. I believe in science that
could make products safer. But that involves the full
participation of firearm owners.
Mr. Lott. Thank you very much for your question. There are
two general points I would make. One is I think we need to move
a little bit away from the focus on firearms and talk about
what creates the incentives for people to go and use them the
way they do, and to talk about what can you do to eliminate the
profits that are involved in gang violence and in drug gangs.
If you focus on the guns, you are going to be as successful in
stopping these drug gangs from getting ahold of guns as you
have been in stopping them from getting ahold of drugs.
We have spent huge amounts of resources to try to stop
these drug gangs from getting ahold of drugs. It is not like a
drug gang can go to the police and say this other gang stole
our drugs, can you help us get them back? They have to set up
their own military. If I could click my fingers today and cause
all illegal drugs to disappear from the United States, and all
guns, how long would it take for illegal drugs to start coming
back into the United States? If you are in El Paso, 20 minutes.
How long would it take for them to bring the weapons in to go
and protect that valuable property that is there? They would be
bringing them in exactly at the same time.
Just look at Mexico, as I was saying. It is no more
difficult for them to go and bring in the drugs or the guns.
So to me, the big focus is what creates the incentives for
them to engage in this violence, which is so heavily
concentrated in the urban areas, in these small areas within
our country.
Ms. Frankel. I yield back.
Mrs. Watson Coleman. Thank you, Chairwoman. And thank you
to the Ranking Member for holding this very important hearing
today.
With our passage in the House of the two bipartisan bills
last week that would expand background checks and ensure that
guns are not transferred until a check is completed, it is now
more important than ever to empower our public health agencies
to research the epidemic of gun violence.
We know that nearly 40,000 Americans die from gun violence
every year. In 2017, more Americans died from gun violence than
car crashes. This is a public health crisis. In my district,
there have been more than 1,000 incidents of gun violence since
2014.
Today, I just want to share this photo of young Trey Lane,
a constituent of mine who was gunned down because he was simply
trying to shield his friends from a drive-by shooting. His life
was taken too early by gun violence, before he could realize
his dreams and aspirations. His mother has taken her grief and
turned it into organizing and talking to other mothers.
In the richest country in the world with cutting-edge
technology and research capabilities, there is no reason why we
cannot focus our public health pools on addressing gun
violence.
So let me get to some of my questions. I am particularly
concerned with the disproportionate experience of this violence
in our communities of color, and the research that has taken
into account the intersectionality of our people of color and
gun violence.
Dr. Webster, we know that gun violence has ravaged
communities of color for decades, but what shocked me was a
2017 analysis by the CDC of data on child deaths that found
that black children were 10 times more likely than their white
peers to die from gun-related homicides. I am a mother and a
grandmother, so you know what that means to me.
Based on your research and experience, how can Congress and
this committee better support studies to address the
disproportionate amount of gun violence in these communities of
color?
Mr. Webster. Thank you. I think that is a great question.
There are a couple of different directions I guess I would go
with this. One is when we try to address problems like
violence, or any other public health emergency, we want
evidence-based solutions. The truth of the matter is that there
has been relatively modest investment in actually developing
innovations to test. We have Cure Violence; it was alluded to
before. There have been studies looking at cleaning and
greening, a variety of things that seem to have some beneficial
effects. But honestly, it is a much bigger, more complex
problem, and very modest levels of investment in innovations.
I think what we need to do is--and we do this to some
degree on the law enforcement side. We develop partnerships
with researchers and law enforcement officials to
systematically study the problem, develop innovative
solutions----
Mrs. Watson Coleman. So you agree that we need better data
and better research specifically in this area?
Mr. Webster. Yes, and I guess what I am getting to is that
it should be directed towards developing innovative solutions
that are not wholly dependent upon over-aggressive policing. So
I think communities and researchers can develop innovations
with adequate resources.
Mrs. Watson Coleman. Thank you.
For those of you who don't know, I am a co-founder of a
caucus on black women and girls, specifically looking at the
intersection of race and sex with regard to certain policies.
Our goal is to give voice to those issues. Research into
interventions against gun violence is incredibly important
because women of color are nearly three times as likely to be
murdered with guns than white women. They are also more likely
to experience death or harm as a result of an intimate
relationship.
Dr. Morral, what is it that we should be doing with the
Centers for Disease Control and Prevention, the NIH, and the
National Institute of Justice to address the intersectionality
of these deaths and these injuries and color and race?
Mr. Morral. Thank you, excellent question. These are
problems that are not well researched right now. I think that
we do need to do a lot of basic descriptive research to
understand who is being harmed by whom and how the weapon was
obtained, in addition to the basic descriptive research. Then
we have to move into research on programs and interventions to
address that.
Mrs. Watson Coleman. Thank you. I see that my time has
expired. I am very interested in this area. I think there has
been an under-utilization of information, caring, and response,
and I look forward to having further discussions and to hearing
from other researchers as well, including those who look like
me who research my issues. So, thank you.
I yield back.
Ms. DeLauro. Congresswoman Clark.
Ms. Clark. Thank you, Madam Chairwoman, and many thanks to
the panel for being here today. Again, I want to thank members
of this audience. I know you are just the tip of the huge
advocacy iceberg, and we appreciate you being here and all your
work.
I can't think of another public health crisis where we have
said there is no role for Federal research dollars. Can any of
you? It is a yes or no question, Dr. Lott.
Mr. Lott. There is a lot of money going in here now.
Ms. Clark. We are here looking at how we can prevent gun
violence, how we can prevent deaths from guns, and we know that
that is a range, from suicides to mass shootings, and we need
to have the data to look at all of this.
I have been listening to the questions from the members of
Congress, and I do think, Mr. Morral, that your analogy to the
national traffic safety is a good one. Cars don't kill people,
and I know when I was a state representative and we were
looking at mandatory seat belt laws, my phone lit up from
people saying they wanted the freedom to drive their car
without it.
We certainly have a large cultural difference in how we
look at guns. I get it. They are inanimate objects designed to
kill things, people, animals, but they are inanimate.
Can you explain that analogy a little bit and tell me how
you think we could best constitute a similar Federal agency for
addressing gun violence?
Mr. Morral. Yes, thank you for the question. The National
Highway Traffic Safety Administration was set up in 1970, and
it has since then been collecting this incredible data set on
all traffic crashes that have happened in the U.S. This has
been super-valuable for doing research and designing new
strategies for reducing traffic fatalities in the U.S. As a
result, today, deaths per vehicle mile traveled are a quarter
of what they were when the National Highway Traffic Safety
Administration was set up.
We have similar tremendous benefit from all the Federal
investment and research on smoking. Today, smoking and the
associated disease is much less than it was when these research
programs began.
These are success stories that suggest that Federal
research programs, when they are devoted to doing this kind of
work over a long term and really focusing on a problem, can
have great benefits. There is no guarantee--to Dr. Lott's
point, there is no guarantee that if we were to do the same
thing with firearms violence that we would have the same
benefits, but we haven't tried it yet, so we don't know. And I
think it is worth trying because of how many people are being
injured by firearms.
Mr. Lott. Can I respond to that?
Ms. Clark. No.
I wondered, if you were looking at setting up a similar
agency, where would you look? What other Federal agencies
besides the CDC would you include? By agency, I am referring
back to NHTSA.
Mr. Morral. Right. What my testimony suggests is that there
is a role for the CDC, obviously, but also for NIH, for the
National Institute of Justice, possibly for the National
Science Foundation. I think that each of them could approach
the problem of firearms violence prevention and firearms policy
from a different and important angle. So I think there is
potentially a role for all of them.
Mr. Lott. I just have to say one thing, please.
Ms. Clark. Thank you. This is my time, Mr. Lott, not yours.
Mr. Lott. He misstated facts.
Ms. Clark. I would like to also ask a question of Dr.
Webster and Dr. Stewart.
One of my concerns as I have talked to parents and
community members, advocates, is the impact on childhood trauma
by bearing witness to gun violence. We know that childhood
trauma over years has the potential to even change the DNA of
people in response. Can you address that and steps that we can
take to help with this problem?
Mr. Webster. You are absolutely correct that trauma, such
as witnessing acts of gun violence, can very directly and
physiologically affect your brain and your body. There is
really growing research to that fact, and this is part of the
public health emergency for gun violence.
While I agree with Dr. Stewart and some of the other
remarks about the importance of addressing trauma, the post
part of the PTSD suggests something that happened before and
the trauma is gone. What we have right now is too many children
are living in communities where people get shot on a regular
basis, and we have to certainly address their trauma, but the
reason they have so much trauma is there is an abundance of
guns readily available through a variety of means, and that is
where I think we could have very valuable contributions to
understanding that better and how we prevent it.
Ms. Clark. Thank you very much.
Ms. DeLauro. Thank you.
Maybe we can get Congresswoman Bustos in.
Mrs. Bustos. Thank you, Madam Chair, and thank you to our
panel for being here.
I was across the hall at another hearing, and that is why I
came in late. And the reason I came over here was because I got
a text to me saying that right now, as we sit here, there is an
active shooter in my part of the State of Illinois, in
Rockford, Illinois. I share the representation of this town and
the county, Winnebago County, with Congressman Adam Kinzinger,
and we are in constant communication right now. But I wanted to
come over here knowing what the topic of this conversation is.
Let me just tell you what happened. This is in the northern
part of the State of Illinois. It is the farthest northeast
part of the congressional district that I serve, and there is
an active shooter right now.
What happened was a law enforcement officer went to serve a
warrant, and the initial reports are this man who was armed
shot through the door and shot the law enforcement officer. I
don't know how the law enforcement officer is doing right now.
We have some preliminary reports, but it would be irresponsible
of me to say exactly what his condition is.
So, this shooter is now on the loose. Everybody in our
community is being warned about how he is armed and dangerous.
These kinds of stories, everybody is sitting up here, everybody
sitting out there knows of these kinds of stories, and just the
imminent threat, and you just never know when these things are
going to hit.
I just cannot imagine the fact that the Centers for Disease
Control and Prevention has not invested more resources to get
to the bottom of this. Congresswoman Clark hit on those issues
and the importance, and I appreciate you drilling down. Dr.
Morral, I appreciate your answer to that.
But I am going to be going home to my congressional
district to meet with folks, and I am just wondering, as we sit
here and this is going on, and things are going on, I am sure,
in other communities right now as well, but it just is really
hitting home right now.
Your message to people who I represent in Illinois? And any
one of you can address this.
Mr. Webster. I would like to respond. I am very sorry about
that incident.
One thing I want to underscore here in terms of thinking
about gun violence as a public health problem, much of the
science of public health is studying risk, right? And active
shooters is one element of risk that we can study. The
Consortium for Risk-Based Firearm Policy, which I am a part of,
has analyzed the data, recognizing that quite often there are
situations where people will give some warning signs, so to
speak, that something of this nature may occur. That was the
impetus for extreme risk protection order laws.
So I think an area of research that we really need more of
is understanding those risks, how do we gather the best
available data and study different responses to those risks. I
think this, again, underscores the value of the public health
science approach to a very complex problem.
Mr. Lott. If I could comment? God forbid that the officer
ends up dying in this tragedy. But one thing that is
interesting is that 90 percent of the people who commit murder
have a past violent criminal history. This is not something
that your typical person goes and does. That obviously suggests
certain responses.
But the notion of mental health, I wish it was that simple.
Over half the mass public shooters in the last 20 years were
actually seeing mental health care professionals in the year
prior to their attack, and in not one single case were those
individuals identified as either a danger to themselves or
others.
So the question becomes--you know, I am all for trying to
treat mental health and things like that, but the notion that
somehow you are going to be able to go and identify these
individuals beforehand, people with mental health issues are
significantly less violent on average than the general
population, and people with mental health issues are also much
more likely to be victims of violence than the general
population. So you are talking about people who engage in
violence at such low rates.
There is a whole academic literature about the inability
for mental health care professionals to go and identify people
who are a danger to others. They realize themselves in the
profession the difficulties that they have. If the issue here
turns out to be a criminal who was being served a warrant
there, unfortunately, as I say, the vast majority of murders
are people who already have a violent criminal history, and it
probably was illegal for the individual to own a gun to begin
with.
Mrs. Bustos. Thank you, Madam Chair. I yield back.
Ms. DeLauro. What we are going to do is look toward closing
comments. I am going to ask Ranking Member Cole if he has any
further comments to make before we close, and then I will make
some closing comments, and then we will draw the hearing to a
close.
Mr. Cole. Thank you very much, Madam Chair. I want to again
thank all of the witnesses here. I really found the discussion
exceptionally useful, and the materials that you all produced
extremely useful as well as sort of prep for this. It has been
a good discussion. It has been robust.
I suppose one of the concerns I have here--and I am going
to draw from a memo that was prepared for me, not by these
gentlemen coming in, and it says that the public health push
for banning guns goes back to the late 1980s. In a 1989 issue
of the Journal of the American Medical Association, the Centers
for Disease Control official, Patrick O'Carroll, stated ``We
are going to systematically build a case that owning firearms
causes death. We are doing the most we can do given the
political realities.''
I would suspect that that probably did more damage to the
cause of legitimate gun violence research than probably any
single statement in modern history, and it goes back to a point
that Mr. Morral made. In some cases, the predisposition of the
researcher can impact at least the conclusions, and you would
hope an honest researcher--and I know all of you are, and I
think most researchers are--just follows the data to where it
takes him, as opposed to saying I already have my conclusion,
now we are going to build a case to support my conclusion, the
exact opposite of what good science ought to be.
But I think you have shown a lot of areas where we could
move ahead, I think, on common ground. I frankly like the idea
of sort of keeping the Dickey Amendment as a guardrail because,
again, it doesn't prohibit research. I would hope, frankly, the
people at NIH and CDC who have been giving a lot of signals,
both in report language and in statements by the Secretary--you
know, if you have some legitimate ideas, go out there and do
it. We are not trying to stop you from researching. Certainly
this subcommittee has not done anything to try and discourage
that, quite the opposite. This subcommittee, for the first time
in a dozen years, started putting significant resources back
into NIH and back into CDC. We were flat funded for 12 years
under both Republicans and Democrats, and that has not been the
case in the last four years, and I am pretty certain it won't
be the case going forward. We have a bipartisan commitment
here.
So resources are available. We will have our discussion
over whether or not we should direct it. I think that is a
legitimate discussion, and there are some dangers there. We are
pretty careful about trying to let researchers decide what the
areas of research are that make sense, and let scientists
decide which avenues of inquiry are important. We don't want to
impede them, quite the opposite. Again, that is why the
statements were made in the record, because I do think there
has been some confusion here that hopefully the Secretary has
cleared up, hopefully this subcommittee, working in a
bipartisan fashion, has cleared up, and we will continue to
work on that going forward.
But there are persistent concerns--and this doesn't just
apply to this politically sensitive area--as to do you adopt
policies that seem on their surface to make sense and then get
the opposite direction. There was a time in our country's
history when drinking was a really bad thing, and it is, and
over-drinking is terrible, and it is. So let's try prohibition,
and we did, and it didn't work very well. It didn't solve the
problem. It exacerbated the problem.
I think Dr. Lott made a very good point when he talked
about the strength of gun laws in Mexico, the laws and what you
could buy, and then what the reality on the ground is. We know
that, frankly, we have a great deal of responsibility, in my
view, there because we are the market.
I have talked to the president of Mexico before about
violence inside his country and all the thousands of deaths,
and he said maybe you should legalize drugs in your country. I
would never do that here, and this was a previous president, by
the way, not the one that is there now. He said your inability
to control your consumption is killing us down here, because we
don't have the resources to police as robustly as you do, so
the production comes down here, smuggled across your border,
and you have some responsibility for that. I thought that was a
very fair point to make.
But it also pointed out that the problems, for cultural or
economic reasons, they were complex. They had to do with
addiction and all sorts of behavior that is inappropriate.
Again, Dr. Lott's point about 50 percent of the murders in
2 percent of the counties is pretty staggering, and probably
usually in counties that have pretty strict gun control laws.
So we clearly have a whole complex of problems here that
demand research, and hopefully this subcommittee will be in a
position to robustly fund that research and widen it out in
ways that help us get answers, and hopefully we don't jump to
policy conclusions before that research is actually completed.
So again, I want to thank all of you. I thought this was a
terrific, terrific session. I want to thank you for the
expertise and the passion. I used to be in academics. This is
almost like being back on a college campus again, because we
had some great debate too, particularly at both ends of the
table over some of these things, but it was helpful debate, it
was good debate, and it was civil debate.
So, Madam Chairwoman, thank you very much. I enjoyed being
here and enjoyed hearing our witnesses and look forward to
working on this issue with you as we go forward.
Ms. DeLauro. Thank you very, very much, Congressman Cole.
I have to ask for a unanimous consent to enter into the
record two statements, one by the American College of
Physicians, and another by the American Academy of Child and
Adolescent Psychiatry.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. DeLauro. I am also sorry that Dr. Stewart, if we had
gone further, I wanted to address a project which was really--
Project Longevity, which exists in my community.
A small investment in intervention programs have a
tremendous impact. It was launched in 2012 as high rates of
violence in several cities--New Haven, Connecticut; Hartford,
Connecticut; Bridgeport, Connecticut. Connecticut spent less
than a million dollars of its $30 billion budget to fund
Project Longevity, a modest investment.
The number of fatal and non-fatal shootings were cut in
half between 2011 and 2016. Researchers from Yale University
directly attributed the 73 percent drop in the number of group
or gang-related shootings per month to Project Longevity. On
Monday I am going to have an event in my district where Project
Longevity will be there, focused on research and the public
health emergency with regard to gun violence. I would hope we
might be in touch with others as well to get your views about
more of these violence reduction strategies in which we can
move forward, whether there is evidence of the results. If you
do have those examples, I would ask you to share those examples
with us and with the committee as we move forward to try to
address this issue.
If I might add, I think we have to not be fearful of
research and where it takes us. That is what researchers do
every day. When we research a particular illness or disease, we
find that potentially the properties of one drug or of a
therapy lead us to how it can help. That is the wonder of
research and of science and of where we spend the millions of
dollars every single year to plumb the new discoveries. We
should not be afraid of research.
Gun violence is a public health emergency. Anything that
kills 40,000 Americans every year is a crisis. It is a public
health crisis. The CDC, the Centers for Disease Control and
Prevention, is the nation's foremost public health agency. And
yet, it has been absent from this research agenda for more than
20 years.
I have in front of me--it has been said here that we do not
direct research. We say, ``CDC, you go ahead; NIH, you go
ahead.'' We were going to count the lines here of directed
research that we say to the CDC, this is what you get to do. I
am not going to go through all of these, but I have three
pages, three pages of directed research.
We can direct the CDC, the NIH to sit here and say--today
we say here is the money, you go to it. We have directed
millions to cancer research, to Alzheimer's, to brain research.
We are earmarking. Yes, we are, to these areas. A moonshot
effort. We talked here about opioids. We cannot keep track, and
I am for spending money on the problems that we have and the
crisis that we have in opioids nationwide. But we don't
hesitate for a moment to say we need to do something about it.
And yet for 20 years we have been unable, as Federal dollars,
to look at research into gun violence prevention.
Dr. Redfield, I might add, is the CDC director, has told us
flat out, we just need a funding mechanism. We are poised to
research in this area if Congress chooses to give us additional
funding, if Congress chooses to do all of this research at the
CDC and the NIH, if Congress chooses.
Well, I am going to close with this. I think it was you,
Dr. Stewart, who said we need to focus on needless deaths and
suffering. If our research that we do at the Federal level--and
I applaud the research that is done outside, and we have had
collaborative partnerships outside of the government, and we do
this every day with the NIH and the FDA, et cetera, and looking
at these issues that are major challenges that we face in this
country.
Needless death and suffering. And if gun violence
prevention research can lead us to trying to mitigate against
needless death and suffering, then I believe it is our
responsibility, and a moral responsibility, for us to fund at
the Federal level gun violence research.
I want to say thank you. It has been a great discussion, a
robust discussion. And, you know, it is wonderful to get
different perspectives. That is the way we move the ball
forward, not shutting our minds to any kind of a direction that
this kind of research will take us.
Thank you all very, very much. I appreciate it.
This concludes the hearing. Thank you.
Tuesday, March 12, 2019.
OVERSIGHT OF FOR-PROFIT COLLEGES: PROTECTING STUDENTS AND TAXPAYER
DOLLARS FROM PREDATORY PRACTICES
WITNESSES
HON. RICHARD J. DURBIN, U.S. SENATOR
KEVIN CAREY, VICE PRESIDENT, EDUCATION POLICY AND KNOWLEDGE MANAGEMENT,
NEW AMERICA
MARC JEROME, PRESIDENT, MONROE COLLEGE
ERIC LUONGO, FORMER FOR-PROFIT COLLEGE STUDENT
ROBERT SHIREMAN, DIRECTOR OF HIGHER EDUCATION EXCELLENCE AND SENIOR
FELLOW, THE CENTURY FOUNDATION
Ms. DeLauro. The hearing will come to order. My apologies
for being late, but they pay us to vote. And I understand that
Senator Durbin has to vote and he will be back. And we will,
when he comes, give him an opportunity to be able to speak up.
I would like to welcome everyone to the Labor, HHS, and
Education Appropriations Subcommittee for our oversight hearing
on predatory for-profit colleges. We were going to have two
panels, with Senator Durbin first and then a second panel. I
will introduce each of you before your remarks.
But I want to say a thank you to you, Eric Luongo, who was
formerly a student at a for-profit college, Marc Jerome of
Monroe College, Kevin Carey of New America, and Robert Shireman
of The Century Foundation.
At the signing of the Higher Education Act in 1965
President Lyndon Johnson said the law would, quote, ``swing
open a new door for the young people of America.'' For them and
for this entire land of ours it is the most important door that
will ever open, the door to education.
We have a duty to be examining predatory for-profit
colleges, one, because this subcommittee is charged with
oversight of the Department of Education; two, because we fund
the Pell Grant Program, and for-profit colleges receive nearly
14 percent of all Pell grant funding.
Last year, the University of Phoenix was the largest
recipient of Pell grants, not just among for-profits, but all
colleges and universities. They received more than
$200,000,000.
Phoenix has committed a number of violations, including
deceptive or unfair targeting of military veterans in the
advertising, marketing, or sale of products or services. As a
result, at one point the Department of Defense suspended the
University of Phoenix's ability to recruit on U.S. military
bases and restricted its access to Title IV eligibility.
I have a list which I will submit for the record of all of
the infractions by Phoenix University.
And I also have a document of for-profit infractions 2005
to 2019, several pages in length, which I will submit for the
record as well.
[The information follows:]
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Ms. DeLauro. So it is our responsibility in this arena to
be sure we shine a light on those bad actors who seek to scam
students and taxpayers and thereby block the door to education.
I would note that our colleagues on the other side of the
aisle agree on jurisdiction, on this jurisdiction, having
pushed for riders to remove accountability measures with regard
to for-profit colleges.
So this is in our purview, it is an area that we must
address, because predatory for-profit colleges are scamming
students and taxpayers out of millions of dollars, and
Secretary Betsy DeVos is helping them get away with it.
Predatory for-profit schools have lower graduation rates
and higher default rates than public and nonprofit schools.
According to the Department of Education, the 6-year graduation
rate is 59 percent for public institutions, 66 percent for
private nonprofit institutions, but only 26 percent at private
for-profit institutions. And while accounting for only 9
percent of all students enrolled in postsecondary education,
they account for more than a third of all defaults, 34 percent.
Corinthian was an example of the worst kind of predatory
for-profit school. Corinthian engaged in deceptive marketing,
lied to the government about its graduation rate, and folded
almost immediately when the Federal Government turned off the
spigot--a for-profit private business that could not survive
for 3 weeks without Federal assistance.
The collapse of Corinthian Colleges has wrecked the lives
of tens of thousands of students, leaving them with high debt
and useless degrees. Dawn Thompson attended undergraduate and
graduate programs through a Corinthian subsidiary, Everest.
Less than a year after completing her online MBA Corinthian
closed. Dawn was left with $250,000 in loans for degrees from a
defunct college.
Particularly alarming is how predatory for-profit colleges
built their business model on targeting those who they deemed
to be particularly vulnerable.
The Senate Committee on Health, Education, Labor and
Pensions, chaired by then Senator Tom Harkin, investigated for-
profit colleges in 2012. They uncovered internal recruiting
documents from the institutions, including lists of those they
targeted. And I quote, ``welfare moms with kids, pregnant
ladies, military, active and retired, those who experienced a
recent death, and those who were physically and mentally
abused.'' And the list goes on.
And there again this is the student profile of the people
that they were looking for and what they laid out in terms of
the most vulnerable.
This is not, I might add, a new issue. It is not a new
issue. And what I would just see here is I have here the key
decisions to protect student borrowers during Republican
administrations, going back to Dwight Eisenhower. President
Eisenhower, 1956, there were major abuses of the original GI
Bill after World War II. His Bradley Commission produced a
final report in 1956 that indicated for-profit institutions
enrolling former servicemembers on the government's dime and
concluded that, I quote, ``Much of the training in profit
schools was of poor quality.''
In 1957 the National Defense Education Act passes creating
the National Student Defense Loan Program, prohibiting funding
to for-profit schools.
President Nixon in 1974, Federal Trade Commission creates
rule for proprietary schools to document job placement rates.
President Reagan 1987 and 1988, Bill Bennett proposed new
regulations under which more than 2,000 postsecondary
institutions would immediately face a hearing to limit,
suspend, or terminate their participation in PHEAA, in Federal
student aid programs if their default rate on Federal loans
exceeded 20 percent.
In 1988 Bennett delivered a blistering attack: Kids are
left without an education, and no job, and the taxpayer ends
upholding the bag for a kid who gets cheated.
President George H.W. Bush, 1991, Secretary of Education
Lamar Alexander suggests States implement Federal benchmarks
for vocational programs that include graduation, job placement,
and default rate. So not a new issue.
And it is not just who they target, but how. They train
their employees on something called a ``Pain Funnel.'' It is a
technique to wear down prospective students and coerce them
into sham programs at these institutions.
And that includes our veterans. Under current law, for-
profits are only allowed to receive up to 90 percent of their
revenue from Federal financial aid through the Department of
Education. However, through what is called the ``90-10''
loophole, DOD and the GI Bill benefits do not count.
As a result, schools aggressively recruit veterans,
servicemembers, and their families to get around this
accountability provision and to extract more public dollars. A
Department of Education analysis found that 200 for-profit
colleges received between 90 and 100 percent of their revenue
from taxpayers when DOD and VA benefits were counted as Federal
assistance.
Our witness this afternoon, Eric Luongo, will share his
story. After being honorably discharged from the Navy, Eric
attended DeVry for web graphic design. They promised he could
make $80,000 a year. But as he will testify, they scammed him,
repeatedly misleading him in order to get him to enroll, to
take out loans, despite their promises to the contrary.
He now owes $101,000 and the DeVry degree is worthless.
Eric searched for a job unsuccessfully for a year because the
DeVry program did not prepare him for a career in web graphic
design. Now he is back in school and looking at a bachelor's in
business administration.
The 90-10 loophole gives predatory for-profit colleges a
perverse incentive to target veterans and servicemembers like
Eric, which is why groups such as the Iraq and Afghanistan
Veterans of America, Student Veterans of America, Paralyzed
Veterans of America, and Vietnam Vets of America support
closing the 90-10 loophole.
The behavior of predatory and for-profit colleges is
egregious. They are private companies that can subsist entirely
on Federal dollars. I would think that my colleagues who decry
crony capitalism would particularly object to this, especially
since it comes at the expense of veterans, students, families,
and taxpayers.
In addition, they are now creating other schemes to change
their tax status from profit to nonprofit to avoid regulatory
structure or, if you will, rules to protect students and
taxpayers.
Yet, the Trump administration and Secretary DeVos have
rushed to let these predatory programs off the hook. In
particular, Secretary DeVos is working to roll back two
protections, the Gainful Employment rule and the Borrower
Defense rule.
The Higher Education Act requires all career-oriented and
for-profit programs receiving Federal student aid to, quote,
``prepare students for gainful employment in a recognized
occupation.'' The Gainful Employment rule expanded
accountability and transparency to fulfill that requirement,
thereby protecting students from programs that charged too much
and delivered too little.
The Education Department itself estimated that eliminating
the GE rule would cost $4,700,000,000. Supporters of the
Gainful Employment rule includes 33 military and veteran
organizations, State attorneys general, and student, consumer,
and civil rights groups.
Secretary DeVos missed her deadline for rolling back the
strong rule, but we expect the Department of Education to
finalize their effort in 2019.
Meanwhile, the Secretary is also refusing to follow loan
forgiveness started under the Obama administration. Students
attending these worthless institutions should not be required
to bear the burden of this student loan debt.
The Obama administration's Borrower Defense rule created a
process for students to apply for relief. The Department of
Education's own inspector general found the Borrower Defense
rule would improve the Department's procedures for, quote,
``mitigating harm to students and taxpayers.''
Supporters of the rule include State attorneys general,
veteran and servicemember groups, and organizations dedicated
to fighting for students, consumers, civil rights, faculty,
staff, and college access. Yet, as of December 2018, more than
139,000 loan forgiveness claims were still awaiting action,
including Dawn Thompson, who I mentioned earlier, and our
witness Eric.
And Secretary DeVos is siding with the predatory for-profit
colleges at the staff level. She has hired more than a half
dozen staff who worked for for-profit colleges who have had
oversight of them at the Department. This includes the former
dean of DeVry University to lead the Department's Student Aid
Enforcement Unit. And the senior political appointee behind her
efforts to deregulate higher education is a former employee of
for-profit colleges. You want to talk about the fox guarding
the hen house.
Our Nation's students strive to improve their lives. It is
our responsibility to ensure that they do not have to worry
about being taken advantage of while they seek to invest in
their own skills. So we will continue to fight for students and
taxpayers and demand the Trump administration enforce the
strong Gainful Employment and Borrower Defense rules.
I look forward to hearing from our witnesses today about
the oversight that we must be conducting because we need to
protect students and taxpayers from predatory for-profit
colleges. We must ensure that door to education which President
Johnson cited all those years ago is not sealed shut by the
for-profit colleges who seek to profit at the expense of
students' education.
With that, please let me turn this over to my good friend
and ranking member of the subcommittee, the gentleman from
Oklahoma, Mr. Cole, for any open remarks he cares to make.
Mr. Cole. Thank you very much, Madam Chair.
I would like to thank all our witnesses for their testimony
and sharing their time with the committee, especially those who
traveled here. We really appreciated your efforts.
I would particularly like to recognize Senator Durbin. I am
honored to have the senior Senator from Illinois come and share
his views on this topic before this subcommittee.
So welcome.
Not only somebody I admire as legislator, but I still think
the best interview on ``Morning Joe'' out there, without a
doubt. So I enjoy seeing you in all your many forms.
This hearing season has addressed a number of difficult and
challenging topics. This is certainly one of them today. And
today we will learn more about proprietary institutions of
higher education, sometimes referred to as for-profit colleges.
I have enjoyed reading all the testimony, which I did last
night and this morning, and look forward to our discussion
today on helping students find the best option.
I want to start by expressing my ardent support for
programs helping young people to access quality higher
education. This commitment to increasing opportunities can be
seen in the strong support shown by this committee for programs
like TRIO and GEAR UP over the last 4 years.
These programs target low-income, first generation students
by providing support, encouragement, and structure needed to
attain a college degree. In the past 4 years these two programs
have seen a combined increase of over 20 percent and I hope
such robust bipartisan support for those programs continues
under our new chair.
I also recognize the value of having options in higher
education. A 4-year college degree right after high school does
not fit every individual or family situation. For a variety of
reasons our higher education system offers a range of options
to students.
Many options come with benefits. Schools have found ways to
serve working adults, students with special needs in different
ways of teaching, both online and in the classroom. For
example, proprietary institutions were some of the first
schools offer online instruction. Now nearly every institution
of higher education incorporates this method of learning.
Proprietary institutions can serve as innovators, trying
out methods that may not be possible in more rigid State
university systems. And they can also serve populations that
may have barriers to accessing higher education, such as
working parents who do not find the typical in-classroom
semester easy to accommodate the demands of a full-time job and
a family.
I do not want an overactive Federal Government closing off
options and stifling innovation by forcing one-size-fits-all
rules that can force good schools to close their doors.
Yet I also recognize, and some of our witnesses made this
abundantly clear in their testimony, that there are some
unscrupulous institutions that have preyed on prospective
students, including veterans, with egregious marketing tactics
and in some cases outright lying. Clearly, such behavior by any
school is abhorrent and the government has a role to intervene.
Thankfully, I believe we can balance the interests of
having multiple options in higher education while ensuring
access to information and reasonable safeguards to prohibit
predatory practices. Let's not throw out the baby with the
bathwater. Efforts to include more information for students
about outcomes attained by graduates of all school types seems
like a reasonable first step.
Today, I hope we can learn more about how to stop bad
actors while still preserving the unique role proprietary
schools can play. So I look forward, Madam Chair, to the
hearing and the testimony today and learning ways we can ensure
that the higher education system provides options for all
student types, yet still ensures that we spend taxpayer dollars
wisely.
I yield back my time.
Ms. DeLauro. Thank you very much.
Now it really gives me great pleasure to welcome to the
House side of the Capitol a dear, dear, wonderful friend, but
more than that a tireless leader and someone who has spent a
lifetime in promoting public education, affordable access to
higher education.
A fellow appropriator, I have had the opportunity really to
work with the Senator over the years side by side on a number
of oversight issues at the time, particularly on the
Agriculture Subcommittee with the Food and Drug Administration
and with a single food safety agency, which we keep pursuing.
But we have worked on issues with respect to the Department
of Education. We co-led a letter in February about an Office of
Inspector General report about the potential waste, fraud, and
abuse at for-profit colleges, including various Art Institute
programs. I said we partnered on a food safety agency and other
issues.
So it give me great, great pleasure to introduce the
Senator from Illinois, Senator Durbin.
Senator Durbin. Thanks, Madam Chair. It is an honor to be
with you and with your colleagues. And I know this is an
oversight or investigative hearing, and the first thing you
should investigate is how the ranking member would admit
publicly he watches ``Morning Joe.'' He is going to answer for
that.
Ms. DeLauro. He has to answer for that.
Senator Durbin. I am sure he will.
Thanks, everybody, for allowing me to come over here.
These hearings on this industry are so few and far between,
and it is a darn shame, because what I am about to tell you is
really a sad story, a tragic story for students and for
taxpayers.
So let me say at this point, if you forget everything else
I am about to say, I want to ask you to remember two numbers,
remember these two numbers when it comes to this industry. The
numbers are 9 and 34. Nine percent of high school graduates in
the United States of America go to for-profit colleges and
universities; 34 percent of all the student loan defaults are
students who attended for-profit colleges and universities.
Why? Why would almost four times the percentage of students
end up in default?
The answers are obvious. These schools charge too much for
tuition. They leave the students with too much debt.
Discouraged students leave school with debt and not even a
diploma. And those who end up with you a graduation certificate
or diploma find that the inflated promises of employment and
earnings just don't materialize and they ultimately default on
their debts. Students graduating with all this debt then face a
life that is compromised in terms of what they can do next.
And then they learn the sad reality, that if they are not
going back to that for-profit school that led nowhere,
virtually none of the hours that they took at those schools are
transferrable anywhere. This isn't like your community colleges
and city colleges across the United States. These schools have
been accredited by themselves.
And shame on us. You can't fault the families that send
kids to these schools. How would they know any better? These
schools qualify for Pell grants, they qualify for government
loans. They look like they are the real thing. And students
coming from families with limited experience with college look
at this and say, well, this must be a real college. And it may
have that name on the door, but it turns out it isn't even
close.
John Murphy is a famous individual when it comes to this
industry. He was the cofounder of the University of Phoenix,
the big daddy of them all. He put it this way in Deseret News
in 2015, referring to these for-profit colleges: ``They are not
educators and they are looking to manipulate this model to make
money. There is nothing wrong with making money, but I think
anyone making money in an educational activity has a higher
standard of accountability.''
Murphy explained that quickly after its founding the focus
of University of Phoenix became tapping into what he called the
``open spigot'' of Federal student aid, what he also described
as the ``juice'' of the industry. For-profit schools are one of
the most heavily subsidized industries in America. Many for-
profit colleges receive 80, 90, close to 100 percent of all of
their revenue straight out of the Treasury.
Now, a lot of people have criticized me and say, ``Durbin,
you are just angry because it is a business as opposed to the
traditional means of higher education.'' I am not opposed to
businesses. Frankly, I think they are fine. But to call this an
exercise in the free market is to overlook the obvious: They
exist because of massive subsidies.
I have tried it to imagine, Madam Chairman, any other
company or industry in America, I went through defense
contractors, the big aggies, and all the rest of it, nobody
takes the money out of the Treasury the way this industry does.
This isn't a matter of attracting customers to a business, it
is a matter of attracting students to a heavily subsidized
industry.
Murphy went on to say, Phoenix was the one that got it
rolling and then all the others followed. Let's talk about
them. Corinthian, collapsed in 2014. How many students were
left in the lurch? Seventy thousand students nationwide. For
years, Corinthian had inflated their job placement numbers and
lied to the students, just flat out lied to them, and lured
them into high cost programs that turned out to be worthless.
In the decade that followed leading up to its collapse,
Corinthian brought in more than $10,000,000,000 in Federal
student aid funds. Its CEO, Jack Massimino, took home more than
$20,000,000 in that 10-year period of time, personally took
home more than $20,000,000. And on the other hand, nearly 40
percent of Corinthian College's students, who should have begun
to pay off their student loans in 2008, had defaulted by 2010.
Now, who loses when that happens? Well, we know the
students lose. They have got this on the record. They defaulted
on their student loan. We know it is tough for them to continue
their education or almost anything else. I have met a lot of
them who have moved into their parents' basement, there was no
place else to turn.
But who know who else lost? The American taxpayers lost,
because these students can't pay back their loans. These are
tax dollars.
Corinthian and it is fraud was not unique. It was the
canary in the coal mine. Nearly every major for-profit college
company has faced and continues to face investigation or
lawsuits by State and Federal agencies.
In 2016, ITT Tech--boy, doesn't that sound like a winner,
wouldn't you like a diploma from that place?--in 2016, it
collapsed, again leaving tens of thousands of students
scrambling. In 2018, the Education Corporation of America--how
about these names?--and Vatterott colleges disappeared.
And we are currently in the midst of a collapse of another
for-profit enterprise, schools owned by Dream Center Education
Holdings, including Argosy University.
I used to go to the Chicago Sun-Times editorial offices and
I would get on the elevator and there were all these fancy
looking offices and big names, Argosy University, and I thought
it is a fraud. The poor students who are walking into this
place think this is a real college.
It is not. Argosy is gone. Do you know how many students it
left behind in my State? Seven hundred holding the bag. That is
the kind of situation which can be repeated in almost every
State represented here.
In this case, in addition to an ongoing collapse that has
left students scrambling, millions of dollars in Federal
student aid funds have gone missing. Chairwoman DeLauro and I
have called on the Department of Education inspector general to
investigate.
Incidentally a former Department of Education inspector
general, Kathleen Tighe, warned Congress that for-profit
colleges represent a disproportionate risk to students and
taxpayers to this day.
There were some that who said Corinthian and ITT Tech were
outliers in the industry and that it was the Obama
administration hounding these poor institutions. But the
collapse and practices of Education Corporation of America,
Vatterott, Dream Center under Secretary DeVos and the Trump
administration prove that the rot in this industry runs much
deeper than Corinthian and ITT Tech.
As appropriators in the House and Senate, we are
responsible for ensuring that critical investments and Federal
student aid don't become the juice that we were told earlier.
Unfortunately, many of the key protections for students and
taxpayers that the Obama administration advanced are under
attack by this administration and the former for-profit college
executives which have been hired by the Department of Education
to keep an eye on the industry.
In May 2018, The New York Times chronicled the DeVos
Department's unwinding of the enforcement unit set up in the
aftermath of Corinthian.
Secretary DeVos has also attacked and refused to enforce
the Gainful Employment rule, which cuts off Title IV funding
for programs where graduates' ratio of student debt is too
high. Secretary DeVos has taken steps to reinstate Federal
recognition for the Accrediting Council of Independent Colleges
and Universities, which maintained the accreditation of
Corinthian and ITT Tech to their dying day in bankruptcy.
Madam Chair, you have been patient. I know you have other
witnesses coming before you. But let me just say this. If you
have ever sat down with one of these students and got a feeling
for where they are in life after they have been defrauded by
one of these colleges and universities, I think you would rise
to the same level of emotion as I have on this issue.
This is unfair, and it is fundamentally unfair the American
taxpayers have to subsidize it. And the collapse of these
schools tell you they are not even good economic and financial
models. They take all the money they can and then run for the
border, and the taxpayers end up holding the bag for student
loans that are defaulted on. Is that how we are going to
educate or children? Nine and 34.
Thank you, Madam Chair.
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Ms. DeLauro. Thank you very, very much, Senator. Thank you
for being here today and for your continued passion on this
issue, not so much on the issue but what is happening to
students in this country and their dreams and aspirations being
dashed by these for-profit colleges. Thank you very, very much
for being here this afternoon.
Senator Durbin. Thank you.
Ms. DeLauro. Let me please invite the second panel up. And
I will introduce everyone and then we will move toward
testimony.
And introducing our witnesses, our second panel.
Eric Luongo. Eric served in the United States Navy, was
honorably discharged in 2003. He will provide the subcommittee
testimony on his experiences enrolling and attending DeVry
University.
Marc Jerome, who is president of Monroe College in New
York.
And welcome, Jerome.
Kevin Carey, vice president for education policy and
knowledge management at New America.
And finally Bob Shireman, director of higher education
excellence and senior fellow at The Century Foundation.
Following your presentations--and I will tell you that your
entire testimony will be put into the record, submitted to the
record, and so I will ask you to speak for about 5 minutes. And
then we will proceed to 5-minute rounds for questions. We will
go back and forth in order of arrival.
If you will, Mr. Luongo, begin when you are ready. And I am
told, housekeeping, put the mike on.
Mr. Luongo. My name is Eric Luongo. I am here today to tell
my story in the hopes that what happened to me isn't going to
happen to anyone else.
I enlisted in the Navy in September 1999. I served as an
assistant LAN administrator on board the USS Wadsworth and
served as the LAN administrator and the communications officer
on board the Coastal Mine Hunter Heron.
I was honorably discharged in 2003, and after taking a
couple of years for myself I decided I needed to go to school
again, earn an associate's degree in web graphics design,
because I felt that is where I wanted my career.
After looking around for schools, I picked DeVry University
because I was told by the DeVry representative that their
graduates were making $80,000 and more a year working in the
field of web graphic design. So I started there in 2007.
Before I enrolled, I told the DeVry representative that I
did not want to have to pay for school and I wanted to use the
GI Bill and grants so that I could go to school for free. In
response she told me I would not have to pay for school and
that my classes would be covered by my GI Bill and grants.
So I signed up for classes. Then the DeVry representative
told me I needed to fill out FAFSA. At the time I had no idea
what FAFSA was, but they told me that I needed to complete it
in order to receive grants. So I completed my FAFSA and I was
approved for Pell grant, Stafford loan, and Perkins loan.
I was asked to complete a master promissory note as well.
The fact that I was approved for loans, combined with the
language in the master promissory note, made me very
suspicious. I thought it was very strange that it said I was
signing for a loan, since I was told I would be going to school
for free.
So I called the DeVry representative and started asking
questions. When I said to the DeVry representative I thought I
was going to not have to pay for this, I was told that I wasn't
because I fell under a veterans program and because of that I
had the grants and the GI Bill and I didn't need to worry, I
wasn't going to be charged for any loans. This led me to
believe that I was not actually taking out the loans per se,
that I was just approved for them. Every year I had to complete
the FAFSA again, because I was told I was just recertifying to
receive my grants.
Then, after I graduated in June 2011, I started getting
letters in the mail from loan service providers that said I
owed money for student loans. I had no idea that I had these
loans because I had used my GI Bill and the Pell grants to earn
this associate's and was told that because of my veteran status
I wouldn't have to pay for school at all.
So here it is, years later, because of interest and whatnot
I have over $101,000 for an associate's degree from DeVry
University. The interest keeps accruing. I was never able to
find a job working in web graphic design. I spent over a year
looking for a job.
At one point I ended up settling for a job working with the
developmentally disabled. And later I became an immigration
services assistant with USCIS under the Department of Homeland
Security, where I work to this day. And I still never ended up
working in web graphic design.
A couple of years ago I made the decision that I need doing
to go back to school and get something of substance. This time
I am going for my bachelor's in business administration
information systems. Because of the loans that I unknowingly
took at DeVry, my financial aid has been maxed out and I was
lucky enough to be able to get into the vocational
rehabilitation program through the VA, because I am a disabled
veteran.
I am now attending Medaille University and working full-
time as an ISA with Department of Homeland Security. My time at
Medaille has been like night and day compared to my experience
with DeVry. Medaille has set up a department to specialize in
veterans' affairs and work directly with the VA. Voc rehab
works with DeVry and I have to pay nothing.
I can even speak to the representatives at Medaille
whenever I need. The professors and quality of classes are
night and day. Medaille ensures that the students have the
tools they need to succeed.
Since being at Medaille I have been able to maintain a 3.77
GPA. I am set to graduate in June with my bachelor's degree.
And I never thought that I would be the subject of such
predatory acts like those I experienced with DeVry. It just
kind of shows that this really can happen to anybody.
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Ms. DeLauro. Thank you very, very much for your testimony.
Mr. Jerome.
Mr. Jerome. Good afternoon. My name is Marc Jerome and I am
the president of Monroe College in the Bronx. Thank you for
allowing me to share my perspective today, which of course is a
little bit different.
I absolutely abhor the unethical behavior we have just
heard about, but the current policies do not adequately address
these problems. They unfairly penalize too many ethical
institutions like mine and don't do enough to protect low-
income students wherever they attend.
If you take one thing away from my comments today, it is
this: Higher education as a whole is failing low-income
students, especially minority students. Whether we look at
graduation rates, loan default, or debt to earnings, shockingly
weak outcomes for these students do demand accountability
across the board.
Eighty-six years ago my grandfather and great aunt founded
Monroe College. I am the third generation of my family to lead
the institution and I am passionate about what we do.
Significantly, our Bronx campus is located in the poorest
congressional district in the country, but has some of the best
outcomes for low-income students of any institution across all
sectors.
Given the title of the hearing it was actually very hard
for me to decide to be here today. I am respectfully asking for
a lowering of the inflammatory rhetoric to describe every
institution in the for-profit sector. The word ``predatory'' is
unfair as a blanket statement and it immediately stifles
thoughtful discussion.
Students and families absolutely deserve accurate, easy to
understand, and consistent information on the programs or
schools they want to attend. Yet the current regulatory
framework only requires for-profit institutions to provide
relevant information and warnings. All students should be able
to compare information about similar programs and be warned if
outcomes are weak.
Students should absolutely have a reasonable expectation
that they will graduate from the college they want to attend.
All colleges should be held accountable if too few students
graduate. But in too many schools, across all sectors, this is
not happening. In fact, there are 816 colleges with on-time
graduation rates below 10 percent, and this is for full-time
students. There seems to be no accountability for these
unacceptable results, whether it be from accreditors, the
Federal Government, or boards of trustees.
Students also should have a reasonable expectation that if
they take a student loan, their earnings will be enough to pay
the debt, and colleges should be held accountable if doubt is
too high and salaries are too low. Yet this is not happening.
The data is clear that if a debt-to-earnings metric was applied
across all sectors, huge swaths of higher education would fare
poorly. Yet only for-profit students are deemed worthy of
protection.
Millions of students attend public and nonprofit and
nonprofit schools with high debt and low earnings. They should
be protected, too. There are 334 degree-granting institutions
that have default rates above 20 percent, three-quarters of
which are public and nonprofit. These institutions should also
be held accountable to improve their results.
The Department of Education recently announced that only 24
percent of all borrowers are currently paying down interest and
principal. Repayment rates are also low at community colleges
and Historically Black Colleges and Universities. I don't
believe this should be a punitive measure. Once again, the
current regulations only hold for-profit colleges accountable.
The notion that the difference in sector oversight
justifies separate protections for students just does not
withstand scrutiny. Public and nonprofit boards do provide
oversight, but not always effective outcomes to oversight. If
the oversight was effective, there would not be so many public
and nonprofit institutions with such poor outcomes for low-
income students.
Just think about this: High school principals would lose
their jobs if their on-time graduation rates were below 10
percent.
Accountability and consumer protection should be extended
to all institutions and to all students. To do anything else is
to abandon the 18 million college students who do not attend
for-profit institutions.
On the other hand, some accountability metrics, such as the
Gainful Employment rule, which I have been intimately involved
with for many, many years, are so overbroad and imprecise that
they have the exact opposite effect from what was intended.
Rather than punish poorly performing programs, the rules
actually close some of the best performing programs in the
country while leaving the same programs at other institutions
unaccountable, simply because they have a different tax status.
This cannot be what was intended. Students deserve better.
And I really think we all could do better.
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Ms. DeLauro. Thank you.
Mr. Carey.
Mr. Carey. Thank you, Madam Chair, Ranking Member Cole,
members of the committee.
Senator Durbin mentioned this difference between 9 percent
of students enrolling from high school and 34 percent of
defaults. What accounts for this enormous imbalance?
Well, to start, for-profit programs are often much more
expensive than public programs, making for-profit students much
more likely to borrow. A recent National Bureau of Economic
Research study comparing students enrolled in certificate
programs found that 83 percent of for-profit enrollees borrowed
compared with 24 percent of comparable students at public
community colleges.
For-profit students are also much more likely to default on
their loans or have trouble paying them down. Three years after
for-profit borrowers left college in 2011 and 2012, only one-
third had paid down even $1 in principal on their loans
compared with nearly half at community colleges and two-thirds
at 4-year public and private nonprofit institutions.
Why can't many for-profit students pay their loans back?
Well, because their loans are larger because the degrees those
loans finance are often worth very little in the labor market.
The same study found that even though average for-profit
tuition was more than 10 times greater than at community
colleges, for-profit students actually earned less money in the
labor market.
The authors found that, and here I am quoting, ``Weak
performance of the for-profit sector is not limited to a few
poor-performing institutions, rather the majority of schools
appear to have negligible average earnings effects.''
The burden of this failure falls disproportionally on
students of color, particularly Black students. A Brookings
Institution study projects that 58 percent of Black borrowers
who ever attend a for-profit college will default on their
loans. A Center for American Progress study found that among
Black borrowers who dropped out of a for-profit college the
default rate is 75 percent.
Unsurprisingly, given how much debt their students take on,
for-profit colleges are unusually dependent on Federal
financial aid, and as a result, when they go bankrupt the cost
to the taxpayer is enormous. As of last September, the
Department of Education had received over 200,000 claims under
the Borrower Defense provision of the Higher Education Act,
which allows students who have been deceived by their college
to have their debts discharged.
The vast majority of these claims, which amount to billions
of dollars, are against for-profit schools. It will be the
taxpayers, not the schools' owners, who pay those bill.
Fraud and discharge claims against for-profits are common
in part because for-profit and nonprofit colleges behalf very
differently when they experience financial distress.
We have seen just in the last week that the for-profit Art
Institute of Seattle gave students 2 days notice last Wednesday
that they would be closing on Friday, 2 weeks before the end of
the winter term, leaving hundreds of students in the lurch.
Meanwhile, for-profit Argosy University is currently
embroiled in litigation over the unknown whereabouts of over
$16 million in Federal aid that it ununaccountably failed to
disperse to students while it, too, was in the process of
shutting down.
When for-profit colleges close, the financial interests of
their owners come first.
I would also note for the committee that the premise of
this hearing is that we can identify for-profit colleges as
for-profit colleges. That is increasingly not true. Both the
collapsing Art Institutes and Argosy chains are technically
owned by a nonprofit foundation. This is a new trend in for-
profit higher education.
Let me give you an example. During the last academic year,
Grand Canyon University received over $750,000,000 from Federal
student loan programs, more than any other college in America.
Grand Canyon University is a publicly traded corporation with a
market capitalization of over $5,000,000,000 run by a former
University of Phoenix executive named Brian Mueller. Grand
Canyon University is also an IRS-approved tax-exempt nonprofit
organization run by a former University of Phoenix executive
named Brian Mueller.
Now, how can both of those things be true at the same time?
Because Grand Canyon University the for-profit set up Grand
Canyon University the nonprofit as a conduit through which
Federal financial aid now flows, immunizing the corporation
from Federal rules governing for-profit colleges. Other for-
profit colleges have completed or are contemplating such so-
called conversions.
The Federal Government has been providing student financial
aid in different forms since the end of World War II. There are
lessons in that history. For-profit colleges work from a
fundamentally different sent of incentives and imperatives than
do public and nonprofit schools. Without strong guardrails
protecting students and taxpayers, there is a high likelihood
of waste and exploitation.
Thank you.
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Ms. DeLauro. Thank you.
Mr. Shireman.
Mr. Shireman. Thank you for the opportunity to testify
today.
The United States experience with government funding of
for-profit colleges is not a pretty one. While they
theoretically can bring efficiencies to education, their
financial structure rewards shortchanging students and
taxpayers. And even when the government puts up guardrails to
protect against that problem, the industry has repeatedly
lobbied to eliminate those protections, leading to mass harms
to veterans and low-income students.
Rampant abuses emerged with the first GI Bill, then again
in the 1970s, in the 1980s, and in the 2000s. Now we are
hearing from for-profit lobbyists that the bad days are over.
But those same promises were made before and lawmakers fell for
it as if they thought that because it is dry under the
umbrella, the umbrella can be ditched.
The chair mentioned the Nixon administration. After the
Nixon administration identified the problems, they instituted
an 85 percent cap on the proportion of students that can be
funded by any kind of Federal aid. It was something that they
had learned had worked well in the Korean-era GI Bill. But when
weakened abuses, those did not survive, when those weakened
abuses led to abuses in the 1980s, we heard from William
Bennett, who was outraged that some of the most disadvantaged,
the most vulnerable members of society are left without an
education, with no job, with the taxpayer ending up holding the
bag for a kid who gets cheated by a for-profit college.
New reforms were then adopted by Congress in 1992, leading
to the closure of more than 1,200 schools. After just a few
years, the head of for-profit college association declared that
the industry had been purified, arguing that Congress should
ease up. Congress weakened the 85-15 rule that had been adopted
in 1992 and adopted some other weakening of the laws.
Later, President Bush's Secretary of Education created
several loopholes in the ban on commission-paid recruiting,
insisting that abuses in student aid programs were, quote, ``no
longer possible.'' None other than the CEO of Corinthian
Colleges assured Congress in 2004 that, quote, ``Fraud and
abuse perpetrated by certain for-profit institutions was in the
past.''
An amendment included in a budget bill then opened the door
to rapid unchecked growth in Federal funding of online
education programs.
Congress should have known better. Combined with the other
weakened protections, the result was a disaster that we are
still grappling with.
This is the part of the testimony where some will expect me
to say that the problem is bad actors and we need to get those
bad actors and extract them from the student aid programs.
But that is not the way this usually happens. Most
predatory schools did not start out with people who are aiming
to be predatory. Instead, they are business people who launch a
plan to do good by doing well, following market indicators like
the number of new customers and the stock value.
In many industries those signposts lead to a quality
product at a fair price. But in education these simplistic and
narrow indicators of business success are not adequate,
especially when the customer is a third party, like the
government, that is not able to check quality, the value for
the money.
Without the direct oversight of trustees or public
appointees prohibited from taking the money for themselves, the
for-profit navigation systems cause the schools to trample
students' interests, not always, but frequently and
unpredictably, and often without the school owners being able
to admit to themselves that they have strayed far from their
original intentions.
My colleague on today's panel says that regulation should
neutral with regard to a college's sector. This is a favorite
refrain of for-profit advocates, like the tweet I saw recently
that said all schools from all sectors should be held to these
same accountability standards.
That bumper sticker is nonsensical. The very definitions of
each sector about their accountability the way each is
regulated. Ignoring the fact that a school a run by investors
is sector ignorant, not sector neutral.
As the chart in my testimony shows, there are major
regulatory requirements that apply to nonprofit and public
entities that do not apply to for-profits, and those need to be
enforced also. The sectors are very different beasts and the
for-profits are more hazardous.
The consumer protection afforded by nonprofit
accountability is obvious when you examine school closures,
which are sudden and calamitous at for-profits but generally
not at nonprofits.
I would be happy to expand on any of these points during
the question period. Thank you very much for the opportunity.
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Ms. DeLauro. Thank you very much.
Thank you all for your testimony.
We will now proceed to questions.
Mr. Shireman, thank you for being here today and for your
testimony.
Given that overall enrollment in the for-profit industry
has declined and that efforts by the Obama administration have
led to a crackdown on for-profit abuses, why can't we take our
foot off the gas peddle when it comes to the oversight of the
industry?
Mr. Shireman. I think there is a huge danger here that we
will be lulled into the sense that, oh, well, Corinthian closed
and Vatterott closed and Argosy closed and the other colleges
are gone, but that is exactly the same mistake that previous
Congresses have made.
We are now about at the level of enrollment in for-profit
colleges that we were in 2005, just before the last ramp-up in
massive, quick expansion of colleges. So we need to be on the
watch more than ever, especially with two major for-profit
colleges, including Grand Canyon that Mr. Carey just mentioned,
announcing big profits, which will cause all of the rest of the
industry to have investors clamoring for more.
They want in on the money. They see that the gravy train is
coming again, just like before. And they want in early because
that is how you make the big money, and that is how taxpayers
and students will be ripped off again.
Ms. DeLauro. My hope is that we will be able to talk in a
subsequent round about the kinds of things that we might be
able to do and the committee might be able to do.
Mr. Carey, having looked at the public and private
nonprofit sectors of higher education, is there reason for
alarm with respect to the for-profit industry? What is it about
this industry that is so concerning?
Mr. Carey. Fundamentally all colleges and universities are
financed through enrollment, but there is no limit on the
financial ambitions of a for-profit college.
And if you look historically, often the worst abuses are
not in the education that is provided, although often we find
that the courses don't lead to degrees, as we heard from our
other witness today, it is abuses in recruitment and marketing,
where you have large numbers of salespeople who are financially
motivated to enroll anyone possible because, as a friend of
mine said to me, what other business is there where you can get
someone to buy something for $50,000 by calling them on the
phone?
Really just higher education, because these are things that
can be with a few signatures on a piece of paper transfer over
large amount of government money and take out large amounts of
debt, no questions asked.
So I think the combination of that easily available money
and the extremely lucrative nature when it is successful
presents a constant risk for the taxpayer and for students.
Ms. DeLauro. And I will just add that I think the
recruiting tactics of these institutions. We have to pay very,
very close attention to that.
Mr. Shireman, 2017-2018 largest recipient of Pell grant
dollars was University of Phoenix, a for-profit college. Second
largest recipient was Miami-Dade College, a public college. The
third largest was Grand Canyon, a for-profit college that
converted to a nonprofit college.
Should we be concerned as a committee that the University
of Phoenix and Grand Canyon University were two of the top
three recipients of Pell grant dollars?
Mr. Shireman. Given the tendency of for-profit colleges to
collapse somewhat unpredictably, the size of those institutions
and the amount of Federal money that they are getting should be
of great concern.
I also would recommend that the subcommittee pay attention
to some of the funding streams that are in other subcommittees.
For example, University of Phoenix is also the number one
recipient of GI Bill dollars. Grand Canyon is about number 15,
I think.
Another subcommittee oversees the IRS, and IRS funding was
cut for oversight of charitable organizations. The IRS is now
basically rubber stamping applications for tax-exempt status.
The denial rate has gone down 90 percent because Congress cut
funding for the oversight of tax-exempt entities. That is what
has allowed this very strange for-profit/nonprofit Grand Canyon
beast.
Ms. DeLauro. Thank you.
I just have a few seconds left so I will yield back my
time.
Mr. Cole.
Mr. Cole. Thank you very much, Madam Chair.
I am just going to ask you all quickly, I am just curious,
I will start with you if I may, Mr. Shireman, do you think
that, frankly, for-profit colleges ought to just simply be done
away with?
Mr. Shireman. No, I think it is really important. I think
for-profit colleges have provided that there are many very good
ones. It is hopeful to note that some of the best ones actually
get no Federal funding at all.
And I think a good test of whether a for-profit college is
just taking advantage of government funding or actually serving
a marketplace need is the extent to which it has employers, for
example, financing some of its students' education.
John Murphy, in fact, the cofounder of University of
Phoenix, who later was very concerned about what had happened
there, he said that the first number of years what kept them on
track was that they were accountable to employers. Those
employers saw that this was a valuable education to their
employees and it was worth the money, and that kept them
anchored to a market indicator.
Mr. Cole. Thank you.
Same question to you Mr. Carey.
Mr. Carey. No, I don't believe that for-profits should be
categorically excluded from Title IV. I think it is perfectly
possible to run a for-profit college that does a great job by
its students. In fact, I think President Jerome the president
of one of those colleges. The outcomes of Monroe College are
quite good.
So it can be done. It just isn't too often. And I think we
need substantially higher standards of outcomes with a special
scrutiny on institutions that are operating from a profit
motive. And we ought to apply those standards vigorously across
the industry to protect students and taxpayers.
Mr. Cole. Thank you.
I think I probably know the answer, but I want to give you
an opportunity to respond.
Mr. Jerome. Well, I actually agree with a lot of my
colleagues.
What I offer is a nuance. If you come to New York there are
no publicly traded colleges. We have 12 family-owned
institutions that have an average life of 90 years.
And essentially, because we keep coming back year after
year, I feel comfortable that the regulatory framework that is
out there now isn't working. It actually doesn't address the
marketing and the recruitment aggressiveness. It addresses
outcomes.
And what I would ask all of you to look at is, because this
is what I look at and I have looked at it for 10 years,
outcomes are very weak across all institutions. And the dilemma
we face is that the rules that are proposed for for-profit
colleges, they would not--independent and public institutions
would not pass them. And that then brings up hypocrisy in
higher education and should you be protecting a student.
All of you can just go to the College Scorecard and look at
the debt and the earnings of students and the institutions, and
across all sectors there are places with very high debt and
very low earnings.
Similarly, to think that aggressive recruiting just is in
the for-profit sector is just false. We are starting to see,
and I am very upset about it, the abuses you saw only in the
for-profit sector migrating to the real nonprofit and public
sector with the growth of large, multi-State, fast-growing
online institutions, whether they are public or private.
My last comment on this is I think now the largest
advertisers in the country are either nonprofit or publics. The
world is changing. As Mr. Carey said, you can no longer tell
the difference between a public, a nonprofit, and a for-profit,
and especially because so many nonprofits and some publics
contract out education to very aggressive for-profit companies
and it is all hidden.
So I hope that is enough.
Mr. Cole. Mr. Luongo, I want to give you a chance to answer
that question, too.
Mr. Luongo. I am not necessarily qualified to answer the
question, but I do have an opinion on it. And my opinion is
that colleges, like people, are all individual. There is no set
mold that everybody fits into.
And like I have had negative experiences at DeVry, there
are people out there who have had fantastic experiences. I have
had fantastic experiences at Medaille. There are people who
have had horrible experiences there.
I don't think that--I don't know, I don't think there is
any one mold that everybody fits into. I don't think that all
for-profits fit into this mold and I don't think all nonprofits
fit into this mold.
Mr. Cole. I would just say as a guy who earned a doctorate
and began my career as a college professor, I agree very much
with that, that there is a lot of variety in this marketplace.
We actually had a situation in my State where, I am sad to
say, a public institution was sort of rapped pretty severely by
the Department of Defense, they are located near a military
facility, for just basically being a degree mill, if you will.
They had to reform and refund money and do some things like
that. So we clearly have a problem in the industry in the
whole.
Mr. Jerome, and I don't have a lot of time, but you have
obviously done this successfully and thought a lot about this.
Again, tell us the things we ought to be doing to make sure
that all these taxpayer funds are put to good use and that all
of our students have the best chance for success, because we
want them all to succeed.
Mr. Jerome. I don't want to have to keep coming back to
Washington to testify on this. I would really love to find the
policies that stop the really abusive practices.
I would say for this committee you should look at growth,
and that is a big issue, and you may find that both in the for-
profit and the nonprofit sector.
Last thing is, I would look at return on investment. How
much Pell dollars go to each institution and how many Pell
students do they graduate? As far as I know, no one has ever
looked at it. I haven't looked at it. I think I will. But I
think that is an interesting way to see how the money is being
spent.
Mr. Cole. Madam Chair, I would yield back my time, but
maybe that is something we should look at and the Department of
Education should take a look at. It seems to me to be a
reasonable metric.
Ms. DeLauro. Thank you.
Mr. Pocan.
Mr. Pocan. Thank you, Madam Chair.
And thanks to the witnesses.
So the question series that Mr. Cole asked about was
interesting about the for-profit colleges in the sense that
there was a for-profit that became a nonprofit in my State,
Herzing University, that has an excellent reputation. I have
toured multiple locations. They work for a lot of the
employers, one of the very things that you said I think is
important, around looking how they are working.
But at the same time, I can't help but recognize the
extremely large percent of the for-profit colleges that are in
the failed category.
I guess maybe a question first for you, Mr. Jerome. You
started to talk about growth and you didn't really say much
more on the return on investment for where we should be going.
But just in the recognition that we do seem to have this much
larger percent that are failing, I mean, what are the things
that you are saying that you think should be looked at
specifically that we should be addressing to try to solve this?
Mr. Jerome. I mean, a couple of things. Number one,
actually in the State of New York the two largest closures were
two independent colleges, Dowling College and last week, as a
shame, College of New Rochelle announced its closure after,
like, 200 years.
But I think, whether it is enrollment or revenue growth, it
is a fair thing to look at. Higher education is highly
regulatory. I am an attorney, I am at my institution 25 years,
it is very difficult to keep up. For me to imagine doing this
growing and in many, many States at the same time I think leads
to difficulty. So I would say that.
I also think it is fair to come up with one or two metrics
that should cause an audit, whether it is low completion rates
or a high default rate or a high debt-to-earnings rate. And it
should be a rebuttable presumption, but there are certain
metrics either Congress or the Department of Ed could implement
that could cause much more accountability.
Mr. Pocan. Just to the question of the high number that is
there. I mean, what do you think has been the cause of that up
to this point?
Mr. Jerome. I think the answer is unchecked growth without
proper regulation. I mean, I absolutely remember speaking to a
high level Department of Ed person who said: We sit on investor
calls and we hear different institutions have different ethics.
They knew who to go after. In my mind, they just didn't enforce
the rules on the books or there wasn't just enough
institutional will to identify and go after those places.
In New York, even if it is a for-profit college, we
recommend our Department of Education regulate effectively and
close. But we look at that at all institutions.
Mr. Pocan. So this is a question for everyone. I know that
Secretary DeVos overturned an Obama-era decision that
terminated recognition of ACICS, which was around when we had
failed Corinthian and FAST TRAIN. What do people think of that
decision? Is that something that--was it a good idea, bad idea?
I am just trying to get some input on that.
Mr. Shireman. The decision to reverse on ACICS was not
well-founded at all. The staff recommendation was that ACICS
should not be re-recognized.
I talked to some of the other accreditors where some of the
schools--so ACICS had become known as the place where you could
get cheap and easy accreditation. Right before the action by
the Obama administration a number of the Kaplan campuses had
decided to go over there. And they said, oh, wait a second,
ACICS is in trouble.
I talked to some of the accreditors where some of those
schools applied to become accredited and they were shocked at
how bad some of those colleges were that had been approved by
ACICS.
So it has now sent a message to accreditors that it
actually doesn't matter whether you are a strong accreditor
because you can muscle your way back in and get re-recognized
by the Secretary of Education.
Mr. Pocan. Mr. Carey.
Mr. Carey. In addition, I would note a couple of things. A
number of the colleges that had been accredited by ACICS when
it was shut down tried to find another accreditor and couldn't,
which gives you a sense of what the standards were at ACICS,
that one else would take those institutions.
And I think it is worth noting that the Department of
Education official who decided and approved the reinstatments
was a former lobbyist for a university that was accredited by
ACICS. The Department issued a statement claiming that, I
believe, nine other accreditors had endorsed the move. That
turned out to be a false statement. The accreditors quickly
clarified that was not true, they had not endorsed it.
So there appears to be no basis for reinstating an
organization that was really disproportionately responsible for
overseeing a number of the very worst collapses of the for-
profit industry.
Mr. Pocan. Mr. Jerome, 2 seconds. That is all I have left.
Mr. Jerome. On the difference. All accreditors should be
held accountable to make sure their institutions have good
outcomes. I mean the two institutions--while we exist, the two
public institutions next to us have had below 3 percent
graduation rates for 10 years in a row. Nothing happens, there
seems to be no accountability, and I watch the students.
Ms. DeLauro. Congressman Harris.
Mr. Harris. Thank you very much.
And thank you all for being here.
Clearly, education is something we have to get right, and I
am not sure we are getting it right in the United States right
now.
Mr. Luongo, let me ask you, I was a Navy person, too, did
the VA or the DOD, do you think, give you adequate information
once you separated from service or were separating from service
about how to go about getting an education that is actually
paid for instead of with loans? Do you think they gave you
enough information?
Mr. Luongo. None, I was given none, no information
whatsoever.
Mr. Harris. That is what I suspected. I suspected that was
the answer. Because part of problem is that is one of the
checks in the systems. I mean, obviously, it should have been
very easy for you to--we should have made it easy for you to
figure out whether you were being told the true by DeVry
University. And I mean even prospective so that you know what
the--because we owe that to our veterans.
But I hear it all the time, that we just don't educate our
veterans enough upon separation about what the benefits are and
how to get them and how to avoid being taken advantage of. So I
appreciate that answer.
Mr. Shireman, you started off by saying the government
funding of these for-profits doesn't have such good results.
But I will tell you, government funding of the not-for-profits
doesn't have such a good result either. The bottom line is we
are not educating a workforce to what is needed in the United
States.
My wife will think terribly of me, but she was an art
history major. You can graduate from a very prestigious
institution with an art history degree and end up doing
something totally unrelated and graduate with hundreds of
thousands of dollars' worth of debt. And I know it happens
because it happens to a lot of people.
You know, the for-profit sector, I will tell you, I
remember when I took my business degree, that they said, you
know, we say nonprofit, but it is really just excess revenues
over expenses. That is the difference.
And the bottom line is, I just looked up the 10 highest
paid presidents, and Mr. Jerome's name wasn't on it. At least 8
of the 10 were either private or not for-profit, including--
because I think someone, maybe it was the Senator testified,
well, the president wanted these profits made, $40,000,000 over
10 years.
Well, actually, the highest paid president was a public
university president last year, University of Louisville, over
$4,000,000. I won't even talk about what basketball coaches
get.
Mr. Jerome, do you have anyone on your faculty or in your
university who earns $9,000,000 a year?
Mr. Jerome. No.
Mr. Harris. Okay. $8,000,000 a year?
Mr. Jerome. No.
Mr. Harris. $7,100,000 a year?
Mr. Jerome. No.
Mr. Harris. Because those are the salaries of just the
three highest paid basketball coaches.
I have got to tell you, I love basketball, like anybody who
is 6'4'' loves basketball. It doesn't add a nothing to
preparing our workforce. If you don't think that that is a for-
profit sector in our public-slash-private universities, think
again. It is.
Mr. Jerome, I have got to ask, because I looked quickly up,
I should have remembered, I was a New Yorker way back when, you
have got a nursing program. What is the percent of your BSNs
who get employed?
Mr. Jerome. 100 percent.
Mr. Harris. 100 percent. So you are actually providing a
very important--because I know, look, I work in a hospital, we
don't have enough nurses. You are providing something very
valuable.
I do want to ask you the question, why does someone choose
your college over a community college? Because we heard the
community college--and I know the community college more--but
we also send a lot of money to community colleges. Why would
they choose yours over a community college?
Mr. Jerome. The first thing, our community college system
is a wonderful system. It has open access, it has a different
mission.
But in reality today's students are looking for completion,
they are looking for completion quickly, and they are looking
for it to lead employment.
And the thing we are missing is it is not all about
academic expense, they are actually looking for support. So in
my institution the minute the student arrives, there is a
mentor. It is very expensive.
On the area of student loans, I think we have one of the
largest, most experienced team that helps all these low--some
of the low-income students who get loans make sure they don't
default and they handle it well. But when you have been doing
this for 85 years and graduate 3,000 students a year in one
borough, people know.
Mr. Harris. I appreciate that. And I will tell you that I
don't understand why we would not ask for the rules to be
uniform. Basically the outcome, employment outcome versus debt
for someone who is a liberal arts major at a large university
and graduates $150,000 in debt and can't get a job in their
field, why we wouldn't hold that private not-for-profit up to
the exact same standard. Because I think that is the way to
make education better for everyone and more cost effective.
I yield back, Madam Chair.
Ms. DeLauro. Thank you very much.
Just if I may take as a point of privilege, I just want to
mention a couple of things.
This is an independent analysis of default data. When you
talk into account certificates and degrees, the number of
institutions with default rates above 20 percent is as follows:
197 public institutions, 59 nonprofit, 232 for-profit.
I also might add, and, President Jerome, I would just say I
appreciate no one makes $9,000,000 at your institution, but I
think it is also important to taking a look at average annual
costs, and this is four Bronx colleges. Monroe costs more than
CUNY Lehman College, CUNY Bronx Community College, CUNY Hostos
Community College. Monroe was $11,831 on average. The others
were $8,000, $7,000, $6,000 and $5,000.
Students receiving Federal loans, 77 percent of students at
Monroe College received Federal student loans, 8 percent at
CUNY Hostos, 11 percent at CUNY Bronx, and 22 percent at CUNY
Lehman.
Debt after graduation, Monroe was $21,000, the others were
below $10,000.
Salary after attending, a range, $43,000 at CUNY Lehman,
CUNY Bronx $34,800, CUNY Hostos $31,200, at Monroe it was
$30,200.
Financial aid and debt, 31 percent of students at Monroe
College were paying down their debt, 39 percent at CUNY Hostos,
32 percent at CUNY Bronx, and 51 percent of students at CUNY
Lehman College.
So I will just introduce that for the record.
Congresswoman.
Ms. Clark. Thank you, Mr. Chairwoman.
And thank you to the panelists for being here.
I am interested in the status of the Borrower Defense rule.
As you know, this was put forward by the Obama administration
that allows students to have their Federal student loan
discharged if their school misled or defrauded them and it
prohibits the use of forced arbitration. In July of 2018,
Secretary DeVos tried to undermine this and rewrite it but was
stopped by the courts.
According to the information we have, as of September of
2018, more than 139,000 claims were awaiting action, including
more than 45,000 former students from Corinthian and thousands
from former students of ITT, Argosy, and the Art Institute.
Do you have any current information about is DOE still
refusing to process these claims? And do you have any
estimation on the impact on students and their risk of default?
Mr. Shireman or Mr. Carey.
Mr. Shireman. I don't know whether Mr. Luongo is still
awaiting payment.
Ms. Clark. Yes, Mr. Luongo, I did want to ask about your
personal experience with this.
Mr. Luongo. I applied and was told since my dealings were
over the phone there is no record, there is no proof, and that
was it. There is nothing that can be done.
Ms. Clark. Have you found that this is a typical situation
for our students?
Mr. Shireman. This Department of Education has made the
decision to require the kind of documentation that, frankly,
the college recruiters make sure that a student does not have.
Students feel that they have been told a lie, but it is not
on paper. They are provided with assurances by somebody who has
befriended them and acted as an adviser, portrayed themselves
as an adviser, providing them with advice about how they can
better their lives and this Department of Education has decided
that that is just too bad for the student.
And this is a tragedy, hundreds of thousands of students
who were misled, manipulated. We have the documentation of the
systematic manipulation by the schools, the strategies that
they would implement, very similar across different chains,
which should result in a group discharges for students that
were enrolled in many of these programs. But instead the
Department of Education is requiring each student to go in and
go through a third degree kind of review that has caused this
to go on for far too long.
Ms. Clark. Yeah.
Mr. Luongo, where does that leave you? Where does that
leave you with your claim?
Mr. Luongo. As far as I know, it leaves me on the hook for
$101,000 that, quite frankly, I will never be able to pay off
based on my salary.
Ms. Clark. Yeah. And what have you heard from DOE on your
claim, anything?
Mr. Luongo. That was the last thing I heard, is that the
school responded, that here are our emails and that is it, it
is not mentioned. And it is not mentioned in emails because 99
percent of my dealings were over the phone.
Ms. Clark. Yeah. And do you feel that was on purpose and
specific to not have a paper trail?
Mr. Luongo. I didn't think anything of it at the time and
now I feel 100 percent they knew what they were doing, they
knew exactly what they were doing.
Ms. Clark. Yeah.
This brings me to another question, the way we can
evaluate. Mr. Shireman, your testimony mentions the 85-15 rule
that was from earlier under the Clinton administration. Can
that be something that we should be looking at in response to
the 90-10 with the loophole for our veterans and GI
beneficiaries?
Mr. Shireman. Absolutely. I think it would help to address
this rapid growth problem, to check rapid growth, because a
school would need to make sure that they are not just relying
on the ability to sell a student on taking Federal loans,
Federal grants and loans that feels like a free education, but
instead have a responsibility and a need to make sure that
there are employers, for example, or private scholarship
programs that are helping to enroll students.
Ms. Clark. And I almost--I am out of time, but, Mr. Jerome,
do you agree? Do you think the 85-15? I can let you expand
later.
Mr. Jerome. I actually have a substantive policy suggestion
on this. So in my mind I understand the reason for 85-15, but
an institution like mine in the Bronx, even if it received 100
percent of money from the government, if the outcomes are
excellent, I think you should not be upset.
And what is not happening is there is no credit for
programs that use Federal aid, not loans, that help students.
So at my institution, you gave some data about the students who
borrow, 3 years ago we implemented a program for a thousand New
York City Public School kids to go for free, no student loans.
I would want an 85--if there ever was a change, to have
some portion of it incentivized good behavior. And in my mind
good behavior is graduating students with no student debt.
So I would like to you think about that, because it is a
way, instead of everything being punitive, I am imploring you
to think about ways to make the policies help the students and
make the institutions help the students.
Ms. DeLauro. Ms. Lee.
Ms. Lee. Thank you very much.
I want to thank all of you for being here.
And I want to, of course, thank Mr. Shireman for being
here. I know you go back and forth between Washington and
Berkeley. And so welcome. Good to see you.
Mr. Shireman. Thank you so much.
Ms. Lee. Yes. And thank you for all of your work.
Let me ask you about one very timely issue with regard to--
and you may know about this Mr. Shireman--Argosy University.
Okay, it closed its campuses on Friday. I believe it has put
about 10,000 students at 22 campuses--one is in my district, in
Alameda--quite frankly, in jeopardy.
Now, I am not clear on what took place, but I do know it is
alleged that they stole, quite frankly, $16,300,000 in Federal
funds which were meant for students and instead used it for
payroll and for other expenses.
Now, the Secretary of Education, Betsy DeVos, failed to
take critical action to address this issue before cutting off
access to Federal aid. Even though the administration--and I
know that they were fully aware of this--the Department was
derelict in its oversight duty.
They also did not keep students informed of the financial
issues. The Department could have stopped marketing for this
University knowing that they were under severe financial stress
and they did not do so. Students were not warned that they
would not be receiving financial aid disbursements and only
found out because their refunds never arrived.
So could you kind of explain what will happen now? This is
a recent closing. How in the world do some of these
institutions continue to receive taxpayer dollars and public
financing given these kinds of examples? And what is going to
happen to this missing money from Argosy? Will it be paid back
to the taxpayers? Will the students get refunds? What is going
to happen?
Mr. Shireman. Yeah, I will do my best to untangle this,
though it will take probably years for this mess to really be
untangled.
This it was a completely avoidable situation. Dream Center,
which had no experience running an institution of higher
education, actually came to the Obama administration in its
final year and asked to buy ITT Tech and the administration
said, no, you don't have the qualifications to run this
struggling school.
This administration said yes to the offer to buy the EDMC
properties, Argosy and the Art Institutes, and we have seen the
results of Dream Center, which apparently was then contracting
with for-profit entities to do some of work. And when you
insert that for-profit entity--and this is where we see when
schools collapse there is a big difference between for-profit
and nonprofit.
In the for-profit space, which Dream Center was really more
in that territory, the people who are in control of what is
going on in the school look at all of the accumulated assets,
including money that has come from the Department of Education,
they see the ship is going down, and they want to know, what
can we take for ourselves.
At a nonprofit, a genuine nonprofit organization, they look
at all of the accumulated assets and they say--and they don't--
do not--it would be illegal for them to take it for themselves.
And so they are looking for a good landing for the students and
the institution overall.
What has happened at Dream Center seems to be somewhere, it
is still a mystery what happened to these funds. Obviously, one
of the creditors felt that they wanted to have access to these
funds. Whether they broke laws or not, it was the ability of
folks in control of the school to decide to even put money in
the direction that helps--into their own pockets that drove
them to this situation where we have schools precipitously
closing.
Now students may be able to get closed school discharges,
depends on the situation, students that stuck it out. Students
that left earlier maybe won't be able to. The Department of
Education needs to open up as far as possible the window for
students to get discharges on their funds.
Ms. Lee. Okay. Now, let me ask you--and I said stole the
$16,300,000--are there criminal charges being filed or what
type of criminal investigation----
Mr. Shireman. I don't think there are yet, but it does seem
like it is possible.
Ms. Lee. Do criminal investigations follow in instances
where it could warrant that?
Mr. Shireman. I suspect that they will in this case.
Ms. Lee. And one more question I would like to ask. With
regard to now this 90-10 rule, okay, it is my understanding
that the 90-10 rule bars for-profit colleges from receiving
more than 90 percent of their revenues from student loans and
grants. But also it is my understanding that at least half of
the all-profit schools actually get over 70 percent of their
revenue from student loans and grants. Is that accurate? And if
it is, how do they get around that? Or if it is not, what is
the deal?
Mr. Shireman. Well, what happens with 90-10 is that a lot
of the schools get GI Bill money on top of Federal student aid
from the Department of Education. And that loophole allows them
to basically defeat the purpose of the 90-10 rule.
Ms. Lee. Okay. The 85-15 rule that we just talked about,
could you explain that, the difference between that and the 90-
10 rule?
Mr. Shireman. So the 90-10 rule, used to be an 85 percent
cap.
Ms. Lee. The same rule.
Mr. Shireman. There is also for the GI Bill an 85 percent
cap on the proportion of students who can get GI Bill aid.
Ms. Lee. I see. Okay. Thank you very much for clarifying
that. Thank you.
Ms. DeLauro. Thank you. I want to, just for the record, we
haven't talked about the Gainful Employment rule, but sometimes
there is a mistake about the Gainful Employment rule and who it
applies to. It does not just apply to for-profit schools, it
applies to nondegree programs at nonprofit and public
institutions.
As well, 61 percent of programs that are covered by the
Gainful Employment rule are offered by public colleges,
community colleges. Repealing the Gainful Employment rule would
cost taxpayers roughly $5,000,000,000 over 10 years, according
to the Department of Education's own analysis, and part of this
cost would be charged to the Pell Grant Program plus student
loans.
So that repeal of this rule would serve to hurt students
and helps institutions, quite frankly, that peddle low quality
education.
Mr. Carey, in your testimony you highlight programs, that
for-profit institutions tend to cost more than programs at
public institutions. Given the poor student outcomes at the
majority of these for-profit schools, do you believe that the
increased cost to students is justified? What accounts for the
higher cost?
Mr. Carey. I don't believe they are justified. And one
thing people will note is that public universities get public
subsidies to bring their costs down, that is true. But actually
there have been some good academic studies of this issue. And
even if you account for the public subsidies that public
institutions get, they are still substantially less expensive
than for-profit institutions and I think there are two reasons
for that.
One, for-profit institutions divert some of their revenues
to profits. That is what their business is, they are designed
for that, either to shareholders or executives or some
combination of the two.
Second, much of for-profit industry, and this is becoming
more so, is very competitive, very marketing, very marketing
driven, very recruitment driven, particularly in the fast
growing online higher education space. It is enormously
expensive to go through and compete online.
If you look at the data that the colleges themselves submit
to the U.S. Department of Education, you will see that the
typical for-profit college spends more money on marketing and
recruitment than it does on faculty salaries. So I think it is
a combination of the profits and the marketing and recruitment
that account for the difference.
Ms. DeLauro. Do you know whether or not the marketing or
the advertising is tax deductible?
Mr. Carey. I imagine it is all tax deductible in the sense
that it is a business expense that therefore reduces your
taxable profits.
Ms. DeLauro. We will pursue that at the some point.
Mr. Shireman, what happens to the profit at a nonprofit or
a public university? And what happens to the profits at a for-
profit institution?
Mr. Shireman. So all of the excess of revenue over expenses
at a nonprofit are required to be reinvested into the
institution or saved for the future, which is part of the
reason that we see endowments at nonprofit colleges and
universities.
Surely the people who are running, who are overseeing the
college, the trustees, if they could take that money for
themselves they probably would. And that is the way it works at
a for-profit college and university. They behave differently
because they know that any excess of revenue over expenses that
they generate becomes money that can go in their pocket.
In fact, I once figured out that over about a decade period
if all of the profits at University of Phoenix had been instead
put into a savings account that they would have an endowment
that would be second only to Harvard's endowment, which,
frankly, could pay off a lot of ripped-off students that we
have out there.
Ms. DeLauro. Mr. Carey, after President Trump was elected
several for-profit institutions saw a bump in their stock
prices. Are there any publicly traded nonprofit or public
colleges or universities? Can you buy stock in any of these
colleges?
Mr. Carey. You can't buy stock in a nonprofit university.
Ms. DeLauro. Is it true that you can only purchase stock in
publicly traded for-profit institutions?
Mr. Carey. Yes.
Ms. DeLauro. Well, let me ask you, Mr. Carey, about
conversions. Predatory for-profit institution converts to a
nonprofit, does it somehow shed its predatory nature? Also, why
is the trend of for-profit conversions so alarming? Is there
concern for students?
Mr. Carey. I would urge the committee to not even take the
word conversion at face value. Conversion implies that you were
something and then you became something else.
The example I gave was Grand Canyon University, which has
been widely reported as having converted to being nonprofit.
And yet, Grand Canyon Education, the publicly traded
corporation, still exists. It exists right now. It has a market
capitalization of over $5,000,000,000, which has actually gone
up quite a bit during the process of so-called conversion.
Because it didn't really convert to being a nonprofit at
all. What it did was set up a new nonprofit organization that
is run by the same person who runs the for-profit corporation.
It essentially lends money to the nonprofit, which then handed
it right back to the for-profit company, creating an annual
interest payment debt, and then signed a contract in which 60
percent of all tuition revenues that go to the nonprofit, which
is now the legal face of the college, 60 percent of the
revenues and the interest payments go back to the for-profit,
which is a pretty good business to be in, at least by the
judgment of the market, which again has bid up the value of
Grand Canyon Education the corporation.
Because it is officially a nonprofit for government
purposes, it doesn't pay property taxes and it can advertise as
a nonprofit. And if the Gainful Employment regulations were to
be reinstated, it would not be subject to them.
Ms. DeLauro. Thank you.
I apologize to my colleague. Congressman Cole.
Mr. Cole. No problem, Madam Chair.
I just want to go back to an issue that has been raised a
couple of times, and that is standards and measurements. I know
when we have discussed metrics I have been lobbied as hard by
public institutions as by private institutions, that they
didn't want to be measured, that I had to understand all the
various sophistications and the various goods they were doing
and they were doing research. It just goes on and on.
So, number one, I want to ask you each in turn, just
quickly moving down the aisle, I will start with you, Mr.
Shireman, is a common set of measurements that we could
literally compare, is there merit in that? Is that a bad idea?
I understand we are comparing very different institutions,
I understand we are comparing very different student bodies, in
many cases sort of like the idea that Mr. Jerome suggested of
Pell grant loans versus Pell grant graduates. If you were to
pick out some things that would really be helpful for us in
measuring the effectiveness of all institutions, what would you
focus on if you think that is even an achievable objective.
Mr. Shireman. No, I think that debt to earnings measures
are very useful. I think market indicators, like students who
are paying without aid so that the value for the price is what
is being analyzed in that situation, is a very useful measure.
Those are probably the top two that I would pick.
And I would not put graduate rates there for exactly the
reason that you stated when you noted that public institution
that turned out to be a diploma mill. Graduation, giving a
diploma, is completely determined by the college.
So using it as a--I think it is really important for people
to know graduation rates, for them to be reported as a consumer
information tool, but when you tie an accountability measure to
a strict--to a graduate rate, you will drive diploma mills.
Mr. Cole. Same question.
Mr. Carey. I think all colleges, public, nonprofit, and
for-profit, should be held accountable. I actually think it
would be a great idea if we could get more information about
the earnings and debt income for programs at public and
nonprofit universities. We don't have that now.
I think there is the question of what information do we get
and how do we regulate around that information. I do think that
short-term job-focused programs, it is more appropriate to take
the earnings and debt information and make very quick judgments
about how successful they are, because those programs are
designed to lead to an immediate employment outcome. Whereas a
bachelor's degree in a liberal arts field--long-term people
with bachelor's degrees in liberal arts actually have good
success, but it can take longer. You go to graduate school. It
is a different career path. And so you wouldn't want to
regulate on the information in exactly the same way.
Mr. Cole. Believe me, as a guy who has a Ph.D. In Victorian
history, I am very well aware of that point.
Mr. Carey. There we go.
Mr. Jerome. So on this area I actually disagree with my
colleague, Mr. Shireman. I actually think completion is one of
the most important areas you could look at. All the academic
studies show that the people who drop out of college have the
worst outcomes with everything. And right now if you go and
look at completion rates across the country, they are miserably
low, and they are much too low for the most vulnerable people,
students of color.
Number 2, I actually like cohort default rates, even though
everyone doesn't like them. I think they can be changed so they
can't be manipulated. But the thing about cohort default rates
is if an institution puts resources towards counseling
students, there are plenty of options to make sure they avoid
default that are good options.
And then the last thing is I like debt to earnings. I just
don't like the debt-to-earnings rule that exists now. I think
it was rigged. And you can see it in the results. You are
right, community college certificates were subject to it.
Ninety percent, something like 40,000 of the 50,000, weren't
measured because they didn't graduate enough students.
The other thing is all the institutions with the worst
default rates, worst graduation rates, highest number of
defaulters passed the debt-to-earnings rule. And so I think it
can be jiggered around to make it really right.
Mr. Cole. Let me change it a little bit for you, Mr.
Luongo. What information would have helped you the most when
you were making these decisions? What as a potential student
did you need to go that wasn't provided for you?
Mr. Luongo. It was provided for me, but it was provided
inaccurately, and that is what an employer thinks of that
degree from that university. Because otherwise it is just a
worthless piece of paper. And I was told 80 percent of people
were hired at that degree making $80,000 a year, so that puts a
lot of value on that little piece of paper. It turned out that
was a boldfaced lie.
So that is my opinion, is that unless the marketplace puts
value on that degree from that university, the whole thing is a
waste of time anyways.
Mr. Cole. Thank you very much.
I yield back, Madam Chair.
Ms. DeLauro. Congresswoman Watson Coleman.
Mrs. Watson Coleman. Thank you, Madam Chair, for holding
this. And I apologize, having been pulled out to another
meeting. So if some of my questions are redundant, excuse me.
I have one overarching question and then I have some
questions regarding disparities regarding Black students.
My one question is that if a college shuts down and
students have paid their tuition or Pell grants or something
has paid their tuition, I understand the forgiveness to the
student, I understand that there have been some agreements that
students are not liable, but what should we be able to do as
the Federal Government, as Congress, to recoup that money,
which is indeed taxpayer money?
Mr.--I am sorry, I can't see your name, but since you are
shaking your head.
Mr. Shireman. Well, there were some provisions in the
Borrower Defense rule that the Obama administration adopted
that attempted to get at clawing back, as we say, from
executive stockholders, et cetera, in situations where
essentially a school, when it was on its way down, folks
grabbed the money that was there.
But it is very difficult, which is why public institutions,
which are usually backed by the full faith and credit of the
State, they end up not usually behaving in the predatory ways
because they have deep pockets.
Mrs. Watson Coleman. What is the status of that clawing
back rule?
Mr. Shireman. Well, so it is in effect for now, but this
administration has proposed essentially repealing the Borrower
Defense rule as well as the Gainful Employment rule. So it may
not last for long.
Mrs. Watson Coleman. Thank you.
Mr. Carey, I am sorry I missed your testimony, but my
understanding is that you did mention three studies, two from
the Brookings Institute, one from the Center for American
Progress, which found that students who default on loans are
disproportionately Black. Can you tell us why this might be the
case and what can this committee do to address this chronic
issue?
Mr. Carey. I think there are several reasons,
Congresswoman. First of all, as we all know, there is a very
large wealth gap in this country between African American
households and White households as a result of current and
historical racism and discrimination. And so Black households
don't have as much money to pay for college so they have to
borrow more.
Second of all, I think there is a pattern of for-profit
colleges in particular that market themselves to first
generation college students, lower income college students,
disproportionately women of color, in fields like health and
cosmetology, often nonlicensed fields. So these are not
programs, high quality programs that get people into, say, a
good nursing jobs, but rather programs that might induce
someone to borrow $20,000 for a medical assisting certificate
with no value in the labor market. Often these are women of
color who take these programs.
Mrs. Watson Coleman. That is a statement of the problem.
What is it that you think we should or could do about that?
Mr. Shireman. I think we should reinstate the regulations
of for-profit colleges that were implemented by the Obama
administration that have been suspended by Betsy DeVos.
Mrs. Watson Coleman. Like which ones?
Mr. Shireman. I think we should set new or higher
standards. I don't think that even those regulations went far
enough. And I think a tighter regulatory environment is the
best protection for those students.
Mrs. Watson Coleman. Okay.
Forced arbitration is a bipartisan issue that Members on
both sides of the aisle oppose because we agree everyone
deserves a day in court. The Department of Education recently
proposed allowing for for-profit universities to force students
into arbitration, a process that is one-sided, secretive, and
binding.
Do you think this will further allow predatory universities
to continue to deceive students at the school's expense?
Mr. Carey. I am sorry.
Mr. Carey. I think forced arbitration is for all kinds of
reasons a bad idea. Students are not sophisticated business
people who kind of come in with their eyes open. They trust
their colleges. It never occurs to them that they might up in
some kind of financial dispute or be deceived by their college.
They don't see their colleges as used car salespeople.
And so they don't, as we heard today, go into the process
gathering the kind of information that would ever give them a
leg up in a process like that.
Mrs. Watson Coleman. So my time is just about up, but I
would like to ask for information that could be furnished to
us. And it has to do with, what reform should Congress consider
to protect both students' and taxpayers' hard-earned money?
What should this committee pursue to that end?
And if, Mr. Shireman and Mr. Carey, if they would be able
to send us that information, Madam Chair, through you, I would
be grateful.
Thank you, and I yield back.
Ms. DeLauro. I thank the gentlelady. And in fact we will
try to draw on the panel for giving us information as we move
forward to try to see how we address this problem. So we would
love to have your recommendations.
Congressman Harris.
Mr. Harris. Thank you very much.
Let me just, Mr. Carey, let me follow up on what you said.
Which standards are you talking about that were suspended? Are
you talking about the GE standard?
Mr. Carey. Both the Gainful Employment standards, yes, and
also the Borrower Defense regulations had some additional
regulatory standards that were also essentially suspended.
Mr. Harris. Right. And let me just go to the Gainful
Employment, because I think in response to another question you
said basically you think all colleges should be subjected
earnings-debt analysis. Is that right?
Mr. Carey. Analysis, yes. Regulation not in the same way.
So we should know for all college programs.
Mr. Harris. Okay. Why would you make it different for
analysis and regulation? Because my understanding is the
Department of Education says, look, we are going to eliminate
GE, but we are going to put it on the College Scorecard. So I
am kind puzzled, why--so, why?
Mr. Carey. Because there is a huge variety of programs in
our higher education system. Some of them, like the ones
currently being regulated under the existing rules, are
designed for--only designed for immediate short-term employment
outcomes. You don't get a certificate in cosmetology in order
to build lifelong learning skills, understand the world better,
et cetera, et cetera, in the same way that you might with a
longer undergraduate degree.
So for a program that has only a short-term outcome, I
think a short-term measure of debt to earnings is completely
appropriate to regulate around.
I think for programs that have longer term outcomes, we
would benefit by providing that information to students and
parents choosing colleges, but I would not regulate with that
information in the same way.
Mr. Harris. But my understanding is that before that rule
was suspended, that if you were a for-profit college offering a
degree, so not a certificate, you were subjected to GE.
Mr. Carey. Yes.
Mr. Harris. But if you were a community college offering a
degree you were not subjected to GE.
Mr. Carey. Yes.
Mr. Harris. So you disagree with that. You think that we
should have made--it is all--I mean----
Mr. Carey. Again----
Mr. Harris. So you think we should reapply the GE to for-
profits that give a degree but not to not-for-profits.
Mr. Carey. I think the Gainful Employment regulations were
in part an attempt to recognize the very different set of
organizational incentives that for-profit colleges operate
under, that we have heard ample evidence of today in this
hearing, and that the additional scrutiny of degree programs at
for-profits under Gainful Employment more than anything
recognizes that.
Mr. Harris. I guess I just didn't hear your answer. Do you
think that we should subject--when Mr. Jerome offers a bachelor
of nursing in his program, and down the block the community
college or a private not-for-profit offers that same degree
program, why shouldn't both be subjected to a debt-earnings
ratio? They are both going to have 100 percent employment when
they are done.
Mr. Carey. I think we should know the debt-earnings ratio
for both of them. I think for-profit colleges should be
regulated with more scrutiny.
Mr. Harris. So you think we should regulate his, but not
the not-for-profit down the road that graduates someone, both
of whom are going to be 100 percent employed. So if that for-
profit--that not for-profit down the road charges twice the
tuition of his, they both earn--because I know nurses get the
same thing no matter where, you got BSN you are golden--you
think that shouldn't be something we regulate, that other
nonprofit?
Mr. Carey. Well, the nonprofit almost surely charges half
as much, not twice as much. I mean, that almost never happens.
Mr. Harris. Really? You think that, for instance, the Ivy
League schools, with schools of nursing, you think charge--I
don't know, Mr. Jerome, you have a few Ivy League schools in
the neighborhood. Do you think your tuition for your nursing
program is twice as much as the top tier nonprofit schools?
Mr. Jerome. So we know it is not twice as much.
Mr. Harris. Okay.
Mr. Jerome. And generally community colleges are more
affordable than for-profit----
Mr. Harris. I am not talking about community college,
because they get public subsidies.
Mr. Jerome. No, no, but independent colleges are more
expensive than proprietary.
Mr. Harris. Thank you very much. That is exactly what I--so
in essence, so you think that even though those independents
can charge more, they shouldn't be subjected to a debt-earnings
regulation?
Mr. Carey. Again, Congressman, I think that for-profit
colleges should be regulated with more scrutiny than nonprofit
colleges.
Mr. Harris. Okay. And why won't the College Scorecard be
adequate? Do we not trust students to actually--if we make that
College Scorecard available and if the Department says it now
puts debt-earnings on there, why isn't that adequate?
I mean, these are college-level students, these are people
with--I would hope that our public education system graduating
a high school senior can point them to an information--I mean,
look every other decision we make as Americans is based on
information we get.
If we make that information very widely available, why
should we take the college, the degree-granting programs at a
not-for-profit and not subject them to regulation, but their
private competitor, their private for-profit competitor we
subject to regulation?
Which, Mr. Jerome, I have got to imagine that costs you
money, the regulation. I have got to imagine you have people
who comply with regulation.
Mr. Jerome. It costs money and it is very hard
competitively.
Mr. Harris. That is what I thought. It was kind of a
rhetorical question. Thank you.
I yield back.
Ms. DeLauro. Ms. Lee.
Ms. Lee. Thank you very much.
Let me follow up on the issue as it relates to African
American students, because we know that they are more likely to
attend a for-profit college than White students. And we also
know that they typically borrow at a much higher rate than
their White peers. And we also know this is extremely--this is
especially true at the predatory for-profit colleges.
Now, according to the data that we have, 75 percent of
African American students default on their student loans. And
what is worse, as you mentioned, Mr. Carey, these institutions
provide degree programs that may or may not lead to a good-
paying job.
A couple of things I want to ask you about that. One is
this administration continues to put onerous work requirements
as it relates to eligibility, for example, for housing, for
food stamps, for whatever it takes to live a decent life and as
a bridge over troubled water. These students who receive these
bogus degrees, who can't get a good-paying job, and then still
work requirements are imposed on them, is that fair, is that
right, first of all?
Secondly, would these students who default on their student
loans, they can't get a job and they can't file for bankruptcy
either. Now if it is the institution that is the majority of
problem, which it looks like it is with the majority of African
American students, then shouldn't we do something to repair the
damage that these institutions have caused? And shouldn't we
try to let in no uncertain terms these institutions know that
this is racist, it is discriminatory, it is continues the
institutional racism that we have been addressing for decades,
for centuries in this country?
Mr. Carey. I agree, it is not fair. I would recommend to
the committee the work of Dr. Tressie McMillan Cottom, who is a
sociologist at Virginia Commonwealth University, who has
written a whole book that looks at the intersection between
for-profit higher education and particularly--there it is right
there, Madam Chair. It is a great read and really worth
reading.
No, it is not fair. And, frankly, as we have heard today,
for many, many, many hundreds of thousands of victims of for-
profit colleges there is no reparation in sight. There is no
money coming back from the Federal Government. There is no loan
forgiveness.
Ms. Lee. As you said, reparation, good example of why we
need to repair the damage.
Mr. Carey. I agree.
Ms. Lee. Mr. Shireman.
Mr. Shireman. Yeah, the purpose of the Borrower Defense
rule was to provide that relief where it is called for, and
this administration needs to get on the ball and provide those
students with that help.
I will say on the work requirements around support, they
partly do drive students. So school is work. Doing well in
school is work. And one of the ways that for-profit colleges,
especially online, lure students in is they promise it won't be
too much work so you can continue working in that job.
What we need is the kind of support so that students can
focus on their studies, get a high quality education, get that
degree, and get a job, and recognize that being a full-time
student requires that time and they need the support to do
that.
Ms. Lee. And then when they get these degrees, though, that
may or may not lead to a job, which many--and I know a lot of
these students, they have a degree or a certificate that is
worth absolutely nothing.
So what happens when they go through school, they have
these student loans, they try to get a job from these predatory
colleges, and they can't get a job because it is a bogus
certificate that leads to nowhere? So shouldn't they be given
some kind of reparations and compensation or assistance to get
through these difficult times?
Mr. Shireman. First, we need to prevent that from happening
in the first place. But in the instances when it has happened,
if they have been misled in any way, if there is any evidence
that the school had these boiler room operation with these
manipulative tactics going on, then their loan should be
forgiven.
Other than that there is some help for borrowers who are
low-income relative to their debt, but the first place to go
should be to forgive the loans of people who were misled,
manipulated into programs that were really not what they said
they were.
Ms. Lee. Thank you very much, Madam Chair.
Ms. DeLauro. Thank you.
We are going to wrap up. And I will ask the ranking member
to make any closing comments that he cares to make.
Mr. Cole. I want to thank my friend the chair for the
hearing.
I want to particularly thank each you for coming down and
sharing both your professional opinions and your personal
experiences. It has been extraordinarily helpful, it really
has. And I appreciate the written testimony very much as well.
I know we have made it tough on you in terms of the timing
today, we all apologize for that, but as the chair said, we get
paid to vote around here. So every now and then we do have to
show up and do that.
And, again, I particularly thank those of you who have come
there some distance. I thank all of you, quite frankly. But we
know it takes a big chunk of your time and a commitment to come
down here to help this committee grapple with this really
important issue and see if we can do a little bit better than
we have been doing.
So thank you again for coming.
And, Madam Chair, thank you for holding the hearing.
Ms. DeLauro. Thank you so much.
Just in terms of just I need to get this put into the
record. We have received complaints from Argosy doctoral
students who are facing dire circumstances as a result of the
mismanagement and the closure of Argosy. So without objection,
I would enter those into the record.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. DeLauro. Let me also express my thanks to all of you
for being here. And, again, pardon us for the delay in
starting, and appreciate your patience with all of us.
This is an area where public policy, it is my view, can
make a big difference. That is what we need to do here. And my
hope is that we can draw on your expertise in order to look at
the kinds of recommendations to move forward.
Because the stakes are high. The stakes are very high.
People are trying to better themselves. They are trying to
better their families and their family's lives through
education.
We know that education is the great equalizer and that it
should pay no attention to your gender, to your religion, your
socioeconomic group, your political party. It is about your
God-given talent that ought to let you be able to move forward
and to be able to succeed, and that is what education is all
about.
So we can't sit idly by. And I would just say to you,
President Jerome, you are, I would just put it this way, you
are a drop of success and we applaud you for that. But it is in
a, if you will, it is in a bucket of failures of for-profit
colleges who have really hurt students, put them at a great
disadvantage, and taken advantage of them. And we can't sit
idly by and allow these individuals attending for-profits to be
targeted, to be taken advantage of on the government's dime.
So not a new problem. And I might add that, except for, I
will be flat out, we are looking at--I went back and talked
about Eisenhower and Nixon and George H.W. Bush that recognized
what was happening and they said we have to change. The Obama
administration recognized that we need to have changes. Quite
honestly, it is this administration and it is the current
Secretary of Education who refuses to acknowledge that we have
to do something and who is rolling back, rolling back any
protections.
We need to enforce the Gainful Employment rule, we need to
enforce the Borrower's Defense rule, and weed out the folks
here who are misrepresenting and hurting people, because some
of these institutions are nimble, very, very nimble in coming
around the protections that we put in place, because profit is
a strong motive. So we see the aftermath of Corinthian. Living
through Argosy right now and those students and their comments.
So this subcommittee, we have oversight over Federal aid
and the grants, the Pell grants, and we have a duty to stand
guard over this. So we heard last week at the loan servicing
hearing how borrowers are being taken advantage of as well. So
what we are trying to do with these hearings is to start in a
direction of how we assist those who are vulnerable and how we
give them a voice. So I look forward to the continuing debate
and discussion.
And, President Jerome, you asked, and I understand your
question, but it is, why does predatory often precede the for-
profits? Well, I won't go through the litany. You have got when
a for-profit steals over $16,000,000 in student aid, I think
the label is appropriate. When they shut their doors with 2
days' notice, I think the label is appropriate. When the
largest recipient of Pell grant dollars is for a for-profit
institution that has been engaged in harmful practice, that
label is appropriate.
I say to you, you are a success in this bucket of failures,
and, again, we applaud you for that. But we have to go
cognizant of what is happening overall in this industry. And as
a subcommittee it is to take it on and do something to turn it
around.
I thank you all for being here today. Thanks very, very
much. And I call this hearing to a close.
Tuesday, April 9, 2019.
COMBATTING WAGE THEFT: THE CRITICAL ROLE OF WAGE AND HOUR ENFORCEMENT
WITNESSES
PAUL DECAMP, EPSTEIN, BECKER & GREEN
LAURA HUIZAR, NATIONAL EMPLOYMENT LAW PROJECT
DANIEL KATZ, WASHINGTON LAWYERS' COMMITTEE FOR CIVIL RIGHTS AND URBAN
AFFAIRS
HON. KWAME RAOUL, ATTORNEY GENERAL, STATE OF ILLINOIS
Ms. DeLauro. Good morning. The subcommittee will come to
order. Let me welcome everyone here this morning, and a
particular shout-out to the high school students from Herndon
High School. Where are you, guys? Okay.
[Applause.]
Ms. DeLauro. Congratulations, Virginia. All right. I hope
every--well, I don't know. I watched the game last night. It
was terrific. It was a great game, right? God.
Just to tell you this anecdote, and my colleagues will
appreciate this. When I played basketball, which I did for a
girls' high school in Milford, Connecticut, but at that time
women could only play half court. That is how old I am, guys,
so, you know, you don't even remember that. Anyway.
Again, good morning. Welcome, everyone, to the Labor, HHS,
and Education Appropriations Subcommittee. Today's oversight
hearing will examine wage theft and the critical role of the
Department of Labor's Wage and Hour Division in combatting it.
I will introduce them again before their remarks but let me
thank our distinguished panelists for being here today--Daniel
Katz, senior counsel with the Washington Lawyer's Committee for
Civil Rights and Urban Affairs; Paul DeCamp, member, Epstein,
Becker & Green; the Honorable Kwame Raoul, Attorney General of
the State of Illinois; and Laura Huizar, senior staff attorney
with the National Employment Law Project.
Today we are focused on combatting wage theft and the
critical role of the Wage and Hour Division. The National
Interfaith Committee for Worker Justice is a grassroots
organization. It was founded to spotlight and combat wage
theft. They defined wage theft as a violation of the Fair Labor
Standards Act, which provides for a federal minimum wage and
allows states to set their own higher minimum wage, if that is
what they would like to do. It requires employers to pay time
and a half for all hours worked above 40 hours per week.
When employers violate those requirements in Federal law,
and thus fail to pay working people the full wages that they
have earned and are legally entitled to, those companies are
committing wage theft. We need to call it for what it is, which
is wage theft, and we have an agency responsible for
investigating all forms of wage theft, the Wage and Hour
Division of the Department of Labor. Its mission is to, and I
quote, ``promote and achieve compliance with labor standards to
protect and enhance the welfare of the nation's workforce.''
This is so important because the single biggest economic
challenge of our time is that people are in jobs that do not
pay them enough to live on. They are struggling. It is even
more difficult for people to survive if they are not being paid
the wages they have earned. It creates that much more of an
economic burden.
The Wage and Hour Division, under the Trump administration,
has itself recognized the fact--has recognized the problem of
wage theft, and on its website, under Data, it champions that
the Wage and Hour Division has recovered $304,000,000 in,
quote, ``wages owed to workers in fiscal year 2018, more than
$1,300,000,000 in the last five years.'' And it has outlined--I
have a document here that outlines all of the cases in which
they have really moved to address the issue of wage theft.
Unfortunately, these amounts are just a drop in the bucket
when we look at what workers are owed. According to informed
analysis by the Economic Policy Institute, the Federal
Government, states, and private action in the U.S. has
recovered only $2,000,000,000 in 2015 and 2016. Yet, that is
not even 10 percent of the total cost of wage theft, which EPI
estimates to be as much as $50,000,000,000 a year. For context,
motor vehicle thefts cost to the U.S. $5,900,000,000 in 2016,
and that is according to the FBI. Working people are losing
nine times that.
It is not just fly-by-night businesses. In fact, a 2018
report by Good Jobs First found more than half of wage theft
cases involved Fortune 500 companies or Fortune Global 500
companies. Nor are these just small violations. A 2014 study by
the Department of Labor found minimum wage workers in
California, quote, ``experienced violations equal to 49 percent
of the earnings they took home.'' Nearly half. It is egregious
and it is inexcusable.
Again, with informed analysis, those who can least afford
it are most affected. The National Employment Labor Project
conducted a groundbreaking survey in 2009, of more than 4,000
low-wage workers in New York, Los Angeles, and Chicago. It
found that women, immigrants, and minorities were
disproportionately affected.
There is a significant and severe problem taking place that
is hurting working people and middle-class Americans. We must
be doing more to address wage theft, to prevent it, to combat
it, to ensure working people receive the pay they earned and
are legally entitled to.
Some states are stepping up, and I look forward to hearing
from the Attorney General of the State of Illinois, Kwame
Raoul, later this morning. He and other witnesses will share
what efforts states are taking to protect workers. California,
Illinois, Massachusetts, my home state of Connecticut, to name
a few, are states that are leaders in this fight. Many state
attorneys general have established units to combat wage theft
by targeting high-impact violators through investigations and
legal action.
Yet we cannot leave this to the states. For example,
Georgia, Alabama, Florida, Louisiana, Mississippi--there is no
state-level enforcement. Claims of wage theft must be filed
directly with the U.S. Department of Labor.
So I believe firmly that the Federal Government has a
central role to play in addressing and combating wage theft. I
have introduced legislation, the Wage Theft Prevention and Wage
Recovery Act, that is comprehensive legislation that will
strengthen current Federal law, empower employees to recover
their lost wages. Whether it is compensation for a day's work
or overtime, employees should be paid what they earn. This
legislation not only protects workers but it will help our
economy grow.
That is a legislator reform that I believe is warranted,
but as the title of our hearing should indicate, we need more
enforcement at the Department of Labor and at Wage and Hour, in
particular. Wage and Hour is the cop on the beat. We need to be
helping them to leverage their resources in smart ways, because
right now they are having to do less with less. In fact, Wage
and Hour employs less investigators today than it did in 1948,
despite the workforce having grown significantly in that time,
and, as a result, the number of cases investigated by Wage and
Hour decreased by 63 percent between 1980 and 2015. I believe
it is part of an alarming trend with this Administration.
Last week I laid out the unacceptable rollbacks of the
Department of Labor under the Trump administration. The
department is moving away from being a tough cop on the beat
for workers to being an ally of industry. But we need more
enforcement and investing in enforcement at Wage and Hour
Division is a smart use of Federal funds.
As we know, not all companies are bad actors, but we can
identify where the greatest risks are. That is why Wage and
Hour should pursue, quote, ``strategic enforcement.'' Former
Wage and Hour Administrator David Weil has written, quote,
``Strategic enforcement seeks to use the limited enforcement
resources available to regulatory agency to protect workers as
prescribed by laws by changing employer behavior in a
sustainable way.
Just to quote David Weil, ``Strategic enforcement
represents a proactive approach to using limited enforcement
resources available to a regulatory agency to protect workers
as required by the law. It does so by using enforcement tools,
outreach, collaboration with other government agencies, worker
advocates, businesses, and the public, to change employer
behavior in a sustainable way,'' and it deals with both
outreach to workers and to employers.
The idea is to make excellent use of the data, to identify
industries and employers most likely to be violating wage and
hour laws and those types of workers more likely to be
exploited, and it then prioritizes precious resources there.
Sounds like a common-sense approach. I hope the subcommittee
can come together on a bipartisan basis to increase our
investment in the Wage and Hour Division and in a strategic
enforcement approach.
We certainly should not be taking away from their
enforcement work, which is why I challenge the Secretary's
efforts to expand the Payroll Audit Independent Determination
Program, which lacks any evidence of its success. And that is
why I oppose the President's budget proposal for the Wage and
Hour Division. It fails to increase funding for Wage and Hour
Division's enforcement, only a 1.6 percent increase, and that
is mainly for IT.
Kim Bobo is a worker rights advocate and author. She has
said, and I quote, ``If you steal from your employer, you are
going to be hauled out of the workplace in handcuffs. But if
your employer steals from you, you will be lucky to get your
money back.''
This subcommittee has as duty to understand the breadth and
the depth of wage theft and to help combat it. We must. Working
people cannot afford to have us stand pat.
And with that now let me turn to my dear friend from
Oklahoma, the ranking member of the subcommittee, Congressman
Cole, for any opening remarks that he may have.
Mr. Cole. Thank you very much, Madam Chair, and I want to
thank all of our witnesses for being here today. I had the
opportunity to read your testimony last night so it will be
great to have the opportunity to visit with you today.
We learned last week that our economy created 196,000 jobs
in the month of March, beating economic forecasts by almost
20,000 jobs. The unemployment rate of 3.8 percent is one of the
lowest in almost 50 years. The economy-boosting policies of the
Administration are raising household incomes, helping small
businesses succeed, and supporting the American worker.
The Wage and Hour Division, Department of Labor, is
responsible for the enforcement of the nation's Federal labor
laws, including minimum wage, overtime pay, family and medical
leave, and migrant and seasonal worker protections.
Collectively, these laws cover most private, state, and local
government employment, protecting over 143 million workers in
nearly 10 million establishments nationwide.
Last year, the agency recovered more than $300,000,000 for
more than 265,000 workers. This represents more recovered back
wages than in any other year of the agency's history. The
amount translates to more than $800,000 in back wages for
workers every day and averages more than $1,150 for each worker
found to be due back wages.
In addition to this impressive amount of back wages
recovered, the agency has also assessed more than $6,500,000 in
civil monetary penalties for violations of the child labor
regulations, the second-highest amount ever assessed in the
agency's history. The Wage and Hour Division has also increased
the proportion of agency initiative investigations to 53
percent, surpassing 46 percent in the previous administration.
In addition to its enforcement responsibilities, a critical
function of the Wage and Hour Division is compliance
assistance. Last year alone, the agency conducted a record-
breaking 3,600 outreach events for thousands of employees,
employers, and industry associations. Compliance assistance is
a critical component because Federal labor laws can be complex
and therefore time-consuming and confusing for small
businesses.
The Department of Labor announced a proposed overtime rule
that would make more than 1 million additional American workers
eligible for overtime. The department estimates average
transfer to employees to be more than $425,000,000 per year
over the first 10 years. The efforts by this Administration
represent a strong commitment to ensuring the rights of both
the employee and the employer while preserving economic growth.
By all accounts, the agency appears to be meetings its
statutory responsibility and fulfilling the mission given to it
by Congress.
I look forward, Madam Chair, to hearing the testimony today
and learning ways that we can ensure the rights of workers and
employers are respected and adhered to.
I yield back the balance of my time.
Ms. DeLauro. Thank you very much, Congressman Cole. Let me
once again thank all of our panelists for being here. Again, we
have Daniel Katz, Senior Staff Attorney at the Washington
Lawyers' Committee for Civil Rights and Urban Affairs; we have
Paul DeCamp, member of the firm Epstein, Becker & Green; we
also have Laura Huizar, Senior Staff Attorney at the National
Employment Law Project; and let me yield to my colleague from
Illinois, Congresswoman Bustos, to introduce the Illinois
attorney general.
Mrs. Bustos. All right. Very good. Thank you, Madam Chair,
and once again you are demonstrating, Congresswoman DeLauro,
how every single day you are fighting for the people. I think
with our high school students out there today this is democracy
in action, and welcome to our hearing.
It is my distinct honor to be able to introduce Attorney
General Kwame Raoul, who serves in my home state of Illinois.
From his time as a young attorney handling labor and employment
issues, to his career in the Illinois state legislature,
spearheading workers' compensation reform, Mr. Raoul has been a
tireless advocate for men and women who are in the workforce.
As attorney general, Mr. Raoul's tenure has been dedicated
to bettering the lives of Illinois workers. Due in part to Mr.
Raoul's advocacy with other attorneys general, four large fast-
food franchises will no longer use ``no poach agreements.'' He
is also pushing to create a worker protection unit within the
Attorney General's Office, and amen, Mr. Raoul, for fighting
for working men and women.
I would like to thank Mr. Raoul for joining us today and we
look forward to hearing your testimony.
With that, Madam Chair, I yield back.
Ms. DeLauro. Thank you very much, and to our panelists this
morning please understand that your full testimony will be
entered into the record, and you will be recognized for 5
minutes. And then what we will do, when we conclude the witness
testimony, we will proceed to 5-minute rounds for questions,
and I will recognize members in order of their seniority at the
time that we gaveled down. And then after that I will call on
members in order of their appearance.
And I guess I am told as housekeeping to make sure the mike
is on when you are speaking and off when you are not speaking.
Thank you. Mr. Katz, please begin when you are ready.
Mr. Katz. Thank you very much, Chairwoman DeLauro, Ranking
Member Cole, and members of the subcommittee. Thank you for the
opportunity to testify today. My name is Daniel Katz. I am
senior counsel at the Washington Lawyers' Committee for Civil
Rights and Urban Affairs. The Lawyers' Committee labors to
defend the rights of working people and address poverty,
racism, and other forms of discrimination. In order to serve
low-wage workers we host weekly workers' rights clinics which
monthly assist over 100 low-wage workers who face wage theft
and other violations of their rights, as well as we litigate
claims on behalf of employees who suffer wage theft and
discrimination.
My testimony is informed by these experiences as well as
the 25 years' experience I have litigating claims on behalf of
low-wage workers and counseling many hundreds in regard to wage
theft issues. Each day we speak with individuals who work on
construction sites and restaurants, hotels and daycare centers,
nursing homes and elsewhere, who do not receive the minimum
wage, do not receive overtime pay, who get paid for only a
percentage of the hours that they work, tipped employees who
are forced to perform unpaid hourly work, and others who work
and simply do not get paid at all.
Wage theft impacts every aspect of a worker's life, whether
she can pay for her family's housing, her ability to provide
clothing and food for her children, whether her kids get
medical care, and even her ability to get a job in the first
place.
This is what wage theft is. I would like to spend a couple
of minutes talking about the ``who'' of wage theft. Who are the
victims?
A small subcontractor working on luxury apartments in Foggy
Bottom hired six workers to hang drywall for 3 weeks. When they
tried to collect their wages the subcontractor was nowhere to
be found. When they brought their plea to the general
contractor, who was onsite and helped supervise them, the
general contractor claimed it had no responsibility to pay them
since it had not directly hired them. They received nothing for
their work.
A young mother worked 50 hours per week in a pizza
restaurant in a tiny indoor market. The restaurant paid her for
only 40 hours' work. When she complained, the employer told her
she was lucky. After all, he had paid her minimum wage for all
of those 40 hours. She received nothing for those overtime
hours--not straight time, not time and a half.
Six back-of-the-house restaurant workers were not paid for
4 weeks of work at the time that their Connecticut Avenue
restaurant changed owners. The new owner told them they could
keep their job but had no obligation to pay them their back
wages, and they could not figure out who the old owners were
because their pay stubs referred only to an LLC which was then
defunct.
Over 300 janitors worked for a tristate custodial company,
some for up to 15 years, earning just over the Federal minimum
wage. Their paychecks for the last half of August 2018 did not
arrive, and as their paychecks for the first half of September
became due they found out the company had closed. This has been
ruinous for their families.
A server regularly worked a 12-hour shift at a DC bar. She
made only tips. The employer did not even pay her the $3.89 per
hour that an employer must pay a tipped employee. When she
complained, they gave her two options--keep serving or leave.
Thirty workers performed electrical work constructing a
public hospital. They were hired by a labor broker and worked
side-by-side with individuals performing the same work who were
hired directly by the electrical contractor. But they were paid
less than half the wage of those directly hired and did not
receive overtime pay. When they sought the wages owed to them
the labor contractor was nowhere to be found and the general
contractor disclaimed any responsibility.
I realize that time is tight, and I want to just address
one more issue. The protections of the FLSA would be seriously
undermined by a pernicious Department of Labor proposal that
would gut a core protection for low-wage workers. For
vulnerable workers such as those I have described, the current
FLSA joint employment rules provide the only hope that when the
labor broker or the fly-by-night contractor or subcontractor
disappears the workers still might recover the wages she had
earned.
However, last week the DOL proposed a new four-part test
for determining joint employment under the FLSA. This test
would insulate general contractors and others in the employer
chain from the consequences of wage theft from which they
directly benefit. The DOL proposal would upend decades of court
precedent and ignore the reality of the subcontracting and
outsourcing structure of employment today. This change would
leave thousands of workers who are unpaid without any potential
relief from wage theft. I urge the committee to consider any
step it may take to ensure that the DOL never implements this
proposal.
Thank you.
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Ms. DeLauro. Thank you.
Mr. DeCamp.
Mr. DeCamp. Good morning, Chairwoman DeLauro, Ranking
Member Cole, and distinguished members of the subcommittee. My
name is Paul DeCamp and I am a member of the law firm of
Epstein, Becker & Green here in Washington. Thank you for
allowing me to present my testimony today.
The phrase ``wage theft'' is not a concept recognized under
Federal wage and hour law, nor should it be. Instead, wage
theft represents an amorphous cluster of notions, some of which
involve violations of Federal law and some of which do not.
That being said, because the phrase has worked its way into the
title of this hearing, it is worth defining the terms we use.
The concept of theft has a well-settled legal meaning.
Black's Law Dictionary defines theft as, quote, ``the felonious
taking and removing of another's personal property with the
intent of depriving the true owner of it, larceny,'' unquote.
In short, a perpetrator intending to steal property knowing
that it is not his or hers to take. Theft is a serious crime.
In the context of wages, it is exceeding rare for an
employer to pay an employee wages and then to steal some or all
of that money back from the employee. In legal terms, true
theft of wages is almost nonexistent. When it occurs, state
criminal and civil laws already provide a robust penal and
remedial structure, as with theft of non-wage property. The
much more common scenario is that an employer fails to pay
wages allegedly owed. Sometimes the employer clearly owes
wages, understands that it owes the money, and has the ability
to pay, yet chooses not to pay. There is a broad consensus
among businesses and workers alike that such an employer is a
bad actor who needs to compensate the workers and face
punishment.
This type of situation may constitute fraud or theft of
services under State law, or even theft itself. Under Federal
law, assuming the Fair Labor Standards Act applies, this
conduct would amount to a woeful violation, subjecting the
employer to civil money penalties and an additional year of
liability. The FLSA also provides for criminal liability for
certain willful violations with fines as well as imprisonment.
This type of knowing, willful, intentional refusal to pay
wages that are indisputably due is the image that most
naturally comes to mind when one hears a vague and loaded term
like ``wage theft.'' This conduct is already illegal and often
criminal under State law, and when this type of violation
involves wages owed in the FLSA the result can be a Federal
crime as well.
For purposes of Federal wage and hour enforcement it is
misleading and inappropriate to label anything other than the
willful, intentional nonpayment of wages indisputably owed
under the FLSA or another Federal statute as wage theft. The
FLSA does not federalize all facets of wage payment. Instead,
it establishes a floor relating to minimum wage, overtime, and
child labor. It is simply wrong to use a term like ``wage
theft'' when describing circumstances where conduct is not
willful or intentional.
The FLSA can be so confusing that even the Department of
Labor itself has repeated violated it over the years, certainly
through no desire to steal wages. The Wage and Hour Division
misclassified its entire nationwide cadre of investigators as
exempt from overtime for the first three decades-plus of its
existence until another agency took a closer look during the
1970s, forcing a reclassification. And in 2016, the department
paid $7,000,000 to settle a claim that it had misclassified
thousands of employees as exempt. If even the Federal agency
with the most experience and expertise dealing with the FLSA
has significant trouble complying, we should all pause before
assuming bad motives on the part of other employers.
Where the facts are reasonably in dispute, the law is
sufficiently ambiguous that the obligation to pay is unclear or
an employer was not aware that it owed the wages at issue there
may well be an FLSA violation in which case the law provides
make-whole remedies for the workers plus costs and reasonable
attorney's fees, as well as a presumption of double damages.
But this type of situation has virtually nothing in common with
felonious theft. These non-purposeful errors are qualitatively
different form the category of worst-of-the-worst violations
discussed earlier. Lumping all of these scenarios together
under a broad heading of wage theft obscures critical
differences and leads policy astray. In short, it is
fundamentally unfair to impose criminal or quasi-criminal
punishment where an employer was not on clear notice of what
the law requires and did not act with criminal intent. In my
experience, all but a small percentage of wage hour violations
fall into this non-willful category. By all means, protect
workers and make them whole but do not treat unintentional FLSA
violators like felons.
The best safeguard for workers is clear, understandable,
easily enforced legal standards. The vast majority of employers
consist of decent people who care about their workers and want
to do right by them. Federal wage and hour law should help make
that happen rather than falsely trying to brand millions of
honest people as thieves.
Madam Chairwoman, that concludes my prepared remarks. I
will be happy to answer any questions you or the members of the
subcommittee may have.
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Ms. DeLauro. Thank you very much, and now let me recognize
Attorney General Raoul.
Mr. Raoul. Thank you. Good morning, Chairwoman DeLauro,
Ranking Member Cole, and members of the subcommittee. My name
is Kwame Raoul and I am the Attorney General for the State of
Illinois. I thank you for the opportunity to talk with you
today about the ways in which I and other state leaders are
responding to the crisis of wage theft by engaging in more
strategic wage law enforcement and the critical importance of
the Federal Government as a partner in these efforts.
For decades, state attorneys general have been at the
forefront of enforcing the rights of the residents of our
states in areas such as civil rights, criminal prosecution,
consumer rights, and environmental protections. Until
relatively recently, few state attorneys general have engaged
in much workplace rights enforcement. However, more and more
state attorneys general have come to believe that we must help
address rampant violations of wage and hour laws.
For example, a comprehensive survey of low-wage workers in
Chicago found that a full 26 percent of workers had been paid
less than the minimum wage in the week before. Of workers who
had worked more 40 hours in the preceding week, a full 67
percent were not paid overtime. These statistics are echoed in
what we hear from constituents every day. From home health
workers to security guards to truck drivers to restaurant
employees, every day my office hears from people who don't know
how they will pay their rent or feed their kids because they
have not been paid all of their wages that they have earned.
Not only is this unfair to workers, it harms other businesses
that do comply with the wage laws by making them less able to
compete. It is an unfair business advantage for bad actors.
In 2015, my office established the Workplace Rights Bureau
to fight wage theft and to protect workers. Mo recently, the
attorneys general of the District of Columbia and Pennsylvania
have also started dedicated units in their offices, and other
states have started getting more active on labor issues. These
efforts join established labor bureaus in New York,
Massachusetts, California, and the state of Washington.
This small group of state attorneys general has taken
significant actions to protect the working people of our
respective states. For example, in Illinois, we investigated
wage violations in the Chinese-style buffet restaurant
industry. We found evidence that workers were working around 11
hours a day, 6 days a week, and paid less than $5 an hour.
Workers were housed by their employers in deplorable conditions
and transported to and from work by their bosses. Those cases
resulted in four Federal consent decrees, shutting down
employment agencies that had enabled this exploit, and
requiring payment of back wages of up to $15,000 for some of
the kitchen workers.
We reached a $1,000,000 settlement with a construction
employer that had systematically falsified payroll records for
a period of years to make it look as though employees were
being paid legally required wages.
While I am proud of our accomplishments in this area, my
office has done this work with limited statutory authority.
That is why, as a State senator, I sponsored a bill to give the
attorney general authority to enforce state wage laws. Although
the bill passed, it was vetoed by our former governor. It has
now been introduced again with bipartisan support and it passed
out of committee unanimously two weeks ago, and I anticipate it
will pass out of the Senate this week.
The bill does not take any enforcement away from the
Illinois Department of Labor. It simply gives the attorney
general supplemental authority to investigate and file suit to
enjoin violations of State wage laws. It will also allow us to
strategically partner with local prosecutors, labor, business
and community organizations.
But we do need the Department of Labor as a partner. From
research to worksite investigations to detailed employer
compliance assistance, the U.S. Department of Labor performs
critical tasks that benefit employees, employers, and state
enforcers. The department is also the only public enforcer that
can investigate wage compliance issues across state lines. The
importance of the Department of Labor, if anything, has
increased as mandatory arbitration provisions and class action
waivers prevent more employees from pursuing private wage law
actions.
In short, we are doing the best we can at the state level
to address the issues of wage theft affirmatively and
strategically, with limited resources.
I thank you for the opportunity to speak with you today. I
would be happy to answer any questions.
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Ms. DeLauro. Thank you very much.
Ms. Huizar.
Ms. Huizar. Thank you. Good morning, Chairwoman DeLauro,
Ranking Member Cole, and distinguished members of the
subcommittee. Thank you for the opportunity to testify today.
The National Employment Law Project, or NELP, is a nonprofit,
nonpartisan organization focused on research and advocacy. We
specialize in employment policy, including labor standards
enforcement.
Today I hope that my testimony will shed light on the
problem of wage theft and also the importance of ensuring that
the U.S. Department of Labor has the resources that it needs in
order to adequately enforce our basic labor protections.
Unfortunately, for many workers across the country and
across industries, the Fair Labor Standards Act exists only in
theory. A groundbreaking study in 2009 surveyed over 4,000
workers. Twenty-six percent were paid less than the required
minimum wage in the previous work week and nearly two-thirds
have experienced some kind of pay-related violation in that
period. Dozens of studies have found similar high rates of wage
theft. For example, another recent NELP study highlighted that
nearly 90 percent of fast-food workers experienced some kind of
wage theft, in the warehouse and logistics industry, 25 percent
suffer minimum wage violations, and we know that overtime
violations are significantly higher. About 80 percent of port
truck drivers are classified as independent contractors but we
estimate that about 80 percent of them are actually employees
and misclassified, and they suffer persistent wage theft.
A 2017 study by the Economic Policy Institute, or EPI,
looked at the 10 most populous states, and they found that 2.4
million workers in those states lose about $8,000,000,000
annually to unpaid minimum wages, and nationally, as I think it
has been mentioned before, EPI estimates that workers lose
about $15,000,000,000 per year to minimum wage violations
alone.
Good Jobs First also analyzed more than 4,000 wage and hour
cases and more than half of those cases involved Fortune 500
companies or Fortune Global 500 companies. So we know that this
is not just a problem about small, fly-by-night corporations or
businesses.
Wage theft is a racial and gender justice issue. Women are
significantly more likely than men to experience wage theft, as
are foreign-born workers. Among U.S.-born workers, the rate of
minimum wage violations for African American workers was three
times higher than that of white workers. Nevertheless, wage
theft is an issue that affects all demographic categories. The
majority affected are over 25, they are native-born U.S.
citizens, and nearly half are white.
Low-wage workers who experience wage theft also face myriad
hurdles in accessing justice. Labor agencies across the country
are under-resourced and understaffed. Retaliation remains
rampant and the fear of retaliation keeps countless workers
from coming forward. The growing use of non-compete agreements
and no-poaching agreements has only made it more difficult for
low-wage workers to find work, and it does discourage workers
from coming forward and risk getting fired. Legal assistance,
especially for low-wage workers can be very difficult to find
and extremely costly.
Finally, the recent U.S. Supreme Court decision in Epic
Systems effectively adds another barrier for workers. It allows
employers to force their workers to sign mandatory arbitration
agreements that effectively bar collective action and close the
courthouse doors. For more than 60 million workers who are
subject to mandatory arbitration agreements around the country,
the U.S. Department of Labor and agencies like the USDOL may be
their only recourse, because those agencies are not bound by
such agreements.
Ultimately, an enforcement agency must be able to pursue a
strategic enforcement strategy that effectively leverages their
limited resources. Strategic enforcement refers to an agency's
ability to be selective about where and how they use their
resources in order to focus on where the problems are largest,
where workers are least likely to come forward, and where the
agency's efforts are most likely to improve industry
compliance.
Given the magnitude of the problem of wage theft and the
crucial role that USDOL plays in enforcement, Congress must
ensure that USDOL and the Wage and Hour Division within USDOL
have the resources and the staff that they need in order to
carry out their work strategically.
Thank you for the opportunity to submit testimony today and
I look forward to your questions.
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Ms. DeLauro. Thank you all very much for your testimony. We
will now begin questions.
Let me just, before I go to my questions, just make a
point. There seems to be--I guess, Mr. DeCamp, you talked about
wage theft is non-existent or it is exceedingly rare. It seems
to be in dire contrast to all of the information that has been
provided by the other panelists, so maybe at some point the
four of you can get into that discussion. What I would like, at
the end of the--if we can get to either this morning or you get
back to us, in terms of what kinds of recommendations you have
for the subcommittee to be able to try to move forward.
With that, NELP estimates in 1948, one investigator for
every 22,600 covered workers. Today there is one per every
135,000 workers. In recent years, Wage and Hour reached a high-
water mark of 1,446 full-time employees in 2015. In contrast,
DOL estimated Wage and Hour had just 1,297 in 2019. A 10
percent decrease, alarming, over four years.
Instead of requesting more resources for aggressive
enforcement, Secretary Acosta is looking to expand the
compliance assistance program. That is the PAID--Payroll Audit
Independent Determination. Quite frankly, where we have had no
evaluation, no determination of its effectiveness at all.
A question for you, Ms. Huizar. In your view, can
compliance assistance serve as a substitute for strong Federal
enforcement? Can you walk me through why the Labor Secretary's
approach will not help solve the wage theft crisis we are
seeing?
Ms. Huizar. Yes. Thank you, Chairwoman DeLauro.
So I think compliance assistance means different things at
different times, and I think, as has been said before,
compliance assistance can come in the form of outreach and
education to employers, and it is crucial to make sure that
employers understand their rights and their responsibilities as
it is crucial to understand--for workers to understand their
rights and when they can come forward.
But what we are seeing is that the Wage and Hour Division
of the U.S. Department of Labor is carrying out a program
called PAID, where, you know, labeled as compliance assistance
they allow employers to come forward voluntarily and self-
report violations. And through that program the agency hopes
that employers will pay back wages to workers, but there are no
consequences for employers who come forward through that
program.
So essentially there are no incentives for employers to
change their behavior or for employers who are watching what is
going on with enforcement to change their own practices. And we
at NELP believe that the PAID program is not a form of
compliance assistance. It is actually a form of amnesty for
wage violators.
So we believe at the cornerstone of strategic enforcement
we must place deterrents as a goal and a strategy that does not
impose a higher cost on employers for violations is not doing
that.
I should--oh----
Ms. DeLauro. Go ahead.
Ms. Huizar [continuing]. I should also mention that a
worker who has suffered wage theft and is then offered simply
the wages that they were owed at the beginning is not receiving
a true remedy for what they have experienced. Workers in those
cases are basically giving their employers a zero-interest
loan, based on their unpaid labor, and at the same time
workers, especially low-wage workers, are struggling to make
ends meet. Most workers are living paycheck to paycheck. And so
that is why the Fair Labor Standards Act provides for damages
for workers and for penalties.
Ms. DeLauro [continuing]. A strategic enforcement. So let
me move into that with a question for Attorney General Raoul
and for yourself, in the strategic enforcement efforts, state
labor departments, state attorneys, using these smart ways in
which to deter violations.
Let me ask you, Attorney General, can you explain how you
are leveraging the scarce resources of your Workplace Rights
Bureau to target investigations and lawsuits in ways that
achieve the greatest impact?
Ms. Huizar, your organization published a report, ``Winning
Wage Justice: Strategies for Effective Local Wage
Enforcement.'' Can you explain how local agencies may approach
complaints differently based on the potential impact of the
investigation?''
Mr. Raoul. Thank you, Chairwoman.
So as I explained, we have introduced legislation to allow
us to collaborate with local prosecutors, with labor, with
community organizations. We utilize that collaboration to be
able to enforce--I gave the example of the Chinese-style buffet
restaurant. It is important for us to be able to rely on the
Department of Labor. Oftentimes at the State level we have--the
Federal law sets a floor and oftentimes at the State level we
are a little bit more--we set a higher floor. And so to the
extent that the Department of Labor is not working as a
partner, and we have enjoyed working as a partner with the
Department of Labor, it does not enable us to leverage our
limited resources. We only have 10 investigators in our State
Department of Labor for a population of 12.7 million in the
State of Illinois. It is difficult for us to act alone to
enforce these violations.
Ms. DeLauro. What I am going to do is since I have got 4
seconds left here, Ms. Huizar, we will get back to you and have
you address that question.
Let me yield to my colleague from Oklahoma.
Mr. Cole. Thank you very much, Madam Chair, and I think we
probably all agree that one case of this is one too many.
But I want to pick up where our chair was headed in her
opening remarks and try to get some idea of the magnitude. So I
am going to ask each of you, and I ask you to be pretty brief
if you can because I want to get all of your responses in. But
no. 1, give us some sense of the magnitude of this, either in
terms of the percentage of workers that are impacted or the
frequency, the numbers of firms that are involved in this, so
that we can get that grasp.
And second, your view of the balance, again, between
deliberate violation and accidental, you know, either the
employer misunderstanding or what have you.
So if we could start with you, Mr. Katz, and then we will
just go right down the line.
Mr. Katz. Thank you very much. In terms of how widespread
this is, I would say that if we literally walked out of this
room and were able to interview individuals working on the
construction sites on K Street or in the restaurants on Capitol
Hill or in nursing homes within a couple-mile radius, we would
find that different forms of wage theft are affecting well over
50 percent of the individuals who we would consider low-wage
workers.
That may be a low number when it comes to certain
industries, because I would say our experience in, for example,
the restaurant industry is that well over 50 percent of
restaurants do not comply with minimum wage and overtime
requirements.
In the context of how difficult is it to comply, I would
say there is no question that there may be certain aspects of
the FLSA which are more difficult to understand than most, but
I would say that essentially 98 percent of what the FLSA
instructs us to do in regards to paying minimum wage, paying
over time, keeping accurate records so that there are not
disputes over what people are paid, those provisions are easy
to comply with. They have been the law for approximately 80
years now. And so I would say that when an employer violates
those provisions, by and large that is a willful violation.
Mr. Cole. Thank you.
Mr. DeCamp.
Mr. DeCamp. If we are talking about wage theft the way that
the other members on the panel are defining it, which is any
FLSA violation or perhaps any FLSA and any state wage law
violation, then I would agree that the numbers are very large.
If we are talking about the category of willful, intentional
acts, I think it is much, much smaller category, probably less
than 1 percent.
Look, I don't think there is an employer out there where I
couldn't go through their records and talk to their employees,
including in this building, and find violations of the FLSA or
State wage and hour law. These are next to impossible to comply
with 100 percent of the time. But when we are talking about
deliberate versus good-faith or unintentional violations, I
think there is a big difference there.
I think that the comment here, from the previous witness,
that 98 percent of the requirements of the FLSA are crystal
clear to comply with, that is true at 30,000 feet--time and a
half, overtime, minimum wage, keep records. That is easy. But
at the ground level, when you are actually applying these
rules, in their details, in the 1,000-plus pages of regulations
under the FLSA, and 80 years of case law, everybody gets it
wrong. There are so many ambiguities that nearly all the
violations that I see--and my practice is 100 percent wage and
hour--is in the non-willful range.
There are willful violations. They are small but they are
out there. But that is not most violations.
Mr. Cole. Thank you.
Attorney General Raoul.
Mr. Raoul. You know, I think we have heard a little bit of
consensus from the previous two speakers. The bottom line is
whether willful or intentional the end result is a worker not
being paid the wages that they worked for. And to the extent
that we are facing consequences where there are mandatory
arbitration agreements and class waivers, that enhances the
burden on public enforcers because there is no private action.
So for my office, where I have no investigators, it creates
a huge burden, particularly if we do not have the partnership
of the U.S. Department of Labor.
Mr. Cole. Thank you, General.
Ms. Huizar.
Ms. DeLauro. Can I interrupt for a second?
Mr. Cole. Certainly.
Ms. DeLauro. This is an important question, I want to say
to my colleagues. Because we are over on the time----
Mr. Cole. Yeah, no, you control the time.
Ms. DeLauro. No, no. Well, but I just want to just say
don't feel--I mean----
Mr. Cole. Yeah.
Ms. DeLauro [continuing]. Let's----
Mr. Cole. Yeah, no. I think we all want to get this one. So
please. Thank you, Madam Chair.
Ms. Huizar. Thank you. So I think that the definitive study
at this point on wage theft prevalence was a study conducted--
or released in 2009. It was NELP. It was the UCLA Institute on
Research and Labor--Research on Labor and Employment, it was
the Center for Urban Economic Development at the University of
Illinois, and a number of other partners.
They surveyed over 4,000 workers in several cities and
through that survey they were able to basically gather
information about a market that is representative of the low-
wage market. And through that study, which has been cited over
and over again, we found minimum wage violations in about 26
percent of cases for the previous work week that was analyzed.
As I mentioned, nearly two-thirds of workers in that study had
experienced some kind of pay-related violation.
When we look at industries within that study, the home care
industry had overtime violations above 80 percent, for example.
Within the food and drink, hospitality sectors, agriculture,
and others, we know that rates are that high.
And I think I will say, in terms of whether these are
small, technical violations that are hard to detect and hard
for employers to understand, you know, just from my personal
practice--I started my career at the grassroots level,
administering economic development programs in Connecticut--and
I will say that in my experience most of the violations that I
have come across are not small or technical.
I have seen employers instruct workers that only their
first 40 hours will be placed on their paycheck and will be
recorded, and then the next 20, 25 hours will not be recorded
anywhere. And they may get paid some portion of the minimum
wage for those extra 40-plus hours, but they often do not get
the full overtime pay for those hours. And that is when workers
would come to me and to my fellow attorneys for help. I think
they understood that they were working all day, basically,
every week, for very little in pay.
And, of course, we see workers--you know, I saw countless
workers in the construction industry who go back to their
employers at the end of two weeks or a month of hard work and
the employer either gives them just a portion of what was
promised, what was explicitly promised, or gives them nothing
at all.
And so I think that in our practice most violations are
very clear to workers, and that is when workers come forward or
they seek help, but that is also why we need strategic
enforcement to go out and find industries that are taking
advantage of these practices and undercutting their
competitors.
Mr. Cole. Thank you. Thank you, Madam Chair.
Ms. DeLauro. Thank you.
Congresswoman Frankel.
Ms. Frankel. Thank you. Thank you for the hearing, thank
you to the panelists, and welcome to the students.
So I think, if I listen to you all, for a worker I guess
whether the wage violation is deliberate or not, it is the same
effect. You are not getting what you earned, right?
What is the most common type of wage theft? You mentioned--
somebody mentioned Fortune 500 companies. What is the most
common wage theft for a Fortune 500 company?
Ms. Huizar. So I think in terms of the most common form of
wage theft I would say, in my experience and based on the
research that I have reviewed, it is often overtime violations.
So workers will get oftentimes the minimum wage for the first
40 hours and then nothing for the overtime hours, or some
iteration of that.
But we do see violations, for example, in the restaurant
industry, where tipped workers who are supposed to get a base
wage from their employer, or a guaranteed base wage plus tips,
where there is a sub-minimum wage for tipped workers, we often
see that employers are not tracking precisely how much in tips
workers are recovering each week. If you talk to most
bartenders and most waitresses and waiters, they will tell you
that they get sort of the same paycheck every week from their
employer, which is a very small amount, and then the rest is
sort of an informal system that does not guarantee them the
minimum that they are owed under the law.
Ms. Frankel. Is this detected by the worker? I mean, do the
workers know they are not getting overtime, and then what is a
worker supposed to do, other than talking to their boss and
then they are told, sorry. Then what is a worker supposed to
do?
Mr. Katz. If I may, Congresswoman, one of the issues is
essentially what are the resources available to that worker.
Unfortunately, in our experience, what we can say is it is a
small percentage of the individuals who are not paid the
overtime, are not paid minimum wage, or are paid as, you know,
so-called independent contractors when they are really
employees. It is only a small percentage who ever find their
way to a workers' rights clinic or to a private lawyer to
assist them. Unfortunately, the resources available to low-wage
workers are very limited, and unfortunately, also, many times
employers do not keep the records that the law mandates they
keep so that the employees can, at some later point, figure out
what are the wages they are actually owed.
Ms. Frankel. So, I mean, I read some of the estimates of
the lost wages. I think it was something like $4,400,000,000
annual for women workers, $3,600,000,000 for men annually. I
guess that is because more women are in minimum wage jobs. What
is it, two-thirds of the minimum wage jobs are for women?
So what can we do to enforce the law? I mean, what can we
do better, from a Federal point of view?
Ms. Huizar. So I think that a lot has been done at the
Federal level, especially under the last administration. I
think Administrator David Weil has conducted a lot of research
and study on what works best, how do we leverage limited
resources in the best way. And that is where this idea of
strategic enforcement really comes from. It is about employing
the principles of prioritization to cases and deterrence, and
thinking about how an agency can influence a system-wide
change.
And those are things that the agency has already started to
put in place. We are seeing more and more directed
investigations by the agency instead of simply responding to
complaints as they come in. And what the agency needs, and
what, I think, most agencies need are more resources, more
investigators, in order to really have a chance to analyze the
data that they have and use that data as strategically as
possible to find the high violators, to find workers in
industries that are too afraid to come forward, and to really
use their power to make a difference in employers' decisions.
Ms. Frankel. How does that happen? If you don't have a
complaint, how do we know that there are violations?
Mr. Katz. Madam Congresswoman, the DOL has the authority to
investigate workplaces without there being a complaint, and we
would urge that the number of investigators be increased, that
they be properly budgeted, and that when the DOL investigates
and identifies wage violations in the workplaces that, as one
of my colleagues mentioned earlier, that the remedy for those
individuals is not just what they were previously owed but
remedies to the full extent that the law provides, right now
double damages, and as proposed in this bill, increased
damages.
Ms. Frankel. Madam Chair, if I could just ask. So more
resources. Does anyone have a figure in their mind what kind of
increase in the budget or the amount of personnel that would be
needed?
Ms. DeLauro. I know Mr. DeCamp wants to get into this
conversation.
Ms. Frankel. Okay. Yeah.
Ms. Huizar. So I will not put a specific number out there,
but I will reiterate the number that was cited before where, in
1948, we had about 1,000 investigators in the Wage and Hour
Division for about 22.6 million workers across the workforce.
Today we have fewer than 1,000 investigators for 135 million
workers. So I don't think we can say that we are doing as much
as we were doing in the 1940s, or as much as we can, given the
prevalence of the issue and the growth in the workforce.
Mr. DeCamp. First, on the resource end--thank you, Madam
Chairman--for the resource issue I think it is important to
recognize that the Wage and Hour Division does a lot of good
and with more resources they could do more good. Obviously,
there are competing demands for the money and that is up to the
appropriators, but certainly more resources could be helpful
and could benefit especially low-wage workers.
From the standpoint of how do you prevent violations, I
think it really depends on the type of violation. There are
certainly willful violators out there where putting out all the
compliance assistance information in the world is not going to
change their behavior. For them you need punitive, coercive
enforcement.
But for the vast majority of employers, certainly in my
experience, if you give them the information and if you give
workers the information about what the law requires, they will
want to comply. The workers will be aware of their rights. The
employers will want to comply because they don't want a visit
from the Department of Labor or a plaintiff's lawyer or
anything like that because it is a lot more expensive in that
instance not to comply than to get it right in the first
instance.
So to prevent those types of violations, having clear legal
standards, having more information put out there, having the
Department of Labor and State agencies having more information,
more compliance assistance with employers, with community
groups, with workers, to make sure that everybody understands
the standards, and clarifying some of these gray areas in the
law--and there are a lot of them--would benefit workers and
prevent a lot of violations.
Ms. DeLauro. Thank you very much. And I would just say I
think we should get a copy to everyone of the abstract that the
former Wage and Hour Division head, David Weil, wrote about the
concept of strategic enforcement, which, in fact, does talk
about some of the things that all of you are speaking about in
terms of making the agency do what it needs to do, and have the
kind of outreach it needs to have in order to get at this
problem.
With that let me recognize Congresswoman Herrera Beutler.
Do you want to wait for a few minutes?
Ms. Herrera Beutler. Could you----
Ms. DeLauro. Oh, absolutely. No, take your time. Let us
know. Okay. Thank you.
Let me just take a moment to--thank you all for coming, by
the way, guys. Do well, all right? Run for office. All right.
Mr. Cole. Can we find out where they live first?
Ms. DeLauro. Let me take a moment to question the premise
that the misclassification of workers is somehow not part of
wage theft. Employers are often willfully miscategorizing
workers as independent contractors, and then, in the process,
denying them the wages they should be rightfully paid under the
Fair Labor Standards Act. Historically, Wage and Hour has had
many cases involving civil monetary penalties and liquidated
damages in misclassification cases.
So I have two questions, one for Mr. Katz, one for Ms.
Huizar.
Mr. Katz, it is my understanding that you have seen, first-
hand, worker misclassification and has resulted in vulnerable
workers not getting their promised wages. Can you walk us
through some examples of cases where this happened?
And, Ms. Huizar, in your view, does the Wage and Hour
Division have a role to play in holding employers accountable
for misclassification resulting in workers losing promised
wages and overtime?
Mr. Katz.
Mr. Katz. Thank you, Congresswoman. I can think of two
quick examples. One is from the group of electrical workers
that I talked about earlier in my testimony, who were working
side-by-side with electrical workers hired directly by the
electrical contractors. The individuals whom I represented in
that case, approximately 45 of them, were paid as so-called
independent contractors. They received an hourly wage, $18 to
$20 an hour, and that is what they received. They did not have
taxes withheld from their paychecks. The employer did not pay
the employer portion of those taxes. When they worked overtime,
they were paid $20 an hour instead of the $30 an hour they
should have received.
Similarly, I can think of an example involving three
construction workers who worked for a contractor in the
District of Columbia, in Maryland. The three of them worked
approximately 8 to 10 years for this contractor. They were paid
a straight hourly wage. Again, they were never paid overtime.
The employer never paid their portion of the--never paid--
withheld the employee taxes, never paid the employer portion of
those taxes.
So that has a couple of consequences. Number one, it means
they were not getting--because they were treated as, in quotes,
``independent contractors,'' they were not being paid time-and-
a-half overtime they should have been paid. Number two, when
they went to file their taxes each year, they had a real
headache with the IRS, because the IRS had, of course, no
record that any taxes had ever been withheld and so they got
hit by huge penalties.
Number two, that kind of a situation basically denies
Federal and State taxing authorities of funds they should be
receiving. All of us pay employment taxes, okay. They go to
support also to different government functions. In that kind of
a situation the employer was essentially denying tax monies
owed to Federal taxing authorities and also not paying into,
for example, the unemployment insurance fund, so that when
people get laid off, you know, they can collect unemployment
insurance.
Ms. DeLauro. Ms. Huizar.
Ms. Huizar. Yes. Thank you.
So in terms of whether the Wage and Hour Division has a
role to play----
Ms. DeLauro. Right. Yes.
Ms. Huizar [continuing]. In tackling misclassification, I
think I would first say that the Wage and Hour Division's
explicit goal is to enforce the Fair Labor Standards Act, which
means to protect employees and their right to minimum wage and
overtime and other basic, basic protections. And so in order to
do that, the Wage and Hour Division absolutely has a role in
identifying industries where misclassification is happening. I
think some estimates put the number at around 10 or 20 percent
of workers that are misclassified in the economy these days,
and the agency has the power to use its resources to analyze
data, to look at industries, at sectors, to use complaints to
figure out when employees are being misclassified, and then to
use the agency's resources to bring the most impactful,
targeted cases against violators.
Ms. DeLauro. Thank you.
Congressman Harris.
Mr. Harris. Thank you very much, and, yeah, I am sorry that
I had to step out. We have the Secretary of Agriculture next
door.
Mr. DeCamp, I am sorry I missed your testimony, but some of
this is confusing to me. I am not a labor attorney. My
understanding is that some states, including mine, actually set
a higher minimum wage than other states, and in those states
that what is an exempt and a non-exempt job don't necessarily
overlap with the Federal minimum wage. Is that true?
Mr. DeCamp. There are, in some states, different standards,
higher compensation standards or different compensation
standards to be exempt or non-exempt for the most commonly used
exemptions under the FLSA. That is correct.
Mr. Harris. Right. And I know that, I think in the opening
statement, the ERG study from 2014, sponsored by the Department
of Labor, you know, a statistic was mentioned that has to do
with California. California is one of those states that had a
higher minimum wage and also, I think, had different--a
slightly different definition of which jobs it applied to. Is
that right also?
Mr. Harris. Not just slightly different. Very different in
terms of the types of duties that qualify and how you assess
whether somebody is exempt.
Mr. Harris. Okay. And are you aware of that statistics,
that again was quoted, where 49 percent of the wage was
underpaid to the--in that study, to the people in California
who were subject to the minimum wage?
Mr. DeCamp. I have heard that number used in the written
testimony and the oral testimony. It is not something I had
seen before. It is hard to know without more context what that
really represents or how good that number is.
Mr. Harris. Yeah. I am asking for your comment on that,
actually, because I went and actually read through the study.
And it is interesting because it claimed that a $63 decrease,
or underpayment of that, of minimum wage in a weekly salary,
was actually 49 percent--it was a 49 percent effect on the
income. And I guess that wasn't kind of a full-time job, on
average.
I may ask you again to look into that and get back to me on
exactly how that was derived, but it is just not--and, look, I
know statistics. I have taken a course in statistics. You know,
you pluck one number out of the air and you make it seem, in
California, you know, you are underpaying by 50 percent, but it
appears to be a very small number of people. And again, it
seems because of the definitional differences in California it
might actually be a hard number to determine.
But where are the places, if you could just review for me
where you believe that the term--and I enjoyed reading your
testimony a lot. I am sorry I didn't hear it, because again,
you know, we should just be honest. I mean, theft is a crime,
is a felony--I guess normally a felony. I mean, it involves
actually stealing something. So I understand the emotions of
calling this wage theft, but you make the point that there are
many things that occur where theft is probably a little too
strong, like you didn't really understand what the law--it was
unintentional, for instance. Most times if you think of, you
know, auto theft, for instance, it is rarely unintentional.
So what are the major parts, or what are the contributors
to the overall problem when it is actually an unintentional
act?
Mr. DeCamp. Largely it is ambiguous legal standards. For
example, the issue of who is an employee versus an independent
contractor. That is an issue that has bedeviled Congress since
at least 1978, and well before that with the passage of Section
530 of the Internal Revenue Code. Recognizing that determining,
for tax purposes and other purposes, where that line is can
oftentimes defy word tests, and you only know it after the fact
when a court applies a test that it may make up on the fly, for
purposes of the litigation.
Exempt, non-exempt. When we look at the Department of
Labor's own violations historically, those were in the area
primarily of exempt versus non-exempt. Is an employee properly
classified under the administrative exemption? Do they have
sufficient discretion and independent judgment regarding
matters of significance? These are terms that--they exist in
regulations and they have been in regulations for decades and
decades, but nobody knows what they really mean, in part
because they don't really have meaning. They take on meaning in
the context of a given case, but they don't, in many instances,
lead to noble outcomes ex ante. That is another area of
significant problems.
Another concern is identifying what constitutes compensable
work. Everybody understands that if you are hired to swing a
hammer in a factory, the time you spend swinging the hammer is
work. But what about the time you spend putting on your gear at
the start of the day or waiting in line in security to get
checked out at the end of the day? There have been cases, and
some have reached the Supreme Court, dealing with what
constitutes work. In today's day and age things like travel
time, commuting, use of mobile devices, use of computers at
home. You get a phone call from your supervisor and it lasts 3
1/2 minutes, after hours. Is that work? Is it not work?
These are gray areas that cause a lot of concern. When
people are on call, is that work or is it not work? And these
are areas where employers who want to get it right find it very
difficult to comply, and it is doubly so for smaller businesses
that don't have sophisticated legal and HR staffs in-house to
deal with these questions. A lot of the times the people who
are trying to deal with these standards, to the extent they
even know about them at all, are non-lawyers, regular human
beings who are not used to reading statutes and regulations,
don't even know that some of these laws exist. Maybe they have
heard of overtime but they don't know what the specifics are in
terms of what is required.
Mr. Harris. And my understanding in some states--because I
think I remember this when I was in the State legislature I sat
on the labor committee, that even the definition of independent
contractor can be different in different states. Right?
Mr. DeCamp. Absolutely. There are multiple different tests
that are used. The Federal standard differs from what is used
in California, it differs from what is used in many other
states.
Mr. Harris. That is what I thought. Thank you very much. I
yield back.
Ms. DeLauro. Congresswoman Herrera Beutler.
Ms. Herrera Beutler. Thank you, Madam Chair.
I have a couple of thoughts and I wanted to direct a couple
of questions to Mr. DeCamp. You know, Washington State has been
dealing with a bill at the State level that is similarly
attempting to get at the problem of when people who have worked
for their money don't get paid, period. I don't think anybody
is going to disagree that that is biblical, actually. So I am
not going to fight that one.
But as we all know, we can create layers that maybe attempt
to get at a problem but can create a lot of unintended
consequences for other people who are fair actors, and that is
what we need to get to here.
You know, I am aware, in my state, with a bill that is
moving forward, you know, the testimony was brought if a small
general contractor--and I think about my father-in-law who had
his own business. It was him and then my mother-in-law did
books. So oftentimes they are hiring many different subs to
complete a house or a project. Sometimes those subs have many
more employees that it would dwarf the general contractor.
Correct? And that is where I want to get into some of these
things, because that can have such a negative impact on
everybody involved.
So I was hoping that perhaps you could explain how
businesses, contractors, homebuilders, who are fair-minded
folks, who want to pay their employees, may find themselves in
violations of the Fair Labor Standards Act, and is there any
ambiguity in the law? Are there things that we should be
looking at really to tighten up this process? That is the first
question.
Mr. DeCamp. Sure. There is tremendous ambiguity in the law
regarding the employment relationships in a multi-tier
contracting situation. That has led to a lot of DOL enforcement
in a variety of industries. We have seen it in residential and
commercial construction, among others. And a lot of times the
lines get blurred, and who is a joint employer? These are tough
questions. And if they were easy questions we wouldn't see so
many violations.
And it is the kind of thing where a lot of the practices
are uniform, or relatively uniform, within an industry because
people are not going to lawyers to find out how do I structure
this. They are basing it on how other folks in the industry do
it and how they learned it when they were coming up through the
industry. So there is a lot of HR, by word of mouth. And we see
a lot of convergence of practice, classification in pay,
otherwise, within a given industry for that reason. People move
from company to company and practices spread. And what you can
do, if there is a way to get there, is to provide clearer legal
standards.
I don't have any better answer to the question than
Congress has had for the last 40 years, trying to deal with how
do you draw that line--coming up with a word test that neatly,
through all cases, draws the line between independent
contractor and employee. Lots of people have tried and nobody
has come up with a particularly good answer. It is either a
vastly over-expansive line that kills the concept of
independent contracting or vastly under-inclusive and doesn't
provide adequate remedies for workers. So trying to strike that
balance, it is hard. It defies words.
Ms. Herrera Beutler. So would it be worth our time to spend
more of our energy focused on helping people comply, not
necessarily taking the penalty approach first off? Because you
said--gosh, I didn't write it down--it seems like a lot of
people violate this, not intentionally. So in my mind, I think,
so then how do we get people to comply so that we can, number
one, penalize the truly bad actors, right, and then, number
two, make sure people are getting their wages?
Mr. DeCamp. Well, to the extent that there are clear
standards then you can get into helping people comply with the
standards, compliance ex ante is easier because the standards
are clearer, and then punishing those who don't comply is also
easier and more appropriate because there has been clear notice
of what is required.
When we are talking about helping people comply with a
standard that is gray to begin with, now it is more a question
of risk tolerance and what do we want people to do. Do we force
them to be so far away from where the gray area is to avoid
penalties or do we take some other approach?
I think, on that particular issue of employee versus
independent contractor, Congress could do a lot of good if
there were a way to legislate an answer to that question.
Ms. Herrera Beutler. Thank you. I yield back.
Ms. DeLauro. Thank you. Let me ask General Raoul a
question, if I might.
At a recent hearing on predatory for-profit colleges we
heard how many students are subjected to mandatory arbitration
clauses that deny them the right of private action--the private
right of action. I am startled to hear that in Ms. Huizer's
testimony that more than 60 million workers are subjected to
these agreements, shutting off rights to be able to seek
justice in court.
General, you speak of this issue in your testimony. Just
how has the growth of these waivers in employment contracts
affected the ability of Illinois workers to seek their promised
wages?
Mr. Raoul. Yeah. So Fair Labor Standards, that contemplates
both public enforcement as well as private right of action, and
the balance of which, you know, can have impact on what the
burden is on public enforcers like myself and my office, and
like the Department of Labor, and like State Departments of
Labor.
We saw, from a 2018 study, where in 1992 there was
approximately 2 percent of workers subject to these mandatory
arbitrations, and that it has now grown to, as reflected, close
to 60 percent.
And so what that means is it chokes off the----
Ms. DeLauro. Private right.
Mr. Raoul [continuing]. The private right of action, and
then, if we are not appropriately resourcing the U.S.
Department of Labor and, in our case, the State Department of
Labor--and I testified before our state appropriations
committee just a couple of weeks ago, asking for more resources
to get investigators and lawyers in my office, we are thereby
overburdened and unable.
And if I could touch on the conversation around
misclassification and intentional bad actors and unintentional
bad actors, you know, the reason I mentioned before that I
introduced legislation to enhance the capacity of the Attorney
General's Office, it is not to supplant the authority of the
Department of Labor but it is to go after egregious actors,
egregious to the level where it is clearly not unintentional.
And we have heard complaints, not just from employees but
from contractors who are left at an unfair competition in
bidding wars. You know, if it is a public works project, for
example, they rely on the fact that they--bad actors are
relying on the fact that they are misclassifying workers to be
able to bid lower on public works projects.
Ms. DeLauro. Thank you. I just have a question about--we
have, today, a situation, the growth of what is called the
fissured workplace in our economy. Core business activities are
outsourced or contracted out. Staffing agency conducting HR
functions, housekeeping firms cleaning hotels, contractors for
manual labor in distribution centers.
The firms often turn to their own subcontractors to hire
workers at a specific location or to perform other supporting
functions. When wage theft occurs, who is responsible? How do
we get businesses to make sure their contractors and
franchisees are compliant with the law?
Mr. Katz, you mentioned your concern that changes in
interpretation of joint employer liability would harm your
clients. Do you have anything to add to that point?
Ms. Huizar, complicated contracting relationships are out
there between workers and the businesses in today's economy.
How can strategic enforcement on the Federal and State levels
deter the behavior?
Mr. Katz.
Mr. Katz. Thank you. An example that I think I mentioned
earlier in my testimony is a group of--let me say this. If we
took a walk down K Street in the District of Columbia and
observed some of the construction sites in the booming
construction industry in D.C., we would see the banners of the
large general contractors and the other large contractors, you
know, hanging from, you know, the building that is being
constructed.
However, large numbers of the individuals who are pulling
the electrical wires, who are pouring the concrete, who are
hanging the drywall, work for either labor brokers or highly
undercapitalized subcontractors. And so that if you have,
within that industry, essentially business entities that are
able to control the workplace, yet able to structure the
workforce so as to attempt to avoid liability, many individuals
who are not paid, even though it is the general contractors who
are benefitting from the labor of those individuals.
If the Department of Labor moves backwards and eliminates
the ability of the individuals who are doing the work to try to
seek unpaid wages from the general contractors who are
benefitting from the labor, in reference, again, to the
proposed change in joint employment, then essentially those
individuals will be out of luck.
If I can mention one more example, we represented a group
of five women who were employed by essentially a fly-by-night
cleaning outfit to work at a hotel in Georgetown, and they
worked 11:00 at night to 6:00 in the morning, vacuuming the
hallways, cleaning the bathrooms. Every single operation they
did was a direct instruction of the hotel itself--this is how
you vacuum the hallway, this is how you clean the bathrooms.
However, when that fly-by-night subcontractor didn't pay
them for four weeks and disappeared, the position of the hotel
was, ``We didn't hire these people.'' So we now have what has
been referred to a fissured workplace, where despite the fact
that these individuals worked in the hotel, wore the uniform of
that hotel, and were under the supervision of cleaning
supervisors, janitorial supervisors in that hotel, the hotel
still attempted to disclaim responsibility for those unpaid
wages.
Ms. DeLauro. I am going to--and I checked with the ranking
member--Mr. Huizar, just about how can the issue of strategic
enforcement bear on this instance?
Ms. Huizar. Yeah. So I think it is important too, to
recognize that the fissured workplace is not a new phenomenon.
I think the garment industry is a great example of how this has
been around for a very long time. We have layers and layers of
contractors and subcontractors. But it has become an issue
where companies are using the fissured workplace to shed
liability, to be able to essentially turn a blind eye to
violations in their own supply chairs in their industries.
And so through strategic enforcement we can apply some of
the lessons of the past in dealing with industries like the
garment industry, and also some of the research that has been
developed in recent years. And some of the things that have
been done, have proven successful are prioritizing cases and
looking for the lead companies in an industry, the people and
the companies that truly exercise influence and power over
conditions of work, down the chain and across the industry.
So if you focus on those you can bring them to the table,
if they care about their brand name and their reputation, and
you can work with them to fix some of the issues voluntarily.
You can also use a joint employer kind of strategy to hold
accountable more than one employer, when the reality is that
multiple companies are responsible for violations.
When it comes to penalties, we have damages and fines that
can be used, but we have research telling us that we can be
very careful and strategic about where we use those fines and
penalties.
Ms. DeLauro. Thank you.
Congressman Cole.
Mr. Cole. Thank you very much. I want to go back to this
issue of the joint employer, and I will start with you, Mr.
DeCamp, because usually when I come across it it is in the
context somewhat different than you discussed, Mr. Katz, which
is big national or international corporations that are
basically operating franchisee systems. And, you know, they
come in and they say, ``Look, we don't hire the workers. We
don't have somebody there supervising them. We are not doing.''
What we have done is create a structure that has allowed,
particularly in these communities--and I know a lot of these
people in my area. In small towns, this actually becomes the
way up for a lot of people to actually become very successful.
These can be very lucrative, but the people that pursue them
are usually working 80 hours a week. They have had to amass
capital. They are the classic small businessman but with the
structure around them now to support them.
And while I certainly would agree with Mr. Katz--and I will
give you a chance to respond as well--you know, on some of the
egregious examples he mentioned, I don't want to kill a goose
that is laying golden eggs out there and giving people an
opportunity--and, frankly, sometimes creating entrepreneurs in
communities that have very, very few, and where they are
tethered in the community and they stay there and they spend
money there and they employ people there.
What is your reaction to what the Administration has done?
What, in your view, is the appropriate balance on this joint
employer issue?
Mr. DeCamp. Historically, contractors that engaged in the
kind of behavior described by Mr. Katz, if we are talking about
a general contractor that is running all aspects of everything
that happens on a work site, including directing the hiring and
firing of employees of subcontractors, and setting the wages
rates, and controlling every piece of what happens, effectively
is the employer, and that has always been the case under the
FLSA, back to the 1930s or 1940s. That has not changed.
I think what is interesting about where the law was going
for a while, recently, was that it was threatening more
traditional arrangements like franchising, like related
corporations, and trying to make people financially responsible
or making entities financially responsible where they were not
actually exercising control as an employer.
I think that the proposed joint employment regulation
restores more of a realistic approach to looking at who is
actually, with respect to the workers at issue, acting like an
employer? Who is controlling the work? Who is hiring and
firing, maintaining the records, setting the wage rates? If a
company somewhere up the chain is actually directing all that
then that is going to be an employer, or a joint employer at
least, and will be liable. And if they are not, then they
won't.
And so I think that the current proposal reflects where the
FLSA has been, historically, and I think it is a good way to
strike the proper balance.
Mr. Cole. Obviously you have a different view, Mr. Katz,
and I want to give you an opportunity to express that.
Mr. Katz. Thank you, Congressman. The concern that is what
we see in workers is not the issue of minor violations. It is
not the issue of an occasional business in which it is unclear
what is the relationship between two businesses. What we see
regularly are the situations, some of the examples I have been
describing, where the violations of the FLSA are very clear and
where--in situations where the employer, the business that
controls the work situation is consciously taking advantage,
essentially using another entity in order to attempt to avoid
liability for wages that are owed, for taxes that are owed.
I would also say the situations that I am describing, if we
are, you know, addressing fairness that some of my colleagues
mentioned, it is not only unfair to the workers who, you know,
I have described in these instances, it is also unfair to the
other contractors, to other businesses that are trying to play
by the rules, who are trying to follow the law who, as one of
my colleagues says, end up being underbid on a contract
essentially because they are trying to play by the rules.
Mr. Cole. Thank you very much. There is actually not that
much difference, if I understand both of you, I mean, your
respective positions in some ways, and it gets down to this
difficult area of legal ambiguity that you mentioned, and
obviously just the determination of the appropriate facts on
this issue.
Let me ask this one quickly, and I will try to ask it
across all of you. You know, we all know that we have different
minimum wages, by states, in many cases, above the Federal
floor, which, by the way, makes it very difficult to legislate
federally. It is sort of--we would be better off with a one-
size-fits-all, or allowing state and locality, because of cost
of living, to take different things into different
consideration.
So I would like your view on that. What should we be doing,
going forward, on minimum wage, at the Federal level? And we
will just start with you, Mr. Katz, and go down the line, if I
can.
Mr. Katz. I would say that a significant increase in the
Federal minimum wage would help address, number one, any
ambiguities that may exist between states, or even within
states in which there are different minimum wages. I would say
that increasing the Federal minimum wage would help lift up the
living standards of all of those who are working for a living
and who are covered by the Fair Labor Standards Act, and that
where we lift up the minimum wage we are lifting up the living
standards of working people.
Mr. Cole. Thank you. Mr. DeCamp.
Mr. DeCamp. I think we need to be very careful about
increases to the minimum wage in areas where the wage levels
are low, where the economies have different price levels and
wage norms. What might work perfectly fine in San Francisco and
New York does not work in rural Alabama. We have to look at
making sure that we are not killing jobs. Now modest increases
don't seem to have a significant effect on job. Significant
increases do.
And we are already seeing this is in the restaurant
industry. If you increase the minimum wage too steeply it
incentivizes automation and the destruction of jobs, and we
need to be careful not to make it cheaper for businesses to not
hire workers than to hire workers, because the true minimum
wage is zero. If you don't have a job then the minimum wage is
simply a barrier to entry. It doesn't protect you. It keeps you
down.
Mr. Cole. I will----
Ms. DeLauro. Go ahead.
Mr. Cole. Well, is that okay? Finish up?
Ms. DeLauro. Yeah. Go ahead.
Mr. Cole. Thank you. General.
Mr. Raoul. Yeah. Sir, I certainly echo the sentiments of
Mr. Katz that it is important to lift the minimum wage on a
Federal level to make sure that we are maintain the capacity
for workers to lift, you know. And I recognize what you pointed
out, Congressman, that in different regions there are different
costs of living, but the reality is that we, in this country,
have not maintained lifting the minimum wage with the increase
of cost of living throughout the country.
Mr. Cole. Thank you. Ms. Huizar.
Ms. Huizar. Thank you. So I think NELP Is a big supporter
of raising the minimum wage, and nationally we know that more
than 40 percent of workers are earning under $15 an hour. We
also know that most workers, especially if they have children,
anywhere in the country, cannot afford their basic necessities
earning under $15 an hour, at this point.
So we are supporters of the Raise the Wage Act and a
careful phase-in of a $15 minimum wage federally, and I would
also say tying that issue to wage theft and the enormity of the
problem, I think that in some ways making workers less
vulnerable financially could go a long way in helping workers
come forward and protect their rights. I think currently
workers have almost nothing in savings, they are living
paycheck to paycheck, can barely afford to live week to week,
and I think if we lift more workers out of those circumstances,
empower them to invest time into protecting their rights I
think that we can also make a difference when it comes to wage
theft.
Mr. Cole. Thank you. Thank you for your indulgence on the
time, Madam Chair.
Ms. DeLauro. Congresswoman Frankel.
Ms. Frankel. Thank you very much. Well, let me just add
that there is something wrong with somebody working all day and
then not being able to pay for their necessities because they
are not getting paid a fair wage. And thank you all again for
being here.
Listening to this, it seems quite obvious to me that one of
the reasons that women earn 80 cents on a dollar that a man
earns, and actually much less for women of color, part of it is
because of the wage theft problem. I saw that NELP--I don't
know if it was in your testimony or something I read, that 30
percent of women experience a minimum wage violation compared
to 20 percent of men. Is there a reason for that?
Ms. Huizar. So I think--oh, if I may--I think part of the
reason is that there are more women in the low-wage workforce.
They are overrepresented nationally and so they are more
vulnerable.
Ms. Frankel. So, and I think there is another sort of side
effect, a bad side effect, is the exploitation in some of these
service jobs, like the massage industry and the nail industry,
where there is a real exploitation of women, sometimes
immigrant women and undocumented women, women who don't speak
English. My question is if there was more of an enforcement by
the Department of Labor, just on the wage issue, whether or not
there would be more detection of this exploitation.
Mr. DeCamp. If I could address that, the Department of
Labor has actually, from time to time, partnered with criminal
law enforcement agencies, human trafficking task forces, and
others, State and Federal, to address that kind of concern,
recognizing that sometimes it is about more than just the
wages. There may be other things going on with these workers.
And those kinds of partnerships can be very helpful in
protecting low-wage works.
Ms. Frankel. Thank you. Okay. Thank you for that.
Can you--somebody explain to me--you talked about how--we
sort of talked about mandatory arbitration and poaching limits
enforcement. But could someone just explain to me why that is,
how that works?
Mr. Raoul. Well, from my standpoint as a state public
enforcer, as I mentioned before, FLSA contemplates both a
private right of action as well as public enforcement, and we
have all been talking about, both at the Federal and State
level, limited resources----
Ms. Frankel. Excuse me. Not to interrupt you but I am,
obviously.
Mr. Raoul. That is all right. [Laughter.]
Ms. Frankel. But let's start with arbitration. The employer
and the employee goes to arbitrate. Is there something that is
preventing an enforcement? What is it that is preventing the
enforcement?
Mr. DeCamp. If I could speak to that, it doesn't prevent
public enforcement. It doesn't prevent a State or Federal
agency from taking a matter and commencing an investigation.
What it prevents is private litigation by the client.
Ms. Frankel. Oh, I see. So are you saying that the employee
is at a disadvantage?
Mr. Raoul. What I was trying to say is if you look at the
universe of enforcement, we don't get to all of the cases, not
nearly all of the cases we experience in Illinois. So if we
choke off one route of enforcement, that creates a greater
burden on public enforcement, whereas if you have that private
right of enforcement, you know----
Ms. Frankel. Got it. And what is the poaching?
Ms. Huizar. If I could maybe get to that as well, I think
for both mandatory agreements and for poaching it boils down to
a worker's ability and incentive to come forward. I think with
mandatory agreements if a worker knows that the arbitrator is
going to be paid by the employer and they won't be able to
appeal their case in any significant way they really have no
incentive to come forward.
When it comes to poaching agreements, I think we are seeing
more----
Ms. Frankel. What does that mean? I am sorry to be ignorant
about that, but----
Ms. Huizar. In most cases, and especially, I think, in the
low-wage industries, we are seeing that employers are basically
coming to agreements with their competitors, where they say,
``You are not going to hire my workers if I fire them or if
they leave.''
Ms. Frankel. Oh.
Ms. Huizar. And so in many ways--that is one way in which
these no-poaching agreements work. And I think it all ties into
the issue of retaliation as well, because if an employee leaves
their job or protests, with a no-poaching agreement not only
are they losing their job but they are losing their ability to
secure a new job, or it is going to be a much harder situation
for them.
Ms. Frankel. Madam Chair, may I just ask one more question?
Ms. DeLauro. Go ahead.
Ms. Frankel. I am going to ask a question for Mrs. Bustos.
Anyway, no. There was a comment early on about an FLSA
proposal, which--maybe it was Mr. Katz who made a mention of an
FLSA proposal that you were against. Do you remember that?
Mr. Katz. Yes.
Ms. DeLauro. Joint employer.
Ms. Frankel. Yeah. Could you just explain what--how that
impacts all this?
Mr. Katz. Yes. That was in reference to a proposal, I
believe it was issued by the Department of Labor last week,
which would cut back on the entities that would be considered
joint employers under the Fair Labor Standards Act. Basically
the DOL has proposed a regulation which would have a four-part
test which would essentially move us back a full generation,
you know, failing to recognize sort of what is the structure of
the present workplace, failing to recognize, you know, the
widespread use of outsourcing subcontractors, et cetera, so
that the business entities that are controlling the workplaces
can attempt to avoid liability for unpaid wages within the
workplace that they control.
The DOL regulation would essentially cut off any
possibility that large numbers of low-wage workers would be
able to get any type of remedy.
Ms. Frankel. Thank you.
Ms. DeLauro. Congressman Harris.
Mr. Harris. Thank you very much, and let me follow up on
that with you, Mr. DeCamp, because in your testimony you say
that, you know, the department's recent joint employment
regulatory proposals are fair, sensible, even-handed
approaches. And I know I had a lot of complaints with the last
administration joint employer proposal, a lot of complaints
from small businesses, especially franchise owners, in my
district.
So could you explain why you feel they are a fair,
sensible, and even-handed approach?
Mr. DeCamp. I think that where the department is going now
is consistent with where the FLSA has been historically. I
think that, historically, when Congress passed the FLSA, and
for decades since, it was clear that certain types of business
arrangements did not constitute joint employment, things like
traditional franchising, things like traditional bona fide
contracting and subcontracting relationships where somebody up
the chain is not actually directing the work and controlling
the employment. That, traditionally, was not seen as giving
rise to a joint employment situation.
I think during the last administration the waters got
muddied a bit and there were some aggressive attempts to use
the concept of fissured workplace as a way to assign broader
responsibility to other individuals and other entities who
historically would not have been regarded as employers. And we
saw some case law start to develop going down that road.
And I think that what the current DOL proposal does is to
walk back perhaps the last five years of the most out-there
case law. The department already, at the start of the
Administration, withdrew some of the department's informal
guidance that came out on some of these issues and this joint
employment regulation follows through with that, restoring the
notion of who is and is not an employer. It is not going to
answer every single question with clarity, but I think it does
reset the balance in a way that is very much in line with what
Congress intended when it passed the law and the way it was
enforced and understood for more than 70 years.
Mr. Harris. Okay. And, Mr. Katz, do you think that my
franchisees have a point about the problems with the joint
employer guidance of the last administration? It would have
made, you know, McDonald's, for instance, responsible for their
franchisees' employees.
Mr. Katz. I would need to have more specific information,
specific facts in any situation about who would be responsible.
What I would say is the following, that the problem that the
Administration, you know, was trying to address, in the joint
employment and the guidance that was issued in 2015, directly
addressed a critical problem that we see in this economy, which
is that businesses that essentially own and control the
workplace are structuring the workplace so as to attempt to
avoid responsibility for violations of the law in the workplace
that they own and control.
Mr. Harris. Okay. So, yeah. So, I mean, obviously,
McDonald's doesn't control the workplace of its franchisees, so
we are probably in agreement on that, I guess.
Mr. DeCamp, there is--you know, problems arise with the
tipped worker. Could you go through where the problems arise
with determination of whether tipped workers are being--you
know, are being paid legally, under the law?
Mr. DeCamp. That problem goes back to the 1960s, when the
FLSA first applied to restaurant employees and hospitality. It
has been confusing everybody since, because there have been
numerous Department of Labor regulations and subregulatory
pronouncement the courts have held to be inconsistent with the
statute. There is ongoing litigation about who is and is not a
tipped employee, what hours of work a tipped employee can get
paid a tip credit wage as opposed to full minimum wage. That is
ongoing and in dispute. The Department of Labor has changed
position on some of these issues over time. There has been
recent statutory amendment to address part of these issues.
And so that is a real challenge for restaurants, even
knowing what they are supposed to do. How do I pay my people? I
mean, a restaurant is not a complicated business situation, for
the most part. People work in a building, by and large, and
there are vertical relationships within that structure. It
should not be difficult. It should not require levels and
levels of Federal litigation and regulation to try to
understand, does this person get $2.13 an hour or more, under
State law, or does this person have to get full State and
Federal minimum wage for this particular work or for their
entire work? It has been maddening.
Mr. Harris. So you think the current law is just ambiguous,
I mean, it creates gray zones?
Mr. DeCamp. I think the statute is clear enough. I think
that the subregulatory pronouncements and the regulations have
been ambiguous to the point of disaster.
Mr. Harris. Okay. Thank you very much. I yield back, Madam
Chair.
Ms. DeLauro. Just a point of clarification. It is my
understanding, and for my colleague, as well, Mr. Katz, it
would appear that McDonald's controls how franchisees fry the
fries, what uniforms they wear, how they set up the store, and
there are many, many employment practices that they dictate to
their franchisees.
With that, if I can, in 2009, the survey that NELP did
found that workers who made a complaint to their employer,
there was a stunning 43 percent experienced one or more forms
of illegal retaliation. Easy to imagine how this might have a
chilling effect in the workplace, keep many victims of wage
theft silent, hindering the efforts of enforcement agencies to
learn about many violations.
Mr. Katz, can you discuss some examples of retaliation you
have seen by employers and supervisors on workers? Can you walk
us through the kinds of experiences that workers may live
through when they stay silent? And, Ms. Huizar, you have talked
about employer retaliation in your testimony, how this
challenge affects the efforts of the Wage and Hour Division,
State labor departments, and State attorneys general to crack
down on violating employers.
Mr. Katz.
Mr. Katz. Thank you, Congresswoman DeLauro.
A couple of points. Number one, when people stay silent
about wage theft because they are intimidated, they justifiably
fear retaliation, the results are fairly straightforward. They
don't get paid the wages they law requires them to be paid.
They live in poverty. They can't afford what they should be
putting on the table or, you know, for their kids. They can't
get their kids medical care. And it essentially keeps people in
poverty.
And we are talking about individuals who, in response, are
often working two and three jobs. So that when people are not
paid the wage they should be paid, and when, for various
reasons, including the potential for retaliation, keep them
silent, then it means that they and, by extension, oftentimes,
the community they live in, are in poverty.
I can think of one specific incidence of retaliation which
had such widespread effects. There were immigrant laborers who
were working on a public construction site in Washington, D.C.,
who should have been paid prevailing wage. Literally the day
before that worksite was going to be subject to an
investigation by the Wage and Hour Division, the employer went
around the worksite handing out little slips of paper that had
the figure $38 on it. And the individuals asked, ``What is
that?'' and the employer said, ``That is the wage I want you to
tell the investigators that you are earning,'' even though
these individuals were earning between $18 and $20 an hour.
They were being paid less than they should have been paid.
So the employer had them essentially lie to Wage and Hour
investigators, and then the laborers protested this and sought
advice from a workers' rights clinic, the individual who first
sought advice was fired. Not only was he fired, the employer
called him up and said, ``Don't talk to anybody about this. We
know where your family lives. And if you give us any more
problems we are going to make sure you and your family are
deported.''
Okay. So that individual literally had to move away from
his family in order to attempt to, you know, seek a remedy for
the unpaid wages. The employer let it be known that that was
the employer's position, and a number of the other employees on
that worksite, who had originally sought legal assistance, you
know, to remedy these unpaid wages, then sort of withdrew their
complaints and did not pursue their unpaid wages.
Ms. DeLauro. Ms. Huizar, and then I will get you.
Ms. Huizar. Yes. Thank you.
I think when it comes to the issue of retaliation it is
important to recognize that it is a sort of foundational issue
when it comes to wage theft, because if workers cannot come
forward in a system that depends on them to bring complaints
and that depends on them to collaborate with investigators, we
can't hope to actually enforce the law or to make our minimum
wage a reality for workers.
We also know--and I think as Mr. Katz's stories, accounts
tell us--retaliation can be incredibly subtle, it can come in
different forms, and what agencies at the State, local, and
Federal level need to do is recognize that it stands as a
barrier to everything else that they are doing, and they must
not only fast-track complaints that come in alleging
retaliation but they must also proactively look for retaliation
in cases, hold employers accountable with harsh penalties, in
order to put them on notice that this is not going to be
tolerated conduct and that it cannot possibly shape employees'
decisions whether or not to come forward.
And I will also just say, on the joint employer issue, if I
may, I think going back to that for a second, it is a standard
that has been around for decades, and I think a key thing to
remember is that the Fair Labor Standards Act uses the term
``suffer or permit to work'' in order to figure out who is an
employer, and that is markedly different from the common law.
It is a standard that has been developed mostly in the
subcontracting and contracting context, and it is only
recently, with sort of an outlier case in the McDonald's sort
of franchise context, that the standard has become as
controversial as it has been. But we have decades of case law
and precedent showing us that it is a crucial or necessary
standard and that we are capable, both as enforcement agencies,
lawyers, advocates in employing it adequately.
Ms. DeLauro. I am going to allow Mr. DeCamp to respond.
Mr. DeCamp. Just very quickly. Thank you, Madam Chairwoman.
Ms. DeLauro. Sure.
Mr. DeCamp. I am not familiar with the specific
circumstances that Mr. Katz described with regard to
retaliation, but assuming those facts to be true, an employer
that did those things would seem to be guilty of multiple
Federal felonies. And so I think there are already existing
robust remedies to deal with an employer that directs employees
not to speak with Federal investigators or to lie to Federal
investigators in the course of a Federal investigation or to
threaten deportation in that process. There is already a
structure to deal with that.
Ms. DeLauro. I understand that and I appreciate the comment
very, very much. But when you are someone who is fearful of
your livelihood, when you are fearful that you and your family
may be deported, it doesn't make any difference, and that you
don't know what is on the books and what your rights are. You
just know that if you keep your mouth shut you are going to be
all right, and if you don't, you and your family are going to
suffer. So that is a reality that we know today. Thank you.
Congressman Cole.
Mr. Cole. Thank you very much, Madam Chair. I am going to
give all of you a rare privilege. I am going to let you--I had
the good fortune to sit where my friend, the chair, sits now,
and she is going to have to mark up a bill pretty soon, and she
is going to have a lot of difficult tradeoffs. We are not going
to make you make any of the tradeoffs.
But it is interesting to me, as I look at this, the
administration has actually requested a very modest increase in
funding here. I would suspect that at least a number of you
would propose more. And we spend about $228-, $229,000,000 a
year now, and they are asking for a $4,000,000 increase.
You know, if you wanted to take a ballpark figure, what
would be appropriate? Because we all agree this is an important
area of enforcement. You have all agreed that this is an area
where more money would be a good thing. So, you know, if you
had to make the decision that my poor friend has to make, what
would you recommend?
Mr. Katz. For the amount of money for enforcement?
Mr. Cole. No. Just the overall budget. And I say that
because, look, our allocation, probably, for this subcommittee,
will be higher than the Administration has requested. So there
will be extra money available. The problem here is always the
competing priorities you have over a vast jurisdiction. I mean,
this is $228,000,000 piece of a $180,000,000,000-plus budget,
so it is not a big item here.
So the real thing is, what would be enough to make a
difference, to do the good that you all say can be done here? I
am just curious. How would you ballpark this? How would you
size this? And, frankly, you know, when you make these
considerations, I can tell you, having been a chairman, you are
sometimes thinking multiple years too, because you recognize
you can give them more than they can spend or staff up to, so
sometimes you lay out a path going forward. My friend and I
have done that at the NIH and other agencies before.
So I am just curious what your professional opinion is.
What would be right-sizing this department, if you will, or
division?
Mr. Katz. I must admit, Congressman, I sort of do not have
enough understanding of the broad parts of the budgetary
process. The one point I think I would offer is that we have
heard that the number of Wage and Hour investigators in the
Wage and Hour Division is the same as existed in 1948, and our
workforce is approximately seven times larger now. So I would
propose a budget that essentially says we need as many
investigators now as we had in 1948, so let's take the budget
specifically for those investigators and multiply it by seven.
Mr. Cole. Mr. DeCamp.
Mr. DeCamp. I wouldn't go quite that far, but I would
suggest that increasing the number of investigators by about 25
or 30 percent over a five- or six-year period would be
appropriate and in line with where the agency has been
historically. It is important not to grow too fast, too soon,
or else you risk quality control, in terms of intake and
training. But graduated increases in staffing levels would be
appropriate and beneficial.
Mr. Cole. Thank you. General Raoul.
Mr. Raoul. Congressman, I honestly have to sort of punt on
this.
Mr. Cole. That is fair enough. It is a very unfair
question.
Mr. Raoul. You know, all I can say is that the U.S.
Department of Labor has been an important partner to us at the
State level, and just appropriately resourcing it could be
helpful to us, in terms of State and Federal.
Ms. Huizar. Thank you. I do think we have a long way to go
before we are back at 1948 levels, and, you know, barring being
able to invest seven times more into the budget I think 25
percent of an increase to the Wage and Hour Division's budget
over two years would go a long way to helping the agency do the
most that it can with the resources that it has.
Mr. Cole. These are tricky questions because, I will tell
you, you know, we do not need an army seven times bigger than
it was in 1948. There are lots of tools, lots of other things
that you have to factor in here. But it is just one of the
tough things that you can see. But we clearly have a consensus
that there is a need for an increase here, and you even have it
from the Administration at some level. So that is helpful, I
think, for all of us to know as we make tough decisions.
I don't have anything else. I will yield back, Madam Chair.
Ms. DeLauro. Congressman Harris.
Mr. Harris. Thanks. Just very briefly, just to follow up on
that, you know, my understanding is, you know, 29 states and
the District of Columbia have a higher minimum wage than the
U.S. If a state enacts a higher minimum wage, why shouldn't it
assume more responsibility for policing that minimum wage? I
mean, you all come here and say, ``Well, you know, the Federal
Government should be policing it,'' but, in fact, states, and
Attorney General Raoul, I am pretty sure Illinois has a higher
minimum wage--Maryland has a higher minimum wage. When the
legislature takes that action, why doesn't it preempt the
Federal Government from actually enforcing that higher minimum
wage? Because you mentioned, you know, we partner with you,
but, in fact, you know, if a state is going to say, ``Look, we
want to be avant garde here. We want to be ahead of everyone
else,'' why shouldn't more of the enforcement fall on the
state? And I am interested on minimum wage. Obviously there are
other things the Wage and Hour Division does.
Mr. Raoul. Certainly. I don't dispute you on that, and as I
indicated in my opening remarks that there are a few state
attorneys general who are actually active in this space at all.
So to the extent that we are active, and I have asked of my
State legislature appropriations to allow me to at least have
an investigator, and a few more attorneys to do just that. But
other states, who may have minimum wages that may mirror the
Federal minimum wage, may not even have an active attorney
general in this space whatsoever. So I don't dispute you.
Mr. Harris. And I think that would be appropriate. I mean,
if you are not going to say that we are going to pay a higher
minimum wage, then the Federal Government should be enforcing
the minimum wage in that state, but it just--again, it is just
puzzling to me. And I am glad you are quite honest about it,
you know, that the state should undertake some of the
responsibility.
Mr. Raoul. I would say, Congressman, the example that I
gave in my opening remarks involved a Chinese-style buffet
restaurant that was paying less than the Federal minimum wage,
and that was a state-enforced action.
Mr. Harris. Good for you. Thank you very much. I yield
back, Madam Chair.
Ms. DeLauro. Thank you. Just a point to my colleague, and
one specific to minimum wage. But Georgia, Alabama, Florida,
Louisiana, and Mississippi, there is no state-level
enforcement, claims, whether it is wage theft, need to be filed
directly with the U.S. Department of Labor. So there are a
number of states who do not have this capacity that Illinois
has had.
Mr. Harris. If the chair would just yield, but do they have
a higher minimum wage than the Federal Government?
Ms. DeLauro. That is not something I know, but I think that
we have places where there is little----
Mr. Harris. Again, you know----
Ms. DeLauro. I tend to look at----
Mr. Harris. You know my point on this.
Ms. DeLauro [continuing]. No, yeah, I do know your point.
Mr. Harris. Having served on a legislature, you know, if we
are going to raise the minimum wage we should actually take
some responsibility for enforcing it.
Ms. DeLauro. Always. Let's do it. Let's go to $15 an hour
and take the responsibility.
Congressman Cole, just wrapping it up.
Mr. Cole. I don't want any remarks I made to be confused
with agreeing to that particular proposal.
But I want to sincerely thank the chair for this hearing.
It has been, I think, a very, very good hearing. And I want to
thank each and every one of you. I found your testimony, you
know, really educational to me, as a legislator. I found the
interchange good. And when you leave this place please go tell
other people that we don't always fight up here, that we
actually do occasionally look for common solutions, and this is
an area where we clearly need to do a little bit better than we
have been doing. You all agree on that. And, as I said, even
the Administration, at some level, thinks so as well.
So I think this has been, Madam Chair, very helpful to all
of us, to sort of sit down and think through some of these
issues, and I thank you very, very much for taking your time,
providing your expertise and your perspectives to the
subcommittee.
Thank you, Madam Chair.
Ms. DeLauro. Thank you very, very much, and thank you again
to our panelists. This has been a very unbelievably rich
hearing, rich in the information, and also the bi-play and
different points of view, which, in some instances, are maybe
not as far apart as sometimes even, you know, political people
would like to make them, but they are not.
I think there was overall a basic--there is a magnitude,
that the problem is widespread. It is nationwide. And whether
or not, in my views, what I said in my opening remarks, we need
to call it what it is when we are looking at infringement of
the act, and to be able to address that.
But also I think that--and I would mention that because the
increases that you talk about, or the way that we can deal with
this--in this budget we are looking at, you know, a $3,500,000,
$3,600,000--$3,800,000 increase, most of which has been
relegated to information technology. And, you know, it would
seem that that is not where the gaps are at Wage and Hour, that
there are much more serious gaps that we can address from this
subcommittee.
And I would talk about--and I want to place into the
record--with unanimous consent I ask for placing into the
record the piece by the former Wage and Hour Division Director,
``Creating a Strategic Enforcement Approach to Address Wage
Theft: One Academic's Journey in Organizational Change.''
I think that this is a document that can provide and help
us with a roadmap of how we go about looking at a place where
we can't provide all of the resources that the agency needs of
all of a sudden, or, you know, but how you do deal with a
creative way in which to address an issue that has an
unbelievable impact on the lives of workers today, millions of
workers today, whether or not they are fearful of the
retaliation or whether or not they are willing to speak up, and
look for a way to be made whole.
We have always said, in this country, we want to pay people
a fair day's work--a fair wage for a fair day's work. That is
what the premise is underlying here. That is what the law
states.
So that you have been enormously helpful in shining a light
at ways in which we might address the issue. And I would just
ask--I know we are asking a lot--if there are ways, other than
in your testimony--and we will scour the testimony for looking
at recommendations--but if there are other recommendations that
you can make to us, as we are putting this piece of legislation
together, not unlike what the ranking member asked in terms of
where increases are. There are other areas, please get that to
us so that we can help Wage and Hour, but we can help the
workers, which they are there to protect.
Thank you very, very much, and the hearing is closed. Thank
you.
[Material submitted for inclusion in the record follows:]
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