DEPARTMENT OF HEALTH AND HUMAN SERVICES FISCAL YEAR 2003 BUDGET
PRIORITIES
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, DC, FEBRUARY 28, 2002
__________
Serial No. 107-25
__________
Printed for the use of the Committee on the Budget
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COMMITTEE ON THE BUDGET
JIM NUSSLE, Iowa, Chairman
JOHN E. SUNUNU, New Hampshire JOHN M. SPRATT, Jr., South
Vice Chairman Carolina,
PETER HOEKSTRA, Michigan Ranking Minority Member
Vice Chairman JIM McDERMOTT, Washington
CHARLES F. BASS, New Hampshire BENNIE G. THOMPSON, Mississippi
GIL GUTKNECHT, Minnesota KEN BENTSEN, Texas
VAN HILLEARY, Tennessee JIM DAVIS, Florida
MAC THORNBERRY, Texas EVA M. CLAYTON, North Carolina
JIM RYUN, Kansas DAVID E. PRICE, North Carolina
MAC COLLINS, Georgia GERALD D. KLECZKA, Wisconsin
ERNIE FLETCHER, Kentucky BOB CLEMENT, Tennessee
GARY G. MILLER, California JAMES P. MORAN, Virginia
PAT TOOMEY, Pennsylvania DARLENE HOOLEY, Oregon
WES WATKINS, Oklahoma TAMMY BALDWIN, Wisconsin
DOC HASTINGS, Washington CAROLYN McCARTHY, New York
JOHN T. DOOLITTLE, California DENNIS MOORE, Kansas
ROB PORTMAN, Ohio MICHAEL E. CAPUANO, Massachusetts
RAY LaHOOD, Illinois MICHAEL M. HONDA, California
KAY GRANGER, Texas JOSEPH M. HOEFFEL III,
EDWARD SCHROCK, Virginia Pennsylvania
JOHN CULBERSON, Texas RUSH D. HOLT, New Jersey
HENRY E. BROWN, Jr., South Carolina JIM MATHESON, Utah
ANDER CRENSHAW, Florida
ADAM PUTNAM, Florida
MARK KIRK, Illinois
Professional Staff
Rich Meade, Chief of Staff
Thomas S. Kahn, Minority Staff Director and Chief Counsel
C O N T E N T S
Page
Hearing held in Washington, DC, February 28, 2002................ 1
Statement of:
Hon. Tommy G. Thompson, Secretary, Department of Health and
Human Services............................................. 5
Tara O'Toole, M.D., M.P.H., Director, Johns Hopkins Center
for Civilian Biodefense Strategies......................... 45
Gail Wilensky, Ph.D., John M. Olin Senior Fellow, Project
HOPE....................................................... 52
Steven M. Lieberman, Executive Associate Director,
Congressional Budget Office................................ 58
Prepared statement of:
Hon. Adam H. Putnam, a Representative in Congress from the
State of Florida........................................... 4
Secretary Thompson........................................... 9
Dr. O'Toole.................................................. 47
Dr. Wilensky................................................. 54
Dan L. Crippen, Director, Congressional Budget Office........ 61
DEPARTMENT OF HEALTH AND HUMAN SERVICES BUDGET PRIORITIES FOR FISCAL
YEAR 2003
----------
THURSDAY, FEBRUARY 28, 2002
House of Representatives,
Committee on the Budget,
Washington, DC.
The committee met, pursuant to call, at 10:01 a.m. in room
210, Cannon House Office Building, Hon. Jim Nussle (chairman of
the committee) presiding.
Members present: Representatives Nussle, Hoekstra, Bass,
Gutknecht, Ryun, Collins, Fletcher, Watkins, Hastings, Granger,
Schrock, Culberson, Brown, Crenshaw, Putnam, Kirk, Spratt,
McDermott, Bentsen, Davis, Moran, Baldwin, McCarthy, Moore,
Honda, and Holt.
Chairman Nussle. Call this hearing to order.
This is the full committee hearing of the Budget Committee
of the House of Representatives, Department of Health and Human
Services budget priorities for fiscal year 2003. We have two
panels today. Our first panel is the Honorable Secretary of
Health and Human Services, Tommy Thompson. On panel two, we
have Dr. Gail Wilensky, Dr. Tara O'Toole and Dan Crippen from
the Congressional Budget Office.
We were just kibitzing a little before the hearing that
Health and Human Services and our first witness, the Secretary,
had quite a portfolio of activity when he took over last year.
Up to September 10, he probably thought that was a big job in
and of itself. Certainly, as we all know, a number of agencies
of our government, especially Health and Human Services on
September 12 picked up a number of new and growing
responsibilities. As we talk about the budget and meet today,
we meet within that context.
The purpose of this hearing is certainly as the lead agency
for addressing bioterrorism, the Department of Health and Human
Services plays a crucial role in enhancing homeland security.
How the President's budget addresses this issue obviously will
be a major focus of this hearing.
In addition, members of this committee I know will want to
use this opportunity to examine a number of issues, everything
from research to welfare reform. There is probably nobody in
the government at any level that has a more stellar track
record of success than Secretary Thompson when it comes to
welfare reform. Certainly we meet in the context of the
President's new initiative in that regard.
Also at issue is access to health care at all levels, as
well as Medicare reform which I will report to my colleagues is
one of the disappointments I have both within the budget and
the foreseeable future. I think it is one of the biggest
challenges facing my State of Iowa, now ranked last in
reimbursements under Medicare, but not too far behind Wisconsin
when it comes to reimbursements. As we discussed last year,
this is a challenge that I hoped and still have hope Secretary
Thompson and others in the administration will tackle in the
very near and hopefully very foreseeable future.
There is no doubt that the world changed on September 11
and that the budget needs to reflect these new priorities. We
are pleased you are here today to discuss these new, growing
and expanding priorities within the President's budget request
and we look forward to your testimony.
With that, I will turn to Mr. Spratt for any comments he
wishes to make before we hear from our witnesses.
Mr. Spratt. Thank you, Mr. Chairman.
Mr. Secretary, as I said earlier, I was reminded last night
in looking over the briefing book for this hearing how big your
portfolio is. I am sure when you were vetted for this job, you
didn't even talk about bioterrorism and homeland security. It
is a whole new category of responsibility, but you bring an
experienced hand to the helm and we are glad to have you there.
You have a tough budget this year. It looks like you get
more money, but in truth, certain things get more and some
things get less. We have some new video equipment here and I
have a simple bar graph which illustrates what I am talking
about because we would like to focus on this today, who are the
winners and losers in your budget.
As you can see, you get an increase of $2.4 billion, but
when you look at it in further detail, I think the other
increases in individual programs are $5 billion, one big one
for NIH again. As a consequence, about $1.3 billion has to be
cut out of other programs in order to accommodate the
bioterrorism and NIH in your budget. From the get-go, you have
problems. You do not have enough to go around and everything
you supervise obviously deserves more support than it is
getting.
There is also a matter of concern to us concerning
Medicare, a big part of your portfolio. There is a serious
discrepancy between what you estimate the baseline cost of
Medicare to be, before any new policy has been applied. You are
assuming that the cost growth in Medicare will be about 5.7
percent annual average over the next 10 years. CBO is about 7.5
or 7.6 percent. That is a big difference compared to CBO, but
your numbers are optimistic compared to the last 10 years where
we have had growth much closer to what CBO is assuming. If you
are wrong, there is a difference here of 200 to $300 billion,
$304 billion in this bar graph. I understand you closed the gap
somewhat between you and CBO, but there is still a big
difference.
We are looking at a budget where the surplus has gone from
$5.6 trillion down to $1.6 trillion and if the Bush budget is
fully implemented, it is $.6 trillion. That $600 billion
remaining unified surplus would be cut in half if CBO is right
and you are wrong. That is why we had to be concerned about it.
There is not much forgiveness left in the budget.
There is also no provision in your budget for providing
payment adjustments even though MedPAC has recommended a series
of them. Mr. Thomas wrote you a letter about 3 weeks ago. I
would like to repeat the last paragraph because we would like
your responses to the extent you are ready to provide them.
Mr. Thomas concludes his letter about the administration's
Medicare budget and about the provisions it does not make for
provider payment adjustments as recommended by the MedPAC
Commission and he ends with these questions which he put to you
in the letter dated February 8. ``Does the administration
believe Congress should address any of the problems identified
by the MedPAC list, and he attaches the list, that comes to
$174 billion over 10 years, with respect to hospitals, home
health agencies, physicians, skilled nursing facilities and
dialysis facilities? Please identify which provider problems
you believe merit congressional action and which do not. Since
the budget calls for budget mutual payment adjustment, if we
made any of these allowances or restorations we would have to
offset them with some equal cut somewhere else. Please provide
a specific list of Medicare savings recommendations which can
finance appropriate provider payment charges.'' I would like to
lay those questions on the table and ask you to answer them to
the extent you can.
Finally, one of the biggest bones of contention and one of
the biggest debates in Congress this year and the coming years
until it is accomplished will be Medicare prescription drugs.
The administration is proposing a $190 billion plan, of which
about $77 billion would be available fairly soon for the low
income benefit, and then we would see following it the addition
of some other kind of broader based benefit for which you are
allocating about $116 billion. There is no detail provided. We
would like the detail to the extent you can provide it for what
you have in mind.
Secondly, usually when the administration makes this
recommendation with regard to prescription drugs, it does so in
the context of Medicare reform and always refers to Medicare
reform. Are the two coupled? Can we have one without the other
in the administration's view? If not, what is Medicare reform?
Broadly speaking, what do you have in mind with respect to
Medicare reform? Is it going to constitute savings that will
offset some of the gross costs so that the $190 billion is a
net number, that plus and minuses will add up to $190 billion?
We are a little puzzled as to what that proposal is and we
would like your clarification of that.
Once again, thank you for coming. We look forward to your
testimony.
Chairman Nussle. I have one announcement to make just for
the members' information. A GAO report just came out that this
committee requested. I believe it came out within the last
couple of days on Medicare provider communications and the need
for improvement. It is a document that this committee requested
based on hearings we have held in the past.
One of the statements in the report confirmed what we had
been hearing from physicians for quite some time that it is
becoming increasingly difficult for physicians and others to
participate in the Medicare Program because they are getting
inaccurate, out of date and sometimes difficult to use or just
plain incomplete information.
The House passed unanimously a bill that our colleague Mr.
McDermott, myself, and others worked on for Medicare regulatory
relief and reform that we passed unanimously in a bipartisan
way. We hope the Senate will act on that but it is in some
respect reacting to this report. That may be another thing we
could address today as well.
With that, without objection, members will have 7 days to
submit written statements for the record. Your statement in
full will be in the record and you may summarize as you see
fit. Welcome to the committee.
[Prepared statement of Mr. Putnam follows:]
Prepared Statement of Hon. Adam H. Putnam, a Representative in Congress
From the State of Florida
Thank you Mr. Chairman for giving me this opportunity and thank you
Secretary Thompson for appearing here today before the House Budget
Committee. As we continue to wage a global war on terrorism, it is
impossible to overlook the role your department has played and will
continue to play in the creation of a homeland security infrastructure.
Over the past months it has become apparent that the Department of
Health and Human Services (HHS) is vital to ensure the safety and well
being of all Americans.
State and Local governments bear much of the initial burden and
responsibility for providing an effective response by medical and
public health professionals to a terrorist attack on the civilian
population. If the disease outbreak reaches any significant magnitude,
however, local resources will be overwhelmed and the Federal Government
will be required to provide protective and responsive measures for the
affected populations. I am encouraged to know that HHS is working on a
number of fronts to assist our partners at the State and local level,
including local hospitals and medical practitioners, to deal with the
effects of biological, chemical, and other terrorist attacks.
In October 2001 Secretary Thompson testified before the House
Government Reform Subcommittee on National Security, Veterans Affairs
and International Relations. At that hearing, Civilian Preparedness for
Biological Warfare and Terrorism: HHS Readiness and Role in Vaccine
Research and Development, the Secretary described the Office of
Emergency Preparedness. Through the OEP, HHS has created several
programs that will work to protect the health of Americans in this time
of ever-present threats. I am interested to hear what Secretary
Thompson's goals are for these programs for fiscal year 2003 and how
the Budget Committee can help him realize these goals in an effort to
continue the excellent work of HHS.
At that earlier hearing on Biological Warfare Defense, we raised
the need for greater communication and coordination between HHS' Food
and Drug Administration and the U.S. Department of Agriculture's (USDA)
Food Safety Inspection Service, which hold joint jurisdiction in the
protection of our food safety. I want to strongly encourage
collaborative actions between the two agencies, particularly in the
coordination of inspection responsibilities and the sharing of
information.
I understand that efforts have begun to streamline and consolidate
inspection capabilities between FDA and FSIS. Currently, one agency's
inspectors may be present at a site and the other agency may lack the
resources to provide inspection services. Through cross-deputation of
agency inspectors, we may improve our inspection capabilities and
optimize staff resources. Similarly, disparities and overlap between
agency responsibilities to inspect food products should also be
reviewed. I wish to encourage concerted and continued efforts between
Federal and State agencies with the goal of providing more
comprehensive and efficient safeguarding of our Nation's food supply.
Thank you and I look forward to working with you toward this end.
questions
1. How will fiscal year 2003 funding levels assist you and HHS in
upgrading the surveillance, risk assessment, and response capacity of
the public health system?
2. What are HHS's priorities and what specific investments in
infrastructure to improve responses to specific priority needs are
currently being reviewed?
3. Please elaborate on the goals and funding needs you have for the
programs designed to assist in prevention and treatment should our
Nation come under a biological attack. Specifically, explain programs
such as Metropolitan Medical Response Systems (MMRS), National Disaster
Medical System (NDMS), pharmaceutical stockpiles, and vaccine
development.
4. I represent a somewhat rural district in the heart of Central
Florida. My question then is what method does HHS utilize to determine
its resource allocation levels to particular State and local health
departments and hospitals for better surveillance, prevention, and
control of microbial resistance? How can I be assured that the local
health departments and hospitals are receiving appropriate attention
even though my district is not as populated as surrounding areas?
5. In HHS's strategic plan you outline various ways to improve the
safety of food, drugs, medical devices, and biological products. What
specifically is HHS doing to expand and provide technical assistance to
the food borne diseases surveillance network (FoodNet). How is it
increasing its capacity to identify sources of food borne pathogens?
6. What is HHS doing to streamline and coordinate overlapping
inspection capabilities with the FDA?
7. What is the statutory responsibility of HHS to inspect food
operations overseas? I understand that that there are discrepancies
between USDA and FDA. Please explain.
8. Could you please explain and elaborate on the proposed
establishment of a national partnership with the Department of Defense,
the Veterans Administration, State health agencies, hospitals, and
health care organizations, to develop and disseminate information on
the best ways of preventing medical errors. What specific improvements
do you see as a result of this program?
9. In fiscal year 2000 strategic plan for HHS one of the main
objectives was to encourage the collaboration and coordination with
other Federal agencies on common issues and challenges, including:
coordination with the Social Security Administration on the Medicare
and Medicaid programs. How would you say that effort is progressing
today? What specific measures have or do you intend to implement?
10. In fiscal year 2000 there were roughly 900 annual performance
goals and many more measures and targets under those goals that were
identified as a means of directing annual efforts and determining the
progress toward strategic goals. These annual performance goals and
measures assess the processes, outputs, or outcomes and results of the
programs. Please comment on the current status of fiscal year 2003
performance goals.
11. Since this is only the fifth year of GPRA performance
reporting, indicators of program success are still evolving and issues
of availability and reliability of performance data are still being
addressed by many programs. What real changes have occurred and can you
identify any specific instances in which GPRA was the precipitating
factor?
STATEMENT OF HON. TOMMY G. THOMPSON, SECRETARY, DEPARTMENT OF
HEALTH AND HUMAN SERVICES
Secretary Thompson. Thank you, Chairman Nussle and good
morning to all the members.
Let me first thank you for the leadership of this committee
and your long-time advocacy of both fiscal responsibility and
prudent public investments.
Congressman Spratt, thank you for all you have done to
ensure the fiscal viability of our Nation's Federal budget.
I am very honored today to appear before all of you on this
committee to discuss the President's fiscal year 2003 budget
for the Department of Health and Human Services. The
President's budget is responsible, it is creative and it is
effective. I look forward to outlining it for you and some of
the key priorities that he has set for America's health care
agenda.
As you all know, since the September 11 attack, we have
dedicated many of our efforts to ensuring that the Nation is
safe. While we responded quickly to the September 11 attack on
New York City and the Pentagon, employing medical assistance
and support within hours of the attack, the task of providing
health-related assistance reminded us again that there is
always room for improvement. It is to that end that our budget
furthers the work of preparing America for bioterrorism by
calling for $4.3 billion, an increase of 45 percent over the
current fiscal year. This will support a variety of critical
activities to prevent, to identify and respond to incidents of
bioterrorism.
Of this $4.3 billion, $1.1 billion is going directly to the
States to help them strengthen their ability to respond to
bioterrorism and other public health emergencies in creating a
strong, vibrant, creative public health system. It will enable
States to begin planning and preparing their public health
systems to respond even more effectively to terrorist attacks.
We are building up our national pharmaceutical stockpile,
increasing assistance to State and local governments, and doing
more to protect America's food supply.
Our budget promotes vital scientific research, dramatically
increases funding for the National Institutes of Health, and
supports childhood development while delivering a responsible
approach for managing HHS resources. It is a budget that
touches the life of every American in a positive way.
The total HHS request, as indicated by Mr. Spratt, for
fiscal year 2003 is $489 billion in outlays. This is an
increase of almost $30 billion or 6.3 percent over the
comparable fiscal year 2002 budget. The discretionary component
of the HHS budget totals $64 billion and an increase of $2.4
billion or 3.9 percent.
Let me spend a few moments on an issue that has been a
passion of mine for many years, welfare reform. On Tuesday, I
was with President Bush when he unveiled our new welfare plan.
I know we all share the President's vision of helping even more
Americans regain hope and dignity through employment and
training. The recent past gives us great reason for realistic
optimism. Since 1996, welfare reform has exceeded expectations,
resulting in millions of Americans being moved from dependence
on AFDC to the independence of work. Nearly 7-million fewer
Americans are on welfare today than in 1996 and 2.8 million
fewer children are in poverty because of welfare reform. The
President's budget boldly takes the new step which requires us
to work closely with States to help those families that have
left welfare to climb up the career ladder and become more
secure in the work force. The foundation of welfare reform
success remains work, for work is the only way to climb out of
poverty and become independent.
The President's budget allocates $16.5 billion for block
grant funding, provides supplemental grants to address
historical disparities in welfare spending among States, and
strengthens work participation requirements. The budget
provides another $350 million in Medicaid benefits for those in
the transition from welfare to work to make sure they continue
with their health coverage. We are calling for a continued
commitment to child care, including $2.7 billion for
entitlement child care funding and $2.1 billion for
discretionary funding.
We are going to require States, however, to engage everyone
in the TANF Program and work on work preparation activities.
States will have to develop and implement self sufficiency
plans for every family and regularly review the progress each
family is making. That is not only reasonable, but also
essential to the continued movement of people from welfare to
permanent gainful employment. While the $16.5 billion
represents level funding for TANF, it provides the funds
necessary that States can spend on helping workers remain in
the work force. That is where the State flexibility comes in.
Just as we reach out to those still relying on welfare, we
also cannot ignore the roughly 40 million Americans who lack
health insurance. That is simply too many in a nation as
compassionate and well off as ours.
During the first year of the Bush administration, we have
made great strides in extending access to health care to
Americans. As part of our efforts, we have had extensive
meetings with the Nation's governors to find out how we can
best help them address the needs of their States. Working in
tandem with them and Members in Congress, here is what we are
doing.
Since January 2001, we have approved State plan amendments
and Medicaid and SCHIP waivers that have expanded the
opportunity for health coverage to 1.8 million Americans and
have improved the existing benefits for 4.5 million
individuals. In addition, we are strengthening the Nation's
community health centers which provide family oriented
preventive and primary health care to over 11 million patients
annually, regardless of their ability to pay.
Currently there are more than 3,300 community health center
sites nationwide. The 2003 budget seeks $1.5 billion to support
the President's plan to impact 1,200 communities with new or
expanded health centers by 2006. This is going to be a $114-
million increase over fiscal year 2002 and will support 170 new
and expanded health centers. Forty-seven percent of those will
be in rural areas. Also, the President has proposed providing
$89 billion in new health credits to low income individuals to
acquire health insurance.
Modernizing Medicare is another key component of our
across-the-board effort to broaden and strengthen our country's
health care system. Since becoming Secretary, I have begun to
modernize the very structure of the centers for Medicare and
Medicaid services. Mr. Chairman, I know you are deeply
concerned about the effectiveness of CMS and I share a
commitment to making sure that CMS is responsive to
beneficiaries.
We instituted a proposal when I started at HHS. It took 80
days when I came to get a response to Congress. The first half
of last year, we got it down to 32 days; the second half down
to 20 days and it is my goal, and I can assure you next year
when I come before you, we will be responding to Members of
Congress within 15 business days.
In addition, last year, I committed to reducing Medicare's
regulatory burden and bringing openness and responsiveness to
that program. We have acted on that and CMS has now initiated
open door forums so that all providers can discuss their
concerns and get a direct response. I have also asked
Administrator Scully to think innovatively about how we can
improve the way CMS does business and he is working diligently
to meet this challenge.
As our work in the area continues, I look forward to
working with you and other members of this committee to make
CMS more user friendly for everyone. These reforms are
essential to continued success of the Medicare Program which is
why the 2003 budget is such a significant step forward. It
dedicates $190 billion over 10 years for immediate targeted
improvements and comprehensive Medicare modernization,
including a subsidized prescription drug benefit, better
insurance protection and better private options for all
beneficiaries.
I know that some Members of Congress are concerned that
$190 billion over 10 years is not enough. However, while we may
not agree on the overall cost, we are committed to working with
this committee and other Members of Congress to ensure that all
Medicare recipients have access to a prescription drug benefit
as part of Medicare. I am confident that as we come together in
good faith, we will reach a fiscally responsible and effective
conclusion about where the funding should be.
This budget proposal also proposes a subsidized drug
benefit as part of a modernized Medicare but also providing
better coverage for preventive care and serious illness. We
also proposed that preventive benefits have zero co-insurance
and be excluded from the deductible.
In addition, the budget proposes several new initiatives to
improve Medicare's benefits and address costs, and offers
additional Federal assistance for comprehensive drug coverage
to low income Medicare beneficiaries up to 150 percent of
poverty, about $17,000 for a family of two. This policy helps
establish the framework necessary for a Medicare prescription
drug benefit.
Finally, Mr. Chairman, a word about how we can help rural
areas. I am from a rural area as you are. I know too well the
problems that rural areas and many communities like it face
when it comes to addressing health care. The health needs of
rural areas are as great as those in the big cities and suburbs
and I want to assure you we are working hard to meet them.
The President's budget proposed increases for community
health centers, which I noted earlier, is an example of that
commitment. Forty-seven percent of those centers serve patients
in rural communities. They reach 6 million patients across the
country.
I have also announced an HHS Rural Task Force to examine
the Department's overall resources and services for rural
communities. We will be rolling that out within the next two
weeks. I have asked them to report to me how we can better
serve rural areas.
Mr. Chairman, the budget I bring before you today contains
many different elements of a single proposal, namely to help
every American of every age and station, in every State and
territory, and on every reservation so they can receive
quality, affordable health care. All of our proposals are put
forward with the simple goal of ensuring a safe and healthy
America. I know this is a goal that we all share and with your
support, we are committed to achieving it.
I thank you again, Mr. Chairman, and I look forward to your
questions.
[The prepared statement of Secretary Thompson follows:]
Prepared Statement of Hon. Tommy G. Thompson, Secretary, Department of
Health and Human Services
Good morning Chairman Nussle, Congressman Spratt and members of the
committee. I am honored to appear before you today to discuss the
President's fiscal year 2003 budget for the Department of Health and
Human Services. I am confident that a review of the full details of our
budget will demonstrate that we are proposing a balanced and
responsible approach to ensuring a safe and healthy America.
The budget I present to you today fulfills the promises the
President has made and proposes creative and innovative solutions for
meeting the challenges that now face our Nation. Since the September 11
attacks, we have dedicated much of our efforts to ensuring that the
Nation is safe. HHS was one of the first agencies to respond to the
September 11 attacks on New York City, and began deploying medical
assistance and support within hours of the attacks. Our swift response
and the overwhelming task of providing needed health related assistance
made us even more aware that there is always room for improvement. The
fiscal year 2003 budget for the Department of Health and Human Services
builds on President Bush's commitment to ensure the health and safety
of our Nation.
The fiscal year 2003 budget places increased emphasis on protecting
our Nation's citizens and ensuring safe, reliable health care for all
Americans. The HHS budget also promotes scientific research, builds on
our success in welfare reform, and provides support for childhood
development while delivering a responsible approach for managing HHS
resources. Our budget plan confronts both the challenges of today and
tomorrow while protecting and supporting the well being of all
Americans.
Mr. Chairman, the total HHS request for fiscal year 2003 is $488.8
billion in outlays. This is an increase of $29.2 billion, or 6.3
percent over the comparable fiscal year 2002 budget. The discretionary
component of the HHS budget totals $64.0 billion in budget authority,
an increase of $2.4 billion, or 3.9 percent. Let me now discuss some of
the highlights of the HHS budget and how we hope to achieve our goals.
protecting the nation against bioterrorism
Mr. Chairman, as you know, the Department of Health and Human
Services is the lead Federal agency in countering bioterrorism. In
cooperation with the States, we are responsible for preparing for, and
responding to, the medical and public health needs of this Nation. The
fiscal year 2003 budget for HHS bioterrorism efforts is $4.3 billion,
an increase of $1.3 billion, or 45 percent, above fiscal year 2002.
This budget supports a variety of activities to prevent, identify, and
respond to incidents of bioterrorism. These activities are administered
through the Centers for Disease Control and Prevention (CDC), the
National Institutes of Health (NIH), the Office of Emergency
Preparedness (OEP), the Substance Abuse and Mental Health Services
Administration (SAMHSA), the Health Resources and Services
Administration (HRSA) and the Food and Drug Administration (FDA). The
efforts of this agency will be directed by the newly established Office
of Public Health Preparedness (OPHP).
In order to create a blanket of preparedness against bioterrorism,
the fiscal year 2003 budget provides funding to State and local
organizations to improve laboratory capacity, enhance epidemiological
expertise in the identification and control of diseases caused by
bioterrorism, provide for better electronic communication and distance
learning, and support a newly expanded focus on cooperative training
between public health agencies and local hospitals.
Funding for the Laboratory Response Network enhances a system of
over 80 public health labs specifically developed for identifying
pathogens that could be used for bioterrorism. Funding will also
support the Health Alert Network, CDC's electronic communications
system that will link local public health departments in covering at
least 90 percent of our Nations' population. Funding will be used to
support epidemiological response and outbreak control, which includes
funding for the training of public health and hospital staff. This
increased focus on local and State preparedness serves to provide
funding where it best serves the interests of the Nation.
An important part on the war against terrorism is the need to
develop vaccines and maintain a National Pharmaceutical Stockpile. The
National Pharmaceutical Stockpile is purchasing enough antibiotics to
be able to treat up to 20 million individuals in a year for exposure to
anthrax and other agents. The Department is purchasing sufficient
smallpox vaccines for all Americans. The fiscal year 2003 budget
proposes $650 million for the National Pharmaceutical Stockpile and
costs related to stockpiling of smallpox vaccines, and next-generation
anthrax vaccines currently under development.
Another important aspect of preparedness is the response capacity
of our Nations hospitals. Our fiscal year 2003 budget provides $518
million for hospital preparedness and infrastructure to enhance
biological and chemical preparedness plans focused on hospitals. The
fiscal year 2003 budget will provide funding to upgrade the capacity of
hospitals, outpatient facilities, emergency medical services systems
and poison control centers to care for victims of bioterrorism. In
addition, CDC will provide support for a series of exercises to train
public health and hospital workers to work together to treat and
control bioterrorist outbreaks.
Today, the United States has one of the world's safest food
supplies. However, since the September 11 attacks, the American people
have a heightened awareness about protecting the Nation's food imports
and food supply at home. The fiscal year 2003 budget supports a
substantial increase in the number of safety inspections for FDA-
regulated products that are imported into the country. Physical
examinations of food imports will double in fiscal year 2002 over the
previous year, and double again in fiscal year 2003. We anticipate
further progress as new staff become fully productive.
The fiscal year 2003 budget also includes $184 million to
construct, repair and secure facilities at the CDC. Priorities include
the construction of an infectious disease and bioterrorism laboratory
in Fort Collins, Colorado, and the completion of a second infectious
disease laboratory, an environmental laboratory, and a communication
and training facility in Atlanta. This funding will enable the CDC to
handle the most highly infectious and lethal pathogens, including
potential agents of bioterrorism. Within the funds requested, $12
million will be used to equip the Environmental Toxicology Lab, which
provides core lab space for testing environmental samples for chemical
terrorism. Funding will also be allocated to the ongoing maintenance of
existing laboratories and support structures.
investing in biomedical research
Advances in scientific knowledge have provided the foundation for
improvements in public health and have led to enhanced health and
quality of life for all Americans. Much of this can be attributed to
the groundbreaking work carried on by, and funded by, the National
Institutes of Health (NIH). Our fiscal year 2003 budget enhances
support for a wide array of scientific research, while emphasizing and
supporting research needed for the war against bioterrorism.
NIH is the largest and most distinguished biomedical research
organization in the world. The research that is conducted and supported
by the NIH offers the promise of breakthroughs in preventing and
treating a number of diseases and contributes to fighting the war
against bioterrorism. The fiscal year 2003 budget includes the final
installment of $3.7 billion needed to achieve the doubling of the NIH
budget. The budget includes $1.7 billion for bioterrorism research,
including genomic sequencing of dangerous pathogens, development of
zebra chip technology, development and procurement of an improved
anthrax vaccine, and laboratory and research facilities construction
and upgrades related to bioterrorism. With the commitment to
bioterrorism research comes our expectation of substantial positive
spin-offs for other diseases. Advancing knowledge in the arena of
diagnostics, therapeutics and vaccines in general should have enormous
impact on the ability to diagnose, treat, and prevent major killers-
diseases such as malaria, TB, HIV/AIDS, West Nile Fever, and influenza.
The fiscal year 2003 budget also provides $5.5 billion for research
on cancer throughout all of NIH. Currently, one of every two men and
one of every three women in the United States will develop some type of
cancer over the course of their lives. New research indicates that
cancer is actually more than 200 diseases, all of which require
different treatment protocols. Promising cancer research is leading to
major breakthroughs in treating and curing various forms of cancer. Our
budget continues to expand support for these research endeavors.
building upon the successes of welfare reform
President Bush has said that American families are the bedrock of
American society and the primary source of strength and health for both
individuals and communities. Our budget includes a number of new
initiatives that support this principle by targeting resources to
strengthen our Nation's families. We look forward to working with
Congress in considering the next phase of welfare reform and other
elements of the President's proposals to help America's low-income
families succeed.
temporary assistance for needy families
As a former Governor, I can tell you that the Temporary Assistance
for Needy Families program [TANF], has been a truly remarkable example
of a successful Federal-State partnership. States were given tremendous
flexibility to reform their welfare programs and as a result, millions
of families have been able to end their dependency on welfare and
achieve self-sufficiency.
Since 1996, welfare dependency has plummeted. As of September of
2001, the number of families receiving assistance--which represents the
welfare caseload--was 2,103,000 and the number of individuals receiving
assistance was 5,343,000. This means the welfare caseload and the
number of individuals receiving cash assistance declined 52 percent and
56 percent, respectively, since the enactment of TANF. Between January
and September of last year national caseloads actually declined about 2
percent, and while the July to September statistics indicate a slight
increase, the figures are still well below the previous year's caseload
levels. The general trend suggests the national caseloads are not
rising but, instead, have stabilized.
In New York City, where we are understandably most concerned about
job opportunities, the city has achieved more than 53,000 job
placements for welfare recipients from September through December 2001.
While the number of TANF recipients increased briefly directly because
of the tragedy on September 11, by December there were about 15,000
fewer TANF recipients on the rolls than there were in August. Indeed,
in December the city had its lowest number of persons on welfare since
1965.
Some other positive outcomes we have seen since the law's passage
include:
<bullet> Employment among single mothers has grown to unprecedented
levels.
<bullet> Child poverty rates are at their lowest level since 1978.
Overall child poverty rates declined from 20.5 percent in 1996 to 16.2
percent in 2000. The poverty rate among African American children
declined from 39.9 percent to 30.9 percent, the lowest level on record.
The poverty rate among Hispanic children declined from 40.3 percent to
28.0 percent, the largest 4-year drop on record.
<bullet> The rate of births to unwed mothers has not increased.
But even with this notable progress, much remains to be done, and
States still face many challenges. Last year, I held eight listening
sessions throughout the country to discuss the state of their TANF
systems and understand the new challenges they are facing. The States
overwhelmingly support this program. While keeping the basic structure
and purpose of the program, States, administrators, recipients,
employers, and advocates have provided valuable insight into where we
could make the program even more responsive to the needs of families.
Our reauthorization proposal embraces the needs of families by
maintaining the program's overall funding and basic structure, while
focusing increased efforts on building stronger families through work
and job advancement and adding child well-being as an overarching goal
of TANF.
Our budget proposes $16.5 billion each year for block grants to
States and tribes; $319 million a year to restore supplemental grants;
$2 billion over 5 years for a more accessible Contingency Fund; and a
$100 million a year initiative for research, demonstration and
technical assistance primarily to promote child well-being through
strengthening family formation and healthy marriages. In addition, our
proposal will call for modification of the bonus for high performance
to reward significant achievement in promoting employment of program
participants.
We maintain State flexibility, but include important changes to
improve the effectiveness of the program. We will also expect States to
engage all families they serve and help them make progress toward their
highest degree of self-sufficiency, even those cases that may appear
hard to employ. We will eliminate the separate two-parent work
participation rates and give States more flexibility in designing
productive self-sufficiency activities while ensuring that the
participation rate requirements are meaningful. We will also ask States
to set performance goals for their TANF programs and report on their
progress toward meeting these goals.
I look forward to working with Congress on reauthorization of this
hallmark program. I am confident that together we will witness even
greater achievements under the TANF program.
other programs supporting tanf goals
The President's budget also includes funding for several other
programs at the State and community level that work to support the
goals of TANF. The Job Opportunities for Low-Income Individuals program
(JOLI) provides grants to non-profit organizations to create new
employment and business opportunities for TANF recipients and other
low-income individuals. Our budget provides $5.5 million to continue
this valuable program. The Individual Development Account (IDA)
demonstration program similarly seeks to increase the economic self-
sufficiency of low-income families by testing policies that promote
savings for post-secondary education, home ownership, and micro-
enterprise development. The President's budget calls for $25 million to
support IDAs. More broadly, the Social Services Block Grant (SSBG)
provides a flexible source of funding for States to help families
achieve or maintain self-sufficiency and provide an array of social
services to vulnerable families. The President's budget request for
SSBG is $1.7 billion.
The President's budget extends the Transitional Medical Assistance
(TMA) program which provides valuable health protection for former
welfare recipients after they enter the workforce. This important
program allows families to remain eligible for Medicaid for up to 12
months after they are no longer eligible for welfare because of
earnings from their new job. TMA is an important stepping stone in
helping workers and their families successfully transfer from welfare
to work without fear of losing vital health coverage.
child care
Child Care has played an important role in the success of welfare
reform by providing parents the support they need to work. The
President's budget recognizes this critical link and maintains a high
level of commitment to childcare. Continuing the substantial increase
in funding that Congress has provided over the last several years, the
President's budget includes a total of $4.8 billion in childcare
funding in conjunction with our request to reauthorize the mandatory
and discretionary funding provided under the Child Care and Development
Block Grant and the Child Care Entitlement. States will also continue
to have significant flexibility under the TANF program and under the
Social Services Block Grant program to address the needs of their low-
income working families. These additional funding opportunities have
substantially increased the amount of resources dedicated to child care
needs. For example, in fiscal year 2000, States transferred $2.3
billion in TANF funds to the Child Care and Development Block Grant.
child support enforcement
The Child Support Enforcement program offers another vital
connection to families' ability to achieve self-sufficiency and
financial stability. The President's budget proposes to increase child
support collections and direct more of the support collected to
families transitioning from welfare. Under our proposal, the Federal
Government would share in the cost of expanded State efforts to pass
through child support collections to families receiving TANF. Pass
through payments enhance a family's potential for achieving self-
sufficiency while also creating incentives for non-custodial parents to
pay support and custodial parents to cooperate in securing support.
Similarly, States would be given the option to adopt simplified
distribution rules that ease State administration but, more
importantly, benefit families that have transitioned from welfare by
directing support otherwise retained by the State and Federal
Governments to these families.
Overall collections would be increased by expanding our successful
program for denying passports to parents owing $2,500 in past-due
support, requiring States to update support awards in TANF cases every
3 years, and authorizing States to offset certain Social Security
Administration payments when they determine such action would be
appropriate to collect unpaid support. Our child support legislative
package would also impose a minimal annual processing fee in any case
where the State has been successful in collecting support on behalf of
a family that has never received assistance.
strengthening families
The fiscal year 2003 budget contains funds for four competitive
grant programs, targeted at community and faith based organizations, to
assist in delivering innovative services, to strengthen families and
help change lives. The Compassion Capital Fund, at $100 million, will
expand the capacity of groups and organizations willing to step up and
help provide these critical social services. Twenty million dollars is
included to promote responsible fatherhood by providing competitive
grants to organizations that work to strengthen the role that fathers
play in their children's and family's lives. The budget also supports
$25 million in new authority for the mentoring children of prisoners
initiative first proposed last year. Finally, young pregnant mothers
and their children will be provided safe environments through the $10
million included for Maternity Group Homes.
promoting safe and stable families
The President's budget would increase the funding level for this
program to $505 million, fully supporting the increased authorization
included in the new law. These funds will be used to help promote and
support adoption so that children can become part of a safe and stable
family, as well as for increased preventive efforts to help families in
crisis.
This landmark legislation also authorized a new program to provide
vouchers to youth who are aging out of foster care so that they can
obtain the education and training they need to lead productive lives.
The President's budget includes $60 million for these vouchers,
bringing the total request for the Foster Care Independence Program to
$200 million.
child welfare/foster care/adoption
Our budget framework includes resources for a number of additional
programs targeted to protecting our most vulnerable and at-risk
children. Foster Care, Adoption Assistance, Adoption Incentives and
Child Welfare Services are designed to enhance the capacity of families
to raise children in a nurturing, safe environment. The President's
budget provides resources to help States provide safe and appropriate
care for children who need placement outside their homes, and to
provide funds to States to assist in providing financial and medical
assistance for adopted children with special needs who cannot be
reunited with their families, and to reward States for increasing their
number of adoptions. At the same time, the budget also supports Child
Welfare Services programs with the goal of keeping families together
when possible and in the best interest of the child.
The budget provides nearly $4.9 billion for Foster Care, $1.6
billion for Adoption Assistance, and $43 million in Adoption Incentive
funds. In addition, the President's budget seeks almost $300 million in
funding for child welfare services and training. Together, these funds
will support improvement in the healthy development, safety, and well
being of the children and youth in our Nation.
abstinence education
The President's budget proposes to reauthorize $50 million in
mandatory funding for abstinence education grants to States. These
resources complement the proposed $73 million in abstinence education
grants to community-based organizations and Adolescent Family Life's
CARE grants ($12 million). Both grant programs will continue to support
the message, through mentoring, counseling and adult supervision, that
abstinence from sexual activity is the only sure way for teens to avoid
out-of-wedlock pregnancies and sexually transmitted diseases.
repatriation
Finally, our commitment to supporting America's families does not
stop at our borders. The President's budget seeks $1 million in funding
for the Repatriation program to assist U.S. citizens and their
dependents returning from foreign countries under extreme
circumstances.
increasing access to healthcare
The issues that have confronted the Nation in the past 6 months
will have far reaching effects. Of all the issues confronting this
Department, none has a more direct effect on the well-being of our
citizens than the quality and accessibility of health care. Our budget
proposes to improve the health of the American people by taking
important steps to increase and expand the number of Community Health
Centers, strengthen Medicaid, and ensure patient safety.
Community Health Centers provide family oriented preventive and
primary health care to over 11 million patients through a network of
over 3,400 health sites. The fiscal year 2003 budget will increase and
expand the number of health center sites by 170, the second year of the
President's initiative is to increase and expand sites by 1,200 and
serve an additional 6.1 million patients by 2006. We propose to
increase funding for these Community Health Centers by $114 million in
fiscal year 2003. Our long-term goal is to increase the number of
people who receive high quality primary healthcare regardless of their
ability to pay. With these new health centers we hope to achieve this
goal.
The Medicaid program and the State Children's Health Insurance
Program (SCHIP) provide health care benefits to low-income Americans,
primarily children, pregnant women, the elderly, and those with
disabilities. The fiscal year 2003 budget we propose strengthens the
Medicaid and SCHIP programs by implementing essential reforms, such as
the extension of expiring SCHIP funds.
As a first step, we propose to develop legislative proposals that
build on the Health Insurance Flexibility and Accountability (HIFA)
demonstration initiative, which would give States the flexibility they
need to design innovative ways of increasing access to health insurance
coverage for the uninsured. In addition to HIFA, the administration's
plan would allow those who receive the President's health care tax
credit to increase their purchasing power by purchasing insurance from
plans that already participate in their State's Medicaid, Children's
Health Insurance, or State employees' programs. This could help keep
costs down and provide a more comprehensive benefit than plans in the
individual market.
We also need to make an effort to narrow the drug treatment gap. As
reflected in the National Drug Control Strategy, Substance Abuse and
Mental Health Services Administration estimates that 4.7 million people
are in need of drug abuse treatment services. However, fewer than half
of those who need treatment actually receive services, leaving a
treatment gap of 3.9 million individuals. Our budget supports the
President's Drug Treatment initiative, and to narrow the treatment gap.
We propose to increase funding for the initiative by $127 million.
These additional funds will allow States and local communities to
provide treatment services to approximately 546,000 individuals, an
increase of 52,000 over fiscal year 2002.
strengthening medicare
The fiscal year 2003 budget dedicates $190 billion over 10 years
for immediate targeted improvements and comprehensive Medicare
modernization, including a subsidized prescription drug benefit, better
insurance protection, and better private options for all beneficiaries.
Last year, President Bush proposed a framework for modernizing and
improving the Medicare program that built on many of the ideas that had
been developed in this committee and by other Members of Congress. That
framework includes the principles that:
<bullet> All seniors should have the option of a subsidized
prescription drug benefit as part of modernized Medicare.
<bullet> Modernized Medicare should provide better coverage for
preventive care and serious illness.
<bullet> Today's beneficiaries and those approaching retirement
should have the option of keeping the traditional plan with no changes.
<bullet> Medicare should make available better health insurance
options, like those available to all Federal employees.
<bullet> Medicare legislation should strengthen the program's long-
term financial security.
<bullet> The management of the government Medicare plan should be
strengthened to improve care for seniors.
<bullet> Medicare's regulations and administrative procedures
should be updated and streamlined, while instances of fraud and abuse
should be reduced
<bullet> Medicare should encourage high-quality health care for all
seniors.
The improvements the President and I have proposed include not only
a subsidized drug benefit as part of modernized Medicare, but also
better coverage for preventive care and serious illness. Thus, we
propose that preventive benefits have zero co-insurance and be excluded
from the Part B deductible. We must make these improvements to more
effectively address the health needs of seniors today and for the
future.
Let me assure you, the President remains committed to the framework
he introduced last summer, and to bringing the Medicare program up to
date by providing prescription drug coverage and other improvements. We
cannot wait; it is time to act. Recognizing that there is no time to
waste, the President's budget also includes a series of targeted
immediate improvements to Medicare.
As you know, last year the President proposed the creation of a new
Medicare-endorsed prescription drug card program to reduce the cost of
prescription drugs for seniors. This year, HHS will continue its work
on a drug card program, which will give beneficiaries immediate savings
on the cost of their medicines and access to other valuable pharmacy
services. The President is absolutely committed to providing immediate
assistance to seniors who currently have to pay full price for
prescription drugs.
Assistance, however, will not come only through the prescription
drug card program. The budget proposes several new initiatives to
improve Medicare's benefits and address cost. This budget proposes
additional Federal assistance for comprehensive drug coverage to low-
income Medicare beneficiaries up to 150 percent of poverty, about
$17,000 for a family of two. This policy would eventually expand drug
coverage for up to 3 million beneficiaries who currently do not have
prescription drug assistance, and it will be integrated with the
Medicare drug benefit that is offered to all seniors once that benefit
is in place. This policy helps to establish the framework necessary for
a Medicare prescription drug benefit and is essentially a provision
that is in all of the major drug benefit proposals to be debated before
Congress. That is, the policy provides new Federal support for
comprehensive prescription drug coverage for low-income seniors up to
150 percent of poverty. And in all the proposals, the Federal
Government would work with the States to provide this coverage, just as
we are proposing with this policy.
Recently, I announced a model drug waiver program, Pharmacy Plus,
to allow States to reduce drug expenditures and expand drug only
coverage to seniors and certain individuals with disabilities with
family incomes up to 200 percent of the Federal poverty level. This
program is being done administratively. The recently approved Illinois
initiative illustrates how States can expand coverage to Medicare
beneficiaries in partnership with the Federal Government. The Illinois
program will give an estimated 368,000 low-income seniors drug
coverage. The model application I have announced is easy to understand
and use, and the Centers for Medicare and Medicaid Services is working
with numerous States, at least 12, that have already expressed interest
in this program. Making it easier for States to take similar steps to
help their citizens who need help the most is the goal I believe we all
share.
The President's budget also includes an increase in funding to
stabilize and increase choice in the Medicare+Choice program by
aligning payment rates more closely with overall Medicare spending and
paying incentives for new types of plans to participate. Over 500,000
seniors lost coverage last year because Medicare+Choice plans left the
program. Today over 5 million seniors choose to receive quality health
care through the Medicare+Choice program. Because it provides access to
drug coverage and other innovative benefits, it is an option many
seniors like, and an option we must preserve. The President's budget
also proposes the addition of two new Medigap plans to the existing 10
plans. These new plans will include prescription drug assistance and
protect seniors from high out-of-pocket costs.
Some of these initiatives give immediate and tangible help to
seniors. But, let me make clear: these are not substitutes for
comprehensive reform and a universal drug benefit in Medicare. They are
immediate steps we want to take to improve the program in conjunction
with comprehensive reform, so that beneficiaries will not have to wait
to begin to see benefit improvements. I want to pledge today to work
with each and every member of this committee to fulfill our promise of
health care security for America's seniors, now and in the future.
This budget proposes a $1.50 charge for submitting paper or
duplicate claims as an incentive for providers to submit electronic
claims one time only. These proposals will help reduce claims
processing costs and ultimately speed up payment of claims. I recognize
that a few health care providers in disadvantaged circumstances may
have to submit a paper claim. This proposal will allow me to waive this
requirement for providers in rural areas or those providers whose
special circumstances make it difficult to comply with submission
requirements. Together, these fees generate $130 million in fiscal year
2003. The paper claims fee is expected to produce $70 million in fiscal
year 2003. In future years, we expect the amount of the fee collected
to decrease as more providers submit electronic claims. The duplicate
and unprocessable claims fee is expected to produce $60 million in
fiscal year 2003. The effective date for each proposal is March 1, 2003
to allow time for CMS to modify systems to incorporate this change.
Each proposal amount represents 7 months of fee collections.
supporting healthy communities
The fiscal year 2003 budget includes $20 million for a Healthy
Communities Innovation Initiative; a new interdisciplinary services
effort that will concentrate Department-wide expertise on the
prevention of diabetes and asthma, as well as obesity. The purpose of
the initiative is to reduce the incidence of these diseases and improve
services in five communities through a tightly coordinated public/
private partnership between medical, social, educational, business,
civic and religious organizations. These chronic diseases were chosen
because of their rapidly increasing prevalence within the United
States. In addition there is $5 million for related activities in CDC.
More than 16 million Americans currently suffer from a preventable
form of diabetes. Type II diabetes is increasingly prevalent in our
children due to the lack of activity. In a recent study conducted by
NIH, participants that were randomly assigned to intensive lifestyle
intervention experienced a reduced risk of getting Type II diabetes by
58 percent. HHS plans to reach out to women and minorities to help make
this initiative a success.
improving management and performance of hhs programs
I am committed to being proactive in preparing the Nation for
potential threats of bioterrorism and supporting research that will
enable Americans to live healthier and safer lives. And, I am excited
about beginning the next phase of Welfare reform and strengthening our
Medicare and Medicaid programs. Ensuring that HHS resources are managed
properly and effectively is also a challenge I take very seriously.
For any organization to succeed, it must never stop asking how it
can do things better, and I am committed to supporting the President's
vision for a government that is citizen-centered, results oriented, and
actively promotes innovation through competition. HHS is committed to
improving management within the Department and has established its own
vision of a unified HHS--one Department free of unnecessary layers,
collectively strong to serve the American people. The fiscal year 2003
budget supports the President's Management Agenda.
The Department will improve program performance and service
delivery to our citizens by more strategically managing its human
capital and ensuring that resources are directed to national
priorities. HHS will reduce duplication of effort by consolidating
administrative management functions and eliminating management layers
to speed decision-making. The Department plans to reduce the number of
personnel offices from 40 to 4; centralize the public affairs and
legislative affairs functions; and consolidate construction funding,
leasing, and other facilities management activities. These management
efficiencies will result in an estimated savings of 700 full time
equivalent positions, allowing the Department to redeploy staff and
other resources to line programs.
HHS continues to be at the forefront of the government-wide effort
to integrate budget and performance. We were one of the first
Departments to add tables to its GPRA Annual Performance Reports that
provide summary tables that associate resource dollars and performance
measures HHS-wide. Although we work in a challenging environment where
health outcomes may not be apparent for several years, and the Federal
dollar may be just one input to complex programs, HHS is committed to
demonstrating to citizens the value they receive for the tax dollars
they pay.
By expanding our information technology and by establishing a
single corporate Information Technology Enterprise system, HHS can
build a strong foundation to re-engineer the way we do business and can
provide better government services at reduced costs. By consolidating
and modernizing existing financial management systems our Unified
Financial Management System (UFMS) will provide a consistent,
standardized system for departmental accounting and financial
management. This ``One Department'' approach to financial management
and information technology emphasizes the use of resources on an
enterprise basis with a common infrastructure, thereby reducing errors
and enhancing accountability. The use of cost accounting will aid in
the evaluation of HHS program effectiveness, and the impacts of funding
level changes on our programs.
HHS is also committed to providing the highest possible standard of
services and will use competitive sourcing as a management tool to
study the efficiency and performance of our programs, while minimizing
costs overall. The program will be linked to performance reviews to
identify those programs and program components where outsourcing can
have the greatest impact. Further, the incorporation of performance-
based contracting will improve efficiency and performance at a savings
to the taxpayer.
government performance and results act
HHS is committed to continual improvement in the performance and
management of its programs and the administration's efforts to provide
results-oriented, citizen-centered government. The budget request for
fiscal year 2003 is accompanied by annual performance plans and reports
required by the Government Performance and Results Act (GPRA). The
performance measures cover the wide range of program activities
essential to carrying out the HHS mission. Some notable fiscal year
2001 achievements include:
<bullet> Reducing Erroneous Medicare Payments: CMS has continued to
reduce the payment error rate from 14 percent in fiscal year 1996 to 8
percent in fiscal year 1999, 6.8 percent in fiscal year 2000, and 6.3
percent in fiscal year 2001. CMS, with the assistance of the Office of
the Inspector General, is committed to further reducing the error rate
to 5 percent by fiscal year 2002.
<bullet> Moving Families Toward Self-sufficiency: ACF reported that
42.9 percent of adult recipients of TANF were employed by fiscal year
1999. This is a primary indicator of success in moving families toward
self-sufficiency. It improves on the fiscal year 1998 baseline of 38.7
percent and exceeds the target of 42 percent.
<bullet> Families Benefiting from Child Support Enforcement: The
Child Support Enforcement program broke new records nationwide in
fiscal year 2001 by collecting $18.9 billion, one billion over fiscal
year 2000 levels. In one such initiative in fiscal year 2000, the
government collected a record $1.4 billion in overdue child support
from Federal income tax refunds, and more than 1.42 million families
benefited from these collections.
These are just a few of the dozens of impressive success stories
found in the 13 performance plans and reports. GPRA has been and will
continue to be an important part of our effort to improve the
management and performance of our programs.
working together to ensure a safe and healthy america
Mr. Chairman, the budget I bring before you today contains many
different elements of a single proposal; what binds these fundamental
elements together is the desire to improve the lives of the American
people. All of our proposals, from building upon the successes of
welfare reform, to protecting the Nation against bioterrorism; from
increasing access to healthcare, to strengthening Medicare, are put
forward with the simple goal of ensuring a safe and healthy America. I
know this is a goal we all share, and with your support, we are
committed to achieving it.
Chairman Nussle. Thank you, Mr. Secretary.
First, let me begin with the compliments because clearly
there are many areas within the budget and many areas within
your jurisdiction over the last year in which there has been
much progress. Certainly the response to September 11, as well
as the continued changes in management within a number of your
agencies has been well documented and very well appreciated by
this body.
We could go on for quite a while just talking about all of
those areas. Unfortunately, we don't have as much time to talk
about the compliments as we do the challenges, so I would like
to cut right to the chase.
Being from the Midwest, I think you know what it means to
be direct. I am not sure what your Rural Commission will find,
but I will give you a hint that I think you already know and
that is money. Our taxpayers in Iowa and Wisconsin pay the same
amount as every other taxpayer when it comes to Medicare and we
don't get a fair shake, in our opinion, when it comes to the
reimbursements.
Certainly at the town meetings I held over the last week,
my seniors are interested in a prescription drug benefit. What
they don't know, but what we know, is that if our
reimbursements don't change and if this system does not change,
our Medicare-dependent areas will continue to fail to meet the
challenge. We will have a drug benefit but the hospital will
close and when the hospital closes, the doctors and nurses will
leave, and the other health care practitioners, the skilled
nursing homes will have a tough time staying open and may in
fact not be there.
Of course the pharmacist on Main Street isn't going to
stick around because if there is no other health care, there is
no reason for her or him to be there. So now as a result, any
emergency procedure, whether you are on Medicare or not, is now
100 miles away instead of maybe 30 or 50 miles away.
As a result of not having a hospital and no health care,
there are no new families who are going to move to town, so
good luck attracting any new businesses to town and the cycle
continues to spiral out of control. As you have seen in your
years in Wisconsin and as we continue to see in a number of
areas, the challenge becomes even greater for a number of other
areas within our priorities. The bottom line is Medicare
modernization, in my opinion, is the key to this. The bumper
sticker may read prescription drugs but undergirding this
entire proposal's success or failure will be our ability to
modernize the entire system.
It strikes me from the President's budget that putting in
the exact same amount for a prescription drug benefit as the
year before fails to address the need in a complete way,
recognizing of course that there are tradeoffs within Medicare
and that savings can be found, I would agree with you that the
costs are still hard to define. Maybe $190 billion is a
reasonable amount, but without the proposal in front of us to
see where those tradeoffs will come, without seeing where the
precise savings will come, it makes it much harder to suggest
that is real. It causes us to believe in the budget we will
have to write here in the House, that number of $190 billion
will have to grow in order to be realistic.
Having said that, let me ask a couple of questions. One,
when do you foresee, because I understand you may not be
prepared today to talk about what Medicare modernization will
mean for this administration in totality. In part, that is what
Mr. Spratt is getting to in the letter Chairman Thomas has
written. When will we see a proposal with regard to Medicare
modernization, more than just what has been put forth with
regard to a prescription drug benefit, and how long do you
anticipate States like Wisconsin, Iowa, Minnesota and others
will languish in the bottom of the barrel when it comes to
Medicare reimbursements without a level playing field?
I know that is a lot to ask, but in my 5 minutes I wanted
to try and lay that all out on the table. I appreciate
certainly your sensitivity to it and I don't want to leave
without appreciating the fact that I know you are moving
forward on it but time is of the essence. We are interested in
the timing on this as well as a little bit of a glimpse of what
we might be able to expect here in the near future.
Secretary Thompson. You have raised many questions, so I am
not going to give you lengthy answers. I will go through them
and be as direct as I possibly can so I can respond as quickly
as possible.
We are making a lot of progress in regard to improving the
responsiveness at CMS and we are going to continue to do so. I
would appreciate and thank you so very much for sponsoring the
Regulatory Improvement Act. Hopefully, the Senate will pass the
bill also.
We have 49 fiscal intermediaries and carriers. We can get
by with 20. We could put in the performance kind of agreements
with them and we could improve that tremendously.
Second, with regard to rural reimbursements, rural updates,
you are absolutely correct. This is something I have fought
when I was a Governor and you were a Congressman. I think it is
important for us to address it. The situation in rural areas is
there is less utilization and the wage index works against us.
These are the two big factors. The wage index affects the rates
and the formula by about 71 percent. We need to change that if
we are going to improve. That means there will have to be some
additional money, some savings within Medicare.
In regard to Medicare, we just rolled out welfare reform
authorization this week and the next step is to work on
Medicare and get that up here as soon as possible. I cannot
give you an exact date. I can tell you that we are working on
it and we are working on the principles the President set down
a year ago on Medicare. We need to improve them, to build upon
them and hopefully we will have a package in front of you
sometime relatively soon, hopefully this spring.
Chairman Nussle. Would you also comment on the differences
between the OMB and CBO baseline as you perceived them within
the Medicare Program and why we have the discrepancy that we
do. I think Mr. Spratt said 304 on that chart--according to
that chart, $304 billion difference. If you could touch on
that, I would appreciate that as well.
Secretary Thompson. I certainly can. There is no question
that there are reasons for it. Basically, there are several
reasons. First, CBO I believe will testify later this morning.
They will be coming closer to the figures we put out. That will
be announced later on this morning. We think once it has been
developed, there will be even closer figures coming together
between CMS and CBO.
The main difference is the Medicare baseline in our budget
was produced by our independent Office of the Actuaries, used
by Democrats and Republicans alike for the last 30 years. They
usually are very much on target. Our actuaries did a full
baseline reduction, produced the estimates in the budget. There
are certain differences, of course. When we put in
recommendations like prospective payments, we take into our
formula the savings. CBO does not recognize those formulas
until they are put in rules, so that is a big difference.
The outpatient expenditures have not been rising as rapidly
as estimated by CBO and by CMS in the past. In fact, they were
almost level last year. They are going to go up but not as
rapidly as before. That is also a difference. Those are two big
differences.
Technical assumptions and economic assumptions are
different between CBO and CMS and those are things that
probably reflect the difference. Those are still being worked
on between CBO and CMS and hopefully we will be able to get
closer in the future.
Chairman Nussle. Mr. Spratt.
Mr. Spratt. Thank you, Mr. Secretary, for your testimony.
This is Dan Crippen's testimony which he will deliver
shortly after you. It is dated February 28 and I think it
reflects the narrowing of the gap you mentioned. The
administration projects that net mandatory spending for
Medicare will grow at an average rate of 5.4 percent. I think
you indicated earlier it should be 5.7 percent through 2012.
It also projects that growth will tend to be lower than the
10 year average rate through 2006, only 4 percent and higher
after 2006, 6.4 percent. That is one reason it is somewhat
suspect because if you spend any time crunching the numbers in
this 10 year time frame and trying to put together a budget,
you find it is a lot easier to get the numbers in the latter
part of the 10 year time frame than it is in the near term.
The administration also estimates that net mandatory
spending for Medicare will total $3 trillion over the period
2003 through 2012 which is about $225 billion or 7 percent
lower than CBO's projection for the same period. It seems to
still be a big discrepancy between the two of you, a
significant number.
If they are right and you are wrong and looking backward 10
years, the number is very close to 67 percent, what they are
projecting forward, we have a major problem on our hands, a
real shortfall.
Secretary Thompson. May I respond?
Mr. Spratt. Yes, sir, I would like your response.
Secretary Thompson. There is no question there is a
difference, no question CBO is moving closer to that. We have
our actuaries here, Rick Foster who has been the head of the
actuaries out of CMS, been used by Democrats and Republicans
alike in both administrations. They have been always relatively
on target. I have a great deal of confidence in their
professionalism.
The second big difference is that we assumed in the current
laws the 15 percent home health cut that starts in 2003, the
SNF add-on payments ending, the reduction in the physician
baseline and the reduction of the outpatient baseline. All
would impact on the growth rate which would I think argue for a
closer assumption of the 5.4, the 5.7 to the 6.0, much more so
than CBO. I don't think CBO recognized them, I don't think CBO
recognized the prospective payment changes that we did at CMS.
There are different assumptions and I believe the testimony of
CBO will indicate there have been some technical changes and
they are relatively close.
Mr. Spratt. You mentioned the 15 percent across-the-board
cut in home health care which has been hanging there like a
sword over the home health care industry for the last several
years. We pulled our punches every year because after the
initial home health care cuts in the Balanced Budget Agreement
of 1997, a number of home health care agencies went out of
business, went bankrupt and we saw the consequences of it, each
of us, in our own districts and we said enough is enough. You
are still assuming that the 15 percent would be administered?
Secretary Thompson. We are assuming what the law is and the
law is that it was going to be phased out.
Mr. Spratt. But you are not recommending that we give
another reprieve to home health?
Secretary Thompson. What I am recommending is that we sit
down and look at all the provider payments. We are working with
the Ways and Means Committee; we want to work with the Budget
Committee. We want to take a look at this because we know the
pressure you are under, pressure that all the Members of
Congress are under for physician payments. The 15 percent, if
you extrapolate it, is closer to 7 percent after you take into
consideration the inflation factor.
We are looking at all these things and hopefully we will
come up with a provision that is going to be budget-neutral
that you and the chairman can look at, the Ways and Means
Committee could look at and see whether or not Congress would
approve it.
Mr. Spratt. Let me ask you about each one of these major
items on Chairman Thomas' list. First of all, MedPAC made a
recommendation that the physician provider payment rates be
adjusted because the sustainable growth factor they believe is
flawed. That is the lion's share of the $174 billion in
provider restorations or corrections Mr. Thomas recommends,
$128 billion. Where does the administration stand on that
recommendation?
Secretary Thompson. We are working with the Ways and Means
Committee and we are working with any Member of Congress that
wants to work with us. We are coming up with suggested savings
that hopefully will make the changes budget-neutral and
hopefully coming together with a package that could be approved
by this Congress on a bipartisan basis.
We spent 3 hours yesterday with OMB on this particular
subject, we are going to be meeting all day Monday on it and
will hopefully be making some recommendations to Chairman
Thomas sometime within the next 10 days.
Mr. Spratt. Will that package include the offsets to make
this budget-neutral or will you recommend that some portion of
what is left of the surplus be assigned to pay for this?
Secretary Thompson. We are trying to make it budget-
neutral. It is not easy as you can well imagine but we are
trying to making it budget-neutral as suggested by Members of
Congress.
Mr. Spratt. Within Medicare or would you look outside of
Medicare for offsets?
Secretary Thompson. We are looking within Medicare to make
the savings, sir.
Mr. Spratt. Turning now to the hospitals, a small amount of
money relative to physicians payments but I believe it would
affect rural hospitals, the MedPAC recommendations with respect
to the difference in in-patient national rates between
hospitals and MSAs less than $1 million and hospitals in all
other areas. It would at least affect those in small towns and
smaller areas. That is $15 billion. Is that feasible from your
standpoint?
Secretary Thompson. If I want to talk from my heart,
absolutely, but looking at the budget situation, we are trying
to take a look at all the provider payments, trying to look at
the reimbursement formulas but it is going to be difficult to
include that.
Mr. Spratt. How about the DSH payment, increasing the cap
up to 10 percent instead of 5.25 percent?
Secretary Thompson. I doubt very much that DSH payments are
going to be included.
Mr. Spratt. And skilled nursing facilities?
Secretary Thompson. We are looking at that as part of the
package.
Mr. Spratt. Don't you think maybe we should withhold our
mark of the budget? This is a big item, $127 billion, until we
see that package and see whether or not it needs to be
accommodated within the budget?
Secretary Thompson. That is strictly in your purview. I
don't want to ever recommend any advice to you as to what you
should do on the budget.
Mr. Spratt. Let me ask you about the Medicare prescription
drug proposal you are formulating. As I understand it, in the
near term, you are recommending that we enhance the programs we
have for low income beneficiaries which are mainly now under
Medicaid rather than Medicare and give the States the
wherewithal to expand those programs I suppose to maybe 160,
170, maybe 200 percent of poverty, is that what you have in
mind?
Secretary Thompson. There are two provisions. One is $77
billion which hopefully would only be utilized by the States up
to 2006 when hopefully we will have a Medicare provision within
a restructured Medicare. That would require only $7.8 billion
of the $77 billion. Basically, that would allow your State, the
Governor and the legislature to be able to design a
prescription drug benefit however they want to do it. They
would have to cover individuals up to 100 percent of poverty
and would get the Federal Medicaid match up to 100 percent.
Then, for coverage of individuals from 100 percent to 150
percent, they would get a 90 percent return for a 10 percent
investment. When I discussed that with the Governors this week
on a bipartisan basis, they were very enthusiastic.
The second one is to use the waiver program and allow what
we call pharmacy plus, allowing States to develop their own
program as long as it is budget-neutral up to 200 percent of
poverty. The State of Illinois has just passed it and they have
allowed it. They have capped it so they will be responsible for
anything over and above that figure as a State and with their
funds. They are going to be able to ensure 368,000 low income
seniors in the State of Illinois will be able to get covered
prescription drugs.
Mr. Spratt. You said as long as it is budget-neutral. What
do you mean by that?
Secretary Thompson. We have a provision in giving waivers
that States have to be able to show it is not going to increase
the outlay of any Federal dollars. That is the budget
neutrality.
Mr. Spratt. Budget neutral up to 200 percent?
Secretary Thompson. That is correct, but also, they are
allowed to be able to establish budget neutrality over the 5
years. That is what the State of Illinois is doing.
Mr. Spratt. Usually in your budget proposal and elsewhere
when you make this proposal of $190 billion, it is coupled with
Medicare reform as if the two were linked and reciprocal, we
won't do one without the other. Is that the administration's
position, we have to have Medicare reform in order to have drug
benefits?
Secretary Thompson. Absolutely, Congressman. We do not
believe if we just pass prescription drugs that we will ever
reform Medicare. The administration believes very strongly that
we have to strengthen, reform and improve Medicare, make some
savings, allow for catastrophic loss coverage and cover
prescription drugs. We are hopefully going to have a proposal
for you sometime this spring.
Mr. Spratt. Can you give us an idea what reform means, what
specifically you have in mind for reforming Medicare that would
save that much money?
Secretary Thompson. We are looking at a lot of things at
this point in time.
Mr. Spratt. Thank you very much.
Chairman Nussle. Mr. Gutknecht.
Mr. Gutknecht. I want to thank you, Governor, for coming
today. Let me say for the record, I happen to agree there are
significant savings and it really is time we really do look at
real reform at the Medicare system.
I also want to congratulate you on a number of things
because normally being the Secretary of Health and Human
Services is a very tough job but after September 11 and with
the anthrax and everything else, it became almost an impossible
job. I, for one, admire the work you have done.
I hate to sound like ``Johnny One Note'' but again, going
back to the anthrax story, you did a brilliant job of
negotiating with the Germans as it relates to the price of
Cipro. We ended up with a very good deal. I don't think most
Americans realize that you did a yeoman's job of making certain
we got a fair price for Cipro.
I want to come back to the basic issue of prescription
drugs because when we talk about a prescription drug benefit,
it seems to me that we continue to just chase our tails--
frankly, I want pharmaceutical companies to make money. I am a
capitalist and I understand they need a profit incentive and I
also understand if they are going to do the kind of research
that we expect on the next breakthrough drugs, they have to
have a profit margin but the more I learn about the system, the
more I think that we as Americans have got to become much, much
better negotiators and at some point, we have to allow market
forces to work.
I look at drugs like Coumadin, for example. My 82-year-old
father takes Coumadin. I have learned from independent sources
that the price here in the United States, the average price, is
about $35 a month. The average price in Europe for exactly the
same drug, adjusted for currency differences, is about $5. I
think we should pay our fair share of those research costs, but
on drug after drug after drug and particularly those drugs
which seniors take on a repeat basis, what bothers me the most
is when you look at what is happening between what we pay in
the United States versus what they pay in Europe, the
differences are 30 to 300 percent right down the line.
At some point, together with your office, we have to make
it clear to our own FDA that they work for us and not the other
way around. They have been so busy trying to protect us from
ourselves that we have criminalized a lot of seniors who are
simply trying to afford the prescription drugs which their
doctors say they need.
I would be happy to work with you, to work with Greg or
anybody from your staff to get the information so that we begin
to make it clear to these large pharmaceutical companies, which
I want to make clear to everyone, many of them now are no
longer American companies. These are companies that are based
in Germany, Switzerland or other parts of Europe. They have one
price structure for the European Union and a much, much
different price structure for the United States of America.
I don't think we can seriously talk about a prescription
drug benefit for seniors as long as we have a situation where
my estimates are that this year seniors and the Federal
Government will buy somewhere in the area of $100 billion worth
of prescription drugs. Based on some outside experts we have
talked to, if we just open the markets, prescription drug
prices in the United States will come down at least 30 percent.
That is $30 billion that would go a long ways to help provide a
benefit to those seniors falling through the cracks.
We want to work with you but I think with all due respect,
Mr. Secretary, you have to make it clear to the FDA that they
work for us and not the other way around.
Secretary Thompson. Thank you, Congressman. We are
neighbors and I have known you a long time. You are a friend of
mine and all you ever have to do is call me and talk to me,
which you do on occasion. I respond right away as I do with any
Congressman that calls me.
We want to work with you. FDA has put a new leader out
there, a gentleman by the name of Les Crawford, with those
instructions directly. I think you are going to be very
impressed by the leadership of Dr. Crawford. He is a wonderful
individual. I hope you get a chance to meet him soon--I hope
you get a chance to bring him up and talk to him. There are
going to be changes made and improvements made. All I can tell
you is we are changing a lot of things at the Department to
make it a lot more responsive in many areas, not only to
Congress but to the public at large.
Mr. Gutknecht. Thank you.
Chairman Nussle. Let me announce to the members we have one
vote evidently on the floor. We will continue this hearing and
Mr. Collins has gone to vote and will continue to chair the
hearing as we continue so that members can make a decision how
they would like to proceed, but we will continue the hearing
during this vote.
Mr. Bentsen is next to inquire.
Mr. Bentsen. Mr. Secretary, good to see you. I have a
couple of questions for you, but I want to make a comment.
In part of your budget, I appreciate the increase in the
community health services funding and in bioterrorism. I am
disappointed that you have sent us another budget that would
cut the pediatric GME program. We are going to restore that
money like we did last year. As is true in your State, these
pediatric hospitals train about 30 percent of the pediatricians
across the country and that program has proven to work quite
well, but I am disappointed you all did that. I figure that was
probably done at the White House and not in your department.
I want to talk to you about the Medicare Program, what you
said in your testimony and what you have here. One question is:
are you saying in response to Mr. Spratt that you all believe
that Medicare reform, whatever that may be, net of any
prescription drug program, would provide net savings to the
Medicare Program because everything else we have seen from this
administration, the prior administration, from both parties is
Medicare reform costs money. I would like you to clarify that.
I also want to talk to you about your drug program. There
are about five things I see a problem with. Many have said that
the $190 billion is insufficient from both sides of the aisle,
from the CBO and from others. The plan you put forth, at least
in the outset over the next six years, this is a problem we
have seen for many years, would only cover about 10 percent of
senior citizens, 10 percent of Medicare beneficiaries.
I think a huge flaw is relying on the States. You mentioned
the State of Illinois and they have done pretty good work on
this, but we know that when you look at programs like SLMBE and
QUMBE, that the States have not done a very good job. Maybe 40
or 50 percent of the eligible participants are actually
enrolled. When you look at the CHIP Program, and other portions
of the Medicaid Program in my home State of Texas, the State
has not done a particularly good job of enrolling children in
the Medicaid Program. We are one of 14 States that has not
waded into the Breast and Cervical Cancer Treatment Act because
the State doesn't want to pull down the money and put their
share up. We are talking about taking a program, Medicare, a
whole Federal program, and dividing it with the States in the
prescription drug component and asking them to pick up the
slack when the evidence has not been particularly good that
they will do that.
As you know, this last week your former colleagues, the
Governors who were meeting, were complaining they can't fund
their Medicaid budgets as it is with what Washington tells them
they would like to do, and here the administration's plan on
prescription drugs would rest a great deal on the States
stepping up to the plate.
You also talk about expanding Medicare choice and the fact
that Medicare choice provides prescription drugs. In my
experience in Washington, we have consistently had to raise the
stipend to manage care companies to stay in the program and
every indication is not only are people dropping out of the
program but they are also dropping the benefits. We are
starting to pay the managed care companies almost the same
amount the government runs the fee for service portion of
Medicare itself. From my economics training, once those curves
cross, that is a very inefficient program.
Finally, I have to tell you on the discount card, that I
have talked to more than a number of small pharmacists in my
district and across my State who tell me that plan will only
force them to carry the freight on trying to fund the
administration's prescription drug program. I think that is
very problematic. These are folks who already are getting a
minimal, marginal or nominal amount from the insurance
companies as it is for the prescriptions they fill.
I think those are some major flaws in your plan and I would
like to know what your response would be to that. I think the
biggest flaw, unfortunately, and I don't want to be critical of
the States, is they have not always followed through and we are
asking them to take a portion of a Federal program and fix
that.
Secretary Thompson. You have addressed lots of subjects,
Congressman. Let me try and go through them.
GME, the program started in fiscal year 2000 at $40 billion
and in fiscal year 2003, we think $200 billion is a very proper
figure. Based upon that fact, it extrapolates up to $51,300 per
resident doctor.
Mr. Bentsen. If I might, quickly. As you know, we funded at
a higher level last year, so this would effectively be a cut.
Secretary Thompson. You subsidized it at $71,000 last year
and we figure $51,000 per resident is adequate.
Mr. Bentsen. Also, we have never subsidized this before,
whereas the Medicare Program has subsidized other types of
positions, pediatricians who are primarily trained in
hospitals.
Secretary Thompson. We think $51,000 is a more accurate
figure considering the budgetary problems right now than
$71,000, but that is a decision you are going to have to make.
In regards to Medicare, we believe there are savings to
have, savings that are hopefully going to be streamlining the
rules and regulations as well as the law. We are hoping to be
able to save lots of dollars in that. We are putting in an
additional $190 billion for that. We know that you do not
believe that is enough. We think it certainly can get us into
good bipartisan negotiations for improving Medicare.
We are very fearful that once again we will talk about it
as we did last year and not get something done. We are hopeful
this year we can get a streamlined, strengthened Medicare
program with prescription drugs and we think $190 billion over
10 years which starts in fiscal year 2006 is a good way.
In regard to what the States are doing, we think this
immediate transitional program, of which we would pay 90-10 for
those States covering individuals over 100 percent of poverty,
giving them a Federal match allowing the States to design their
own prescription drug program is a wonderful way to go. We had
a lot of enthusiastic support from Governors on both sides of
the aisle this week when I discussed it with them.
In regard to breast and cervical examination, I am hopeful
that Texas will be one of the next States that comes in and
puts the dollars in there. It is badly needed, it is a very
good program, as you know, and we think it is the right thing
to do.
In regard to other State functions, we think the welfare,
the TANF Program, the States have measured up and have done an
excellent job. We think if we allow the $77 million for the
transitional drug benefit, they can do an excellent job as well
and design a program that will be very beneficial to your
seniors in Texas while we are working on the permanent fix
through Medicare.
Mr. Bentsen. With the chairman's indulgence, I guess I
would say it sounds to me like once again we are telling senior
citizens, the vast majority, 90 percent, of the Medicare
beneficiaries, that nothing will happen until 2006 because we
want to redesign the Medicare Program because your plan only
appears to cover 3 million, according to your budget document,
senior citizens out of the 32 to 35 million in this country
under the Medicare Program.
Secretary Thompson. The transitional one will cover 6
million right away and we believe the card and the other one
will add an additional 3 million or 9 million. That is a very
good start forward. Hopefully Congress will pass that on a
bipartisan basis. We think a $77 billion transitional program
that could go into effect as early as next year is a wonderful
investment.
Mr. Bentsen. There is no guarantee under your plan like
there is under Medicare where it is a Federal plan that the
States will pick up the plan and run with that. The experience
has been, as in the case in Texas, and I wish it were
otherwise, that even at a 90-10 match, the States are under no
obligation to take it. The other problem you have is States
that run in a biennium like my State of Texas. We pass it this
year, they are not coming back until next year, so we are
looking a year or further off.
I am not trying to be critical but I think that is a
programmatic flaw in what the administration has proposed.
Secretary Thompson. I don't want to argue with you because
I respect you.
Mr. Bentsen. And I respect you as well.
Secretary Thompson. But the truth of the matter is that
what you are arguing with me is, don't do anything. I say $77
billion for States to try it. I am a former Governor; I was the
longest serving Governor until I resigned. I can assure you
when States and Governors see 90 cents for every 10 cents they
invest, they jump at it. They are going to come up with an
innovative program. I have much more confidence in my fellow
Governors that they are going to look at this program. I had
the opportunity to talk to them this week and they said, ``you
mean if we put up our Federal match to get to 100 percent, you
will come in with 90 cents on the dollar so we can structure
our own prescription program?'' I said, ``yes, that is the
program.'' They said, ``how do we get Congress to move?'' That
came from Governor Gray Davis, I believe.
Mr. Bentsen. But Governor Perry of Texas vetoed the Women's
Health Initiative plan that had a 90-10 match on it and the
State of Texas right now has a significant gap in its Medicaid
budget. The point is, it doesn't always work out that way.
I appreciate what you are trying to do. I guess the
alternative would be what we proposed to do in the last
Congress, put forth a program for prescription drugs under
Medicare today and not go back and rely on the States for what
is otherwise a wholly Federal program and not a Federal/State
program. I think that is the alternative but I appreciate your
comments.
Secretary Thompson. I just want to move, get it done.
Mr. Bentsen. As do I.
Secretary Thompson. I think while we debate the
restructuring of Medicare with prescription drugs, let us pass
this one, let us see if it works.
Mr. Bentsen. The only concern I have is that in doing so,
we may never get to a universal program because some who
proposed the plan you are putting forth say we want to help
those who need it the most rather than helping those who need
it as a total. There are a lot of folks in my State and your
State as well, who aren't wealthy people that make more than
150 or 200 percent of the poverty level who are having to
decide how much of the drugs to take their doctor prescribes to
them, or what else they can buy with their fixed income on a
monthly basis. Therein lies the problem. Therein is why I think
we ought to be moving forward. We tried in the last Congress
and we should be doing it in this Congress on prescription
drugs.
Secretary Thompson. I couldn't agree with you more that we
should move ahead and get something permanently done but I
don't know if that is going to happen. I hope that it does. I
am an optimist and believe we can get something done but in the
meantime if we would have passed this last year, we could have
had a lot of States designing their own prescription drugs,
giving help to a lot of low income seniors all over America.
That is my motive. I want to get as many seniors covered as
soon as possible. I hope we can get something done this year,
both on restructuring Medicare and as well, the transitional
program for the States.
Mr. Bentsen. Thank you.
Mr. Collins [presiding]. Thank you, Mr. Secretary. I think
you just had a good example of the difference here in where you
are coming from and where a lot of Members of Congress are
coming from. Many want a universal program,``one size fits
all,'' rather than a good, sound program that can be paid for.
We have to bear in mind that the American worker pays for all
the programs up here.
I am always pleased to see the Ranking Member, Mr. Spratt,
as he opens his portion of the hearings because he always has
good charts, good information. He does his homework, very
thorough. When you look at the charts he puts up and look at
the increases and reductions he showed, the difference between
OMB and CBO, and your explanation of each of his questions,
which were very good questions. I appreciate his questions and
I am sincere with that, I appreciated your answers. It reminds
me of what I was told back in January 2001 prior to the
inauguration when President-elect Bush was choosing people for
his Cabinet. You were one of them and that comment was, it is
great to see the adults back in charge.
What we have here, what you have evidenced, based on the
very good questions of Mr. Spratt, you have brought management
to Health and Human Services, management that was badly needed.
As we observe the questions about what is coming with
Medicare reform, I think you handled it very well because
Medicare reform is very important to be able to meet all the
programs that are needed under the Medicare system. If you
don't do them all together, you won't get it done in this town.
We have seen that in the past.
I like the provisions you are bringing forth on welfare
reform. You were very helpful to us in 1995 and 1996 when we
worked through three welfare reform bills. I was on the Human
Resources Subcommittee for Ways and Means at that time, had a
lot of input on the child support enforcement provisions of it
and I am glad to see you are recommending that the States
pretty well take full control of that program.
I have always emphasized that the States should have full
control of it. The Federal Government does do some financing in
it but those funds collected should go to those who are due the
funds and those are the children of the custodial parent.
A lot has been said about rural hospitals. The community
health centers I think will help rural hospitals. You are
keeping those who need health care within those communities.
Many of them are rural communities, many of them have rural
hospitals who not only will face problems in the future but
have faced problems in the past. I was a county commissioner in
a small county in Georgia with Hill Burton Hospital 25 years
ago and I know how we struggled with that hospital then. I
think the community health centers will help in that area.
The chairman mentioned in his opening comments that it is
money, money, money. That is usually the answer to all
solutions inside the beltway of Washington, DC I refer to it as
cash-flow. Yes, we have had a reduction in the cash flow of the
Federal Treasury, a reduction based on the economy, the fact
that we have had a decline in the economy beginning early in
2001, escalated by the events of September. That is the reason
we have followed the President's advice and his proposals have
three times passed a stimulus package in the House of
Representatives to send over to the Senate.
I recall in the 1960's, the 1980's and now what happened
when tax reduction was put forth. Under President John F.
Kennedy, massive tax relief package in the 1960's brought in
tons of money to the U.S. Treasury, positive cash flow. What
did we do with that cash flow, sir? Create a lot of programs
that you are responsible for today--the Medicare, the Medicaid.
In the 1980's, under President Reagan, the reduction in the
tax burden on the American worker, tremendous increases in cash
flow in the Federal Treasury. What was done with that? What was
done with those dollars? We built a defense department second
to none, ended the cold war, dissolved the Soviet Union. A lot
of good things happened with those dollars.
We need a strong economy now and that is the reason it is
so important that the Senate follow through with the stimulus
packages we put forth because we need the dollars today and the
cash flow of the Treasury. Those dollars come from the cash
flow of individuals across this country. They don't come from
inside Washington. Those dollars are needed to do two things
this decade that you have a large part to manage, Medicare and
Social Security. Both have to be addressed as soon as possible
particularly in this decade. We will need dollars. There is no
way you will handle both programs with the trust funds and we
know that. We might as well 'fess up to it. It is going to take
some general funds to take care of both or you are going to
have such a tax burden on the next generation behind me that
you won't be able to pay for it. We need that tax relief.
To have someone who is of high authority in either body to
call the measures that we put forth, the tax measures we put
forth in three different stimulus packages as fool hearted is
foolish itself. It should never have been said.
Mr. Secretary, I think you are doing a good job. There is
one area I want to caution you about. I mentioned this in the
Ways and Means Committee the other day when we had Treasury
before us talking about some tax proposals and one is in your
proposal today. That is the tax credit for health insurance.
It has an income cap on it, an income cap that cuts off
those who actually pay the bill. That is above the $60,000
annual income. We need to be careful with those types of
provisions. We have enough provisions in the tax codes today to
transfer payments from one taxpayer to another. We need to be
very careful about adding more to it.
Thank you for your work, your dedication. You have been a
Governor, a very good Governor. You understand what goes on at
the local level. You remind me of the phrase that Ronald Reagan
put forth. I have it on a plaque in my office. ``It doesn't
matter who gets the credit, just get the job done.'' I don't
care if the Governors take credit for prescription drugs for
seniors, get the job done. That is your attitude and I
appreciate it.
Thank you for your being here.
Mr. McDermott.
Secretary Thompson. Thank you for your comments.
Mr. McDermott. I had to choose between going to the Ways
and Means Committee and listening to MedPAC talk or come up
here and listen to you and I thought well, I am going to go see
the Secretary because I admire you. I think coming from a
Governor's job to sit up here and be lectured by us is probably
not exactly what you would like to do, so I admire your
willingness to serve. I never have understood why you took that
job.
Secretary Thompson. Sometimes I wonder myself.
Mr. McDermott. I know. It is because I respect you that I
have a little difficulty putting this up here, but you say you
are for rural health but when we look at your budget, you cut
Rural Health Administration. For me to put that all together
because $54 million cut out of there doesn't make sense. Maybe
you will have an explanation but I have a bigger question than
that.
Your budget document says Medicare's extremely complex
provider payment systems based on regulated prices do not
always function smoothly or equitably over time. We all agree
on that. Then you go on to say you are willing to work with
Congress by making budget-neutral adjustments across provider
payment updates.
MedPAC is downstairs telling us that they vote for a full
inflation increase for outpatient services in 2003 and for
inpatient payments in rural hospitals, they also want them to
have full inflation increases.
In the zero sum game of budget-neutral stuff, that is not
possible. I guess you want us to gore somebody else's ox. I
don't know whose ox you are thinking about. If we are going to
actually give these inflation increases to rural hospitals and
keep them open and all the rest, and do something about the
physician business, where are these savings coming from? Is it
coming out of nursing homes? How is this going to happen? You
can't have it both ways and you know that.
Secretary Thompson. First off, let me tell you that on the
reduction at the Rural Administration, that hurt me. That was
one of the last things I lost in my tussle with OMB, so I don't
have much defense for it.
Mr. McDermott. Thank you. I like that honesty. We will take
care of it. I am sorry there are no other members here. I come
from an urban district, so it doesn't mean anything to me.
There are a lot of people here who have rural districts who
don't realize you are fighting for them and I like that.
Secretary Thompson. You must be Irish, Congressman.
Secondly, in regard to the provider payments, most of these
things are things you passed, Congress passed in 1998 and 1999
asking us to do this. We carried out the law and that is why
the physician payment, that is why the reduction in SNF, the
reductions are actually laws that have been passed by this
Congress.
My answer to you is that the only way we are going to fix
them is to sit down on a bipartisan basis, put all the provider
payments on the table and not look to gore one over the other,
but see whether or not we can make some savings and put them
all out there and see if we can come up with a plan on
physicians, on SNFs, on home health and on the outpatient. We
are working on that. In fact, as we speak, there is a meeting
going on over in the Humphrey Building doing just that. We have
another meeting on Monday which I will chair. Hopefully we will
spend all day Monday looking at where we might be able to come
up with some savings because Congress has also asked us to come
up with a budget-neutral answer to this and that is what
Congressman Thomas has suggested. We are trying to do that,
trying to comply with what you are saying.
Mr. McDermott. You have told us that Pogo was right, the
enemy is us. I get that and I am glad you would say it to the
committee. I have one other question I want to put on the
table.
We are going to have a budget out of this committee in two
weeks, ready or not, here it comes. I don't think anybody knows
what in the world they are doing but you believe more people
are going to go off welfare, don't you?
Secretary Thompson. Yes, I do.
Mr. McDermott. Right now, the Child Development Block Grant
only covers 2 million out of 15 million kids eligible in this
country and you flatlined that. You gave them no more money and
the TANF grant, which has also been used for child care, is
also flatlined.
I understand we don't want to leave any child behind, but
if you are going to push people to go to work and have no way
to pay for decent child care, it doesn't work. I can't
understand how you can flatline both the Child Development
Block Grant and the TANF grant and expect that more people are
going to leave when already less than 20 percent of the
children eligible get any money in it. If you can give me some
explanation, I would be pleased to hear it.
Secretary Thompson. First off, we are flatlining the child
grant. It is about $5 billion, $2.8 billion in the mandatory
and $2.1 billion in the discretionary. We are also putting
$16.5 billion in TANF, of which 30 percent of the TANF dollars
can go into child care. We are also allowing additional money
to be taken out of the Social Service Block Grant to be used
for child care. When you add all those figures together, it is
about $9 billion. We think that is a giant step forward.
Because the caseload has been reduced by about 50 percent
across America and TANF has been at the same level, $16.5
billion, we think the States should have enough flexibility in
there to put the additional money into child care. That is our
assumption.
Mr. McDermott. I hope you will not grant a waiver to the
State of Washington for their Medicare Program. They want to
set up waiting lists and all kinds of awful things because
there is $1.5 billion they have to cut out of the budget, big
chunk comes out of Medicaid and these programs and we have the
highest unemployment in the country.
Maybe everyone else believes the economy is taking off and
this problem is going to go away, but I think you are going to
get more people back on welfare in the next few months because
of the fact that all those people we pushed out on $6 a hour
jobs have been cut. They are not making beds at Holiday Inn
anymore. It is this crunch I see the States in, you having been
a Governor know better than anybody else.
Secretary Thompson. Your Governor was in to see me for a
hour this week, Governor Gary Lock, and he told me he had full
support for his waiver except for you.
Mr. Collins. With that, the gentleman's time has expired.
Mr. Fletcher.
Mr. Fletcher. Mr. Secretary, thank you for coming back
here. We want to laud you for the wonderful job you have done
in a very difficult situation we faced over these last months
as a Nation and laud you for the efforts as we look at
addressing some of the concerns. Welfare was mentioned and as a
Governor, you kind of led the Nation in that reform. I am glad
you didn't listen to some of the far left radical ideas that we
may hear around here. Otherwise we would have still have a
number of people locked in a cycle of poverty with no hope of
ever rising to their potential. Thank you for doing that.
Certainly we are glad you are at the helm of further reforming
welfare to give more people in poverty hope of lifting
themselves out of that. Thank you.
Let me ask you about the uncertainty of the baseline that
we heard a lot of discussion about here, if that demonstrates
the need for any fundamental Medicare reform now in the sense
that it is very difficult to predict, as we have heard with the
different estimates we get on the best baseline.
Secretary Thompson. You are absolutely correct, as you
usually are. I applaud you for your question and for your
dedication in this arena.
The truth of the matter is that there are certain economic
assumptions that are made by CMS and by CBO and they are not
always the same and you are going to have a difference. The
second thing is outpatient expenditures have gone down. It was
projected to go up at this level, it has been level pretty much
for the last two fiscal years, so you are starting at a lower
baseline for the outpatient expenditures. It is going to start
going up but it is not going to go up as rapidly as it was.
That is an assumption that continues through our actuaries at
CMS.
The third thing is that we took into consideration what the
law tells us to do, that is that there is going to be a
provider payment on SNFs and on physicians. When you put all
the variables in there you come out with an answer. That answer
is that there is going to be a reduction there. As a result of
that, the baseline is not going to go up as rapidly as CBO
predicts. So there are changes and there are some differences
that need to be reconciled.
The best way to reconcile, as you have indicated, is to
come up with a streamlined and strengthened Medicare reform
package with prescription drugs. This law was enacted in the
1960's and we all know there are many changes that have taken
place in health care led by your profession. There are many
changes that need to be done, namely prescription drugs have to
be included as well as catastrophic loss has to be included.
There are ways I believe that we can streamline it and make
some savings that will be good for the system and make it
better for future populations.
Mr. Fletcher. There are a couple of areas I know you are
interested in and the administration is interested in as well,
and that is the uninsured, your efforts to reduce that to
provide more availability and access to quality health care.
Let me ask you a question about the tax credits. We have
several options, one of expanding the availability of getting
into CHIPS. I am speaking of folks that may have this tax
credit, but because the individual market is not as strong and
healthy as it should be, we need to make sure, especially for
lower income people, high risk, that they have an opportunity
to get into some sort of plan that is affordable, CHIPS,
Medicaid.
I wondered if there is any possibility of coming up with a
grant for our high risk pools back in the States? We have
looked at whether it is 75 or $100 million, something that is
not tremendously large but would help those risk pools
especially with tax credits. These people would have an
opportunity to buy in at an affordable rate.
Secretary Thompson. That is part of the budget. We are
allowing States to pool in this provision and we are allowing
individuals to be able to go into a regional IRS office, get a
number right away, take that to the insurance agent and be able
to use that number as money up front so they can start making
the monthly payments on their health insurance policy which is
an improvement.
Second, we are giving States the authority to set up
pooling arrangements within the State, so you can put all the
uninsured into a pool. A lot of the uninsured are young,
healthy individuals so the pooling rate should be fairly good,
I would think. Maybe you could put some high risk in there as
well and make an overall pool that would be able to allow for
the $3,000 to be able to purchase a very good health insurance
benefit for a family or $1,000 for an individual.
Mr. Fletcher. I appreciate that. I think we do need to look
at several avenues there. We did some pooling in Kentucky and
some other things.
Secretary Thompson. We did in Wisconsin too and they worked
out very well.
Mr. Fletcher. As long as we make sure that you can have a
good competitive market which keeps the rates down for the
young, healthy folks, they get in. Take care of the high risk
folks and if there is some way of making sure they can get in
an affordable rate, especially low income, then you allow the
market to work very well and increase the access to health
care, as you know.
Secretary Thompson. In Wisconsin we required the insurance
companies to subsidize. They were not too excited about that
but it was a way for us to do it.
Mr. Fletcher. I will be working to see if we can't get a
small amount here to look at helping with some of the block
grants in that program.
I think my time is up. Thank you, Mr. Secretary.
Mr. Collins. I am going to request that the gentleman take
the Chair. Mr. Secretary, once again, thank you. I do want to
read a couple of excerpts from a paper that was drafted by the
Honorable Jim DeMint from South Carolina. These are words of
caution. ``By the next election, the majority of Americans will
be dependent on the Federal Government for their health care,
education, income or retirement and at the same time, the
number of taxpayers paying for these benefits is rapidly
shrinking. Today the majority of Americans can vote themselves
more generous government benefits at little or no cost to
themselves.'' Travel with caution, Mr. Secretary.
Secretary Thompson. Thank you, Congressman. I appreciate
your admonition and your common sense.
Mr. Fletcher [presiding]. Let me recognize Mr. Moore now.
Mr. Moore. Thank you very much, Mr. Chairman. And thank
you, Mr. Secretary for being here. I think you have probably
one of the toughest jobs in Washington. So I appreciate the
fact that you are willing to be here and talk to us about some
of the concerns that we have.
Mr. Secretary, I received a letter recently from a
constituent, a woman. It is very brief and I want to read it to
you and maybe you can help me answer her. She says she is
trying to locate a new doctor. ``I had to call four doctors
before I finally found one who would take me. As soon as I told
them Medicare was my primary provider even though I have a
backup, they told me they were not taking any more Medicare
patients. It does not do any good to have Medicare if you can't
get a doctor. I don't know the answer but the problem needs to
be addressed. Thank you.'' I wonder if you can help me answer
her.
Mr. Thompson. I wish I knew more about the situation. But
all I can tell you is that we are attempting to get more
doctors into the system. We are putting the pressure on the
providers to take Medicare patients. We are also providing for
additional money in here to get more doctors into underserved
areas. I do not know if it is an underserved area.
Mr. Moore. No, it is not.
Mr. Thompson. But it is a problem. Of course, one of the
problems is the reimbursement and we have to take a look at
that. That is why, according to Congressman Spratt and
Congressman McDermott as well as Congressman Thomas, we are
looking at ways in which we can figure out a way on a budget-
neutral basis hopefully to do something for provider payments.
Hopefully, we will have some suggestions for this committee and
the Ways and Means Committee in the next 10 days.
Mr. Moore. Thank you. I do appreciate your very candid,
honest answers to Congressman McDermott, because when you do
not have a defense or a justification for something there, and
it is clearly not your fault, I really appreciate the fact that
you are very candid with us.
Another question. I know, and please forgive me if I cover
something that may have been covered before, I have been in and
out for a vote.
Mr. Thompson. I know.
Mr. Moore. On February 8, Chairman Thomas and Nancy Johnson
wrote you and Mitch Daniels a letter, and I am going to read
just one sentence here. ``However, MedPAC has identified
serious problems such as significant and successive payment
cuts to physicians which are unsustainable and require
reform.'' And this is kind of what you addressed. I do not know
if you have responded to the chairman's letter yet.
Mr. Thompson. We have been working with him, Congressman,
and we are going to be responding sometime within the next 10
days. That is pretty much what I indicated before.
Mr. Moore. OK. Alright.
Mr. Thompson. But what you have got to understand,
Congressman, is that we are implementing what Congress has
passed. This is the law that was passed in 1998 and 1999, the
Physicians Provider Payments. So we are implementing that. I
know it is causing some concern from Members of Congress. We
are trying to come up with a constructive solution for you and
for Congressman Thomas and for all Members of Congress. Are we
going to be able to satisfy everybody? No. But we are working