Department of Health and Human Services

Budget in Brief, Rich Text Format

Fiscal Year 2006

Overview 3

Food and Drug Administration 16

Health Resources and Services Administration 21

Indian Health Service 29

Centers for Disease Control and Prevention 34

National Institutes of Health 46

Substance Abuse and Mental Health Services Administration 54

Agency for Healthcare Research and Quality 59

Centers for Medicare & Medicaid Services 64

Administration for Children and Families 105

Administration on Aging 125

Departmental Management 130

Office for Civil Rights 139

Office of Inspector General 142

Program Support Center 145

Retirement Pay and Medical Benefits for Commissioned Officers 147

**ADVANCING THE HEALTH, SAFETY, AND WELL-BEING OF OUR PEOPLE**

*The Department of Health and Human Services enhances the health and
well-being of Americans by providing for effective health and human
services, and by fostering sound, sustained advances in the sciences
underlying medicine, public health, and social services.*

The Department of Health and Human Services (HHS) Fiscal Year (FY) 2006
budget enables the Department to provide for the health, safety, and
well-being of Americans. FY 2006 outlays will total \$642 billion, an
increase of \$58 billion over FY 2005 spending. The discretionary
portion of the HHS budget totals \$67 billion in budget authority and
\$71 billion in program level.

The Department's budget fosters strong sustained advances in the
sciences underlying medicine, in public health, and in social services,
and provides effective heath and human services. This budget request
builds on the Department\'s Strategic Plan goals and enables HHS to meet
present and future challenges. In FY 2006, resources and efforts will be
directed toward:

-   Providing access to quality health care, including continued
    implementation of the Medicare Prescription Drug, Improvement, and
    Modernization Act;

-   Enhancing public health and protecting America;

-   Supporting a compassionate society; and

-   Improving HHS management, including implementing the President\'s
    Management Agenda

The HHS FY 2006 budget will enable the Department to improve the
quantity and quality of health care available to Americans by
implementing Medicare\'s prescription drug benefit, completing the
President\'s current Health Center initiative, and launching a new
health center effort in the poorest counties. This budget will enable
the National Institutes of Health to increase research efforts in
developing bioterrorism countermeasures and to fund biomedical research
at current levels, will allow the Centers for Disease Control to expand
the Strategic National Stockpile, and will support the Food and Drug
Administration\'s efforts to defend the nation\'s food supply; it will
further secure our nation against the threat of bioterrorism.

The Department considered a number of factors in constructing the FY
2006 budget, including the need for spending discipline and program
effectiveness to support the Administration\'s initiative to cut the
deficit in half over four years. Specifically, the budget decreases
funding for lower-priority programs and one-time projects, consolidates
or eliminates programs with duplicative missions, reduces administrative
costs, and makes government more efficient.

For example, the budget requests no funding for the Community Services
Block Grant and a number of smaller community services programs that
were unable to demonstrate results in PART evaluation assessments.

Providing Access to Quality Health Care

**Improving Medicare Through the Medicare Modernization Act:** Funding
for Medicare benefits, which assist 42.7 million elderly and disabled
Americans, is estimated to be \$394 billion in 2006.

Two of the most important provisions of the Medicare Modernization Act
(MMA) are the new voluntary drug benefit, which will begin on January 1,
2006, and the enhanced health plan choices in Medicare Advantage. As a
result of these new benefits, beneficiaries will be able to receive
voluntary drug coverage as well as new support for their existing drug
coverage through Medicare, and access to preferred provider
organizations (PPOs), which are the most popular health plan choices for
non-Medicare beneficiaries. Beginning in 2006, PPOs will begin to serve
beneficiaries on a regional basis thereby promoting competition with
other health care programs.

All beneficiaries will continue to have access to affordable care, while
those with the lowest incomes and the highest levels of spending on
drugs will receive additional assistance. As with current MMA
implementation, as new options become available, Medicare will ensure
that beneficiaries understand their choices and benefits.

**Implementation of the Prescription Drug Benefit Program:** Until 2006,
the interim Medicare-endorsed prescription drug discount cards and
transitional assistance programs will help beneficiaries pay the cost of
prescription drugs. Beginning on January 1, 2006, Medicare will help pay
for outpatient prescription drugs through private plans. Beneficiaries
will have the option of remaining in the traditional fee-for-service
program, enrolling separately in private prescription drug plans, or
enrolling in integrated Medicare Advantage plans for all
Medicare-covered benefits, including drugs. The prescription drug
benefit program will be financed through beneficiary premiums (25.5
percent) and general revenue (74.5 percent) and is projected to cost
\$58.9 billion in 2006.

**Promoting Affordable Health Care:** The Administration is strongly
committed to meeting the needs of the approximately 45 million Americans
who are uninsured. For this reason, the Administration proposes a
multi-pronged approach to promoting economic opportunity and ownership,
including:

-   Health insurance tax credits to facilitate the private purchase of
    health insurance and Health Savings Accounts (HSAs);

-   Grants to States for purchasing pools to help low-income individuals
    purchase coverage with the health insurance tax credit;

-   Tax deductions for individuals with a high-deductible health plan
    and an HSA;

-   Tax rebates to small employers contributing to employees\' HSAs;

-   Association Health Plans for groups of small businesses, civic
    groups, and community organizations;

-   Medical liability law reforms that increase access to high quality
    and affordable health care; and

-   A competitive marketplace for health insurance that crosses state
    lines while maintaining strong consumer protections.

**Increasing Coverage through Medicaid and the State Childrens\' Health
Insurance Program:** The Department currently projects that Medicaid
will cover over 46 million individuals in FY 2006 at a cost to the
Federal Government of \$193 billion.

HHS proposes to provide States with additional flexibility in Medicaid
to further increase coverage among low-income individuals and families
without creating additional costs for the Federal Government. States
largely agree that current Medicaid rules and regulations are barriers
to effective and efficient management. The proposal builds on the
success of the State Childrens\' Health Insurance Program (SCHIP) in
providing acute care for children and families, as well as current
efforts to reduce the number of uninsured individuals.

A modernized Medicaid system will give States greater flexibility
without the need for burdensome waiver applications. Principles that are
employed in SCHIP and emphasize innovation will be expanded to Medicaid
beneficiaries, while long-term care reforms will build on successful
programs that use consumer direction and home-based care and
community-based care to improve satisfaction and lower costs. A
modernized Medicaid system will continue to grow at a robust rate to
accommodate increases in health care spending.

The President\'s Budget includes proposals to extend Medicaid benefits
to cover uninsured individuals and to expand benefits to those already
on Medicaid, an investment of \$7 billion over five years. These
proposals include demonstration projects to expand access to
community-based care for the disabled and elderly, an extension of
transitional medical assistance, and an extension of Medicare premium
assistance.

The FY 2006 budget also includes program integrity and cost efficiency
proposals that will save an estimated \$20 billion over five years in
Medicaid fraud, waste, and abuse. Representative proposals include a
reduction in allowable provider related taxes, an elimination of
inter-governmental transfers that unfairly augment a State\'s share of
Federal Medicaid matching funds, and reform the transfer of assets
policy for medically needy eligibles applying for Medicaid long-term
care.

SCHIP will spend approximately \$5.4 billion in FY 2006. Authorization
for the program expires at the end of FY 2007. Due to its success at
enrolling millions of low-income uninsured children, the President\'s
Budget seeks to re-authorize the program early, and better target the
fund in a more timely manner. Under the proposal, the time States have
to spend their SCHIP allotments would change from three years to two
years. In total, budget proposals that enhance the SCHIP program will
cost \$992 million over five years.

**Health Information Technology:** In April 2004, the President
expressed his vision for improving the safety, quality, and
cost-effectiveness of health care through rapid implementation of secure
and interoperable electronic health records. The FY 2006 budget seeks a
total of \$125 million to make this vision a reality. The Office of the
National Coordinator for Health Information Technology (ONCHIT) will
provide strategic direction for development of a national interoperable
health care system, and encourage clinicians to connect and collaborate
within a national Health IT network. The Agency for Health Care Quality
and Research (AHRQ) will continue to accelerate the development,
adoption, and diffusion of interoperable information technology in a
range of health care settings.

**Increasing the Capacity and Number of Health Centers:** The budget
completes the President\'s five-year commitment to create 1,200 new or
expanded health center sites and serve an additional 6.1 million people
by 2006. In FY 2006 alone, more than 2.4 million individuals will
receive health care through 578 new or expanded sites in rural areas and
underserved urban communities. In addition, the President is
establishing a new goal to help every poor county in America in need
that lacks a health center and the FY 2006 request funds 40 new health
center sites in high-poverty counties.

**Increasing Care Available to Native Americans:** The budget increases
support to 1.8 million members of federally recognized Tribes by \$72
million, for a total of \$3.8 billion. With these funds, the Indian
Health Service will provide high quality health care through 49
hospitals, over 240 outpatient centers, and over 300 health stations and
Alaska village clinics. Increases will serve a growing eligible
population and meet the rising costs of delivering health care.
Resources are included to expand access to care through staffing six
newly built health care facilities.

**Access to Recovery Drug Treatment Program:** Through the Access to
Recovery program, HHS will assist States in expanding access to clinical
treatment and recovery support services and allow individuals to
exercise choice among qualified community provider organizations,
including those that are faith-based. The toll of drug abuse on the
individual, family, and community is both significant and cumulative. It
may lead to lost productivity and educational opportunity, lost lives
and to costly social and public health problems including HIV/AIDS,
domestic violence, child abuse, and crime. The budget increases support
for this initiative by 50 percent for a total of \$150 million.

**Ryan White:** The FY 2006 request provides a total of \$2.1 billion
for Ryan White programs to ensure a comprehensive approach to provide
treatment services to persons living with HIV/AIDS, consistent with the
President\'s reauthorization principles--prioritization, flexibility,
and accountability. Over 570,000 people will receive treatment services
through Ryan White grant funding in FY 2006.

Enhancing Public Health and Protecting America

**Medical Research:** Federal investments in biomedical research have
fueled major advances in knowledge about life sciences. The FY 2006
budget requests \$28.8 billion for the National Institutes of Health
(NIH), a net increase of \$196 million. The request seeks to capitalize
on the resulting opportunities this investment has opened for
significant progress in improving the health of the nation by
preventing, treating, and curing disease and disability. The budget
request enables NIH to continue to implement the Roadmap for Medical
Research; enhance collaborations for multidisciplinary neuroscience
research; and accelerate efforts to develop and evaluate vaccines
against HIV/AIDS. Withing this total, NIH will also increase funding to
address critical requirements in biodefense, including a new targeted
\$50 million research effort to expand the current range of chemical
countermeasures.

**Preventing Disease:** The FY 2006 budget includes targeted efforts to
ensure a stable supply of annual influenza vaccine, develop the surge
capacity that would be needed in a pandemic, improve low-income
children\'s access to routine immunizations, and improve the response to
emerging infectious diseases before they reach the United States.

Influenza

HHS will invest \$439 million in targeted influenza activities in FY
2006, in addition to insurance reimbursement payments through Medicare.
The request for the Centers for Disease Control (CDC) will fund a
three-pronged approach to ensure an adequate supply of annual vaccine.
Within the Vaccines for Children (VFC) program, CDC will allocate \$40
million in new budget authority to buy a stockpile of pediatric
influenza vaccine to guard against late-season surges in demand. The
discretionary Section 317 program will use \$30 million to get
manufacturers to make additional bulk monovalent vaccine that can be
turned into finished vaccine if other producers experience problems, or
unusually high demand is anticipated. Finally, CDC will expand routine
use vaccine procurements to \$104 million, including an increase of \$20
million targeted to children not eligible for VFC.

A draft Pandemic Influenza Response and Preparedness Plan was issued in
August 2004, which lays out action steps in several areas. In support of
this plan, NIH has expanded its research investment to approximately
\$119 million. The budget also increases to \$120 million the
Department\'s investment to develop the year-round domestic surge
vaccine production capacity that will be needed in a pandemic, including
new cell culture vaccine manufacturing processes.

Global Disease Detection

CDC supports a range of efforts to both track and prevent the
international spread of infectious diseases. Although modern advances in
vaccinations and technology have conquered some diseases, recent
outbreaks of infectious diseases such as severe acute respiratory
syndrome (SARS) and avian influenza, are reminders of the ability of
microbes to adapt and to move across borders. In FY 2006, CDC will
invest an additional \$12 million to strengthen Global Disease
Detection.

**Responding to Major Disasters and Emergencies:** The National Response
Plan calls on HHS to lead public health and medical services during
major disasters and emergencies. In support of this responsibility, the
FY 2006 budget includes \$70 million in targeted investments for the new
Federal Mass Casualty Initiative to improve our medical surge capacity.
This includes procurement of portable treatment units through the
Strategic National Stockpile, and the tools and infrastructure necessary
to mobilize and coordinate medical personnel and volunteers in the event
of a major medical emergency. HHS will also invest \$1.3 billion in
support of on-going work at the Centers for Disease Control and the
Health Resources and Services Administration to improve state and local
public health and hospital preparedness.

**Strategic National Stockpile:** HHS has the primary responsibility for
ensuring the Nation\'s citizens have almost immediate access to an
adequate supply of the medicines needed to protect them in the event of
an attack with weapons of mass destruction, or other major public health
emergencies. The Strategic National Stockpile (SNS) includes enough
smallpox vaccine to protect every American, and by the end of FY 2006,
will have sufficient antibiotics to protect 60 million people from
anthrax exposure. The \$600 million request includes \$50 million to
procure portable mass casualty treatment units and \$550 million to buy
additional medicines, replace those that are losing potency, provide
specialized storage, and ensure that medicines and supplies can be made
available for use anywhere in the United States within 12 hours.

**Safe Food and Safe Drugs:** The FY 2006 budget seeks \$1.9 billion for
the Food and Drug Administration (FDA), a net increase of \$81 million
above FY 2005. Within the requested increase for FDA, \$30 million will
be directed to enhancing the agency\'s national network of food
contamination analysis laboratories and support vital research on
technologies able to prevent threats to our food supply. Drug safety is
also a primary focus, with a \$6.5 million (24%) increase dedicated to
evaluating and communicating drug safety risks to the public and
applying scientific expertise to explore the risks of medical products
already on the market. The FY 2006 budget also funds the medical devices
program at a level consistent with the intent of the Medical Devices
User Fee and Modernization Act of 2002.

Supporting a Compassionate Society

**Marriage and Healthy Family Development:**

Abstinence Education

Abstinence education programs are part of a comprehensive and continuing
effort of the Administration to help adolescents avoid behaviors that
could jeopardize their futures. Last year, HHS integrated abstinence
education activities with the youth development efforts at the
Administration for Children and Families (ACF), by transferring the
Community-Based Abstinence Education program and the Abstinence
Education Grants to States to ACF. The FY 2006 budget expands activities
to educate adolescents and parents about the health risks associated
with early sexual activity and provide them with the tools needed to
help adolescents make healthy choice. A total of \$206 million, an
increase of \$39 million, is requested for these activities.

Healthy Marriage / TANF Reauthorization

A high priority in the President\'s Budget is TANF reauthorization. A
key element of the President\'s plan is its support of healthy marriage
and responsible fatherhood. The FY 2006 budget includes \$1 billion over
five years in federal funds to promote healthy marriage through
demonstrations, research, and a matching state program. The budget also
proposes \$200 million in mandatory funding over five years to support
responsible fatherhood.

With matching state funds, a total of \$1.7 billion over five years will
help advance this central goal of the TANF program.

**Faith Based and Community Initiatives:**

As part of the larger Faith-Based and Community Initiative, the budget
maintains a commitment to strengthen the capacity of faith-based and
community organizations.

Compassion Capital Fund

The Compassion Capital Fund advances the efforts of community and
charitable organizations, including faith-based organizations, to
increase their effectiveness and enhance their ability to provide social
services where they are needed. The budget includes \$100 million, an
increase of \$45 million. Among the priorities within the 2006 proposal
is an emphasis on supporting anti-gang efforts through community and
faith-based organizations.

Mentoring Children of Prisoners

The Mentoring Children of Prisoners program, funded at \$50 million,
will establish approximately 33,000 new mentoring relationships for
children of incarcerated parents or those recently released from prison.
Nearly two million children have a parent in a federal or state
correctional facility, and research indicates that children with
incarcerated parents are more likely than the general population to
display a variety of behavioral, emotional, health, and educational
problems.

Maternity Group Homes

The budget includes \$10 million for Maternity Group Homes, to support
community-based, adult-supervised group homes for young mothers and
their children. Grantees will provide a range of coordinated services
such as child care, education, job training, and counseling and advice
on parenting and life skills.

Increasing Care for Children and the Elderly:

*Child Support Enforcement*

The FY 2006 President\'s Budget eagerly anticipates congressional action
on previously proposed child support enforcement legislation. The
President\'s legislative proposals continue to support healthy,
financially strong families by strengthening enforcement tools,
enhancing child support automation, and improving collection of medical
child support. These proposals offer an impressive \$3.4 billion in
increased child support collections to families at a total federal cost
of \$52 million over five years.

Child Welfare Program Option

It is a high priority of HHS to pursue with Congress passage of the
Child Welfare Program Option. The Child Welfare Program Option would
give States the option to receive their foster care funding as a
flexible grant over five years. The flexible option would support a
continuum of services to families in crisis and children at risk. This
proposal costs \$36 million in FY 2006 and it is budget neutral over
five years.

Head Start

The budget requests \$6.9 billion for Head Start, which will provide
comprehensive child development services to 919,000 children of
primarily low-income families. The request includes \$45 million to
support the President\'s initiative to improve Head Start by funding
nine state pilot projects to coordinate state preschool, child care, and
Head Start in a comprehensive system of early childhood programs. Head
Start programs help ensure that children are ready to succeed at school
by supporting their social and cognitive development.

Services for the Elderly

The budget requests a total of \$1.4 billion in the Administration on
Aging for programs that serve the most vulnerable elderly Americans, who
otherwise lack access to healthy meals, preventive care, and other
supports that enable them to remain in their home communities and out of
nursing facilities. It also continues investments in program innovations
to test new models of home and community-based care.

Implementing the President\'s Management Agenda & Improving Management

The President\'s Management Agenda (PMA) provides a framework to improve
the management and performance of HHS. HHS has taken significant steps
to institutionalize its focus on results and achieve improved program
performance that is important to the HHS mission and the American
taxpayer.

**Budget and Performance Integration:** Budget and Performance
Integration (BPI) aims to improve program performance and results by
ensuring that performance information is used to inform funding and
management decisions. For FY 2006, HHS operating divisions produced
their first \"performance budgets\" which combine budget and performance
information in a single document. With this new format the Department
moves from the traditional approach of presenting separate budget
justifications and performance plans to the use of one integrated
document to present both budget and performance information. This
enhances the availability and use of program and performance information
to inform the budget process. The new budget format along with other
successes enabled HHS to improve its BPI status rating from red to
yellow while maintaining a green progress rating on the PMA scorecard.

The Program Assessment Rating Tool (PART) is an important component of
BPI and is used to assess program performance and improve the quality of
performance information. Sixty five HHS programs were reviewed in the
PART process between FY 2004 and 2006. These programs account for more
than 74 percent of HHS budgetary resources. Forty-seven of the\
65 programs reviewed received a narrative rating of Adequate, Moderately
Effective, or Effective. Additional information on PART results for HHS
programs is provided in the individual Operating Division sections as
well as in the FY 2006 PART table on page 10.

**Strategic Management of Human Capital:** HHS has successfully achieved
a green status and green progress rating for Strategic Management of
Human Capital. This high rating recognizes several HHS accomplishments,
such as the consolidation of 40 personnel offices dispersed throughout
HHS into four Human Resources Centers, which became operational in
January 2004. HHS is planning several upcoming projects to support Human
Capital and maintain this high rating.

**Competitive Sourcing:** HHS has successfully achieved a green status
and green progress rating for Competitive Sourcing. To date, HHS has
conducted competitive sourcing studies for almost 25 percent of its
commercial activities. For studies completed in FY 2004 HHS anticipates
gross savings of \$55 million for the benefit of HHS programs and the
American taxpayer. HHS plans to maintain high performance results that
support Competitive Sourcing, which include structuring competitions to
maximize efficiencies and savings and implementing a savings validation
plan.

**Improving Financial Management:** HHS implemented several processes to
improve the financial performance of the Department, such as
streamlining and accelerating the annual financial reporting process and
combining annual audited financial statements with program performance
information in the Department\'s Performance and Accountability Report.
It also continues to implement the Unified Financial Management System
within several HHS agencies.

**E-Government / IT Management:** HHS has achieved a yellow status and
progress rating for Expanded Electronic Government. More than 95 percent
of HHS\' information systems have certified and accredited security
plans. HHS has been working to achieve a more mature Enterprise
Architecture (EA) that links performance to strategic and capital
planning and budget processes.

**Management Initiatives:** In addition to the five government-wide
management initiatives, HHS is also responsible for managing the
following PMA Program Initiatives:

-   Broadening health insurance coverage through state initiatives

-   Eliminating improper payments

-   Real property asset management

-   Faith-based and community initiatives

-   Research and development investment criteria

Overview tables begin here:

President's Budget for HHS

FY 2006 (dollars in millions)

+------------------------------------+---------+-------+-------+-------+
|                                    | *       | **    | **    | **2   |
|                                    | *[2004] | [2005 | [2006 | 006** |
|                                    | {.under | ]{.un | ]{.un |       |
|                                    | line}** | derli | derli | *     |
|                                    |         | ne}** | ne}** | *[+/- |
|                                    |         |       |       | 2005  |
|                                    |         |       |       | ]{.un |
|                                    |         |       |       | derli |
|                                    |         |       |       | ne}** |
+------------------------------------+---------+-------+-------+-------+
|                                    |         |       |       |       |
+------------------------------------+---------+-------+-------+-------+
| Budget                             | \$      | \$58  | \$66  | +\$7  |
| Authority\...                      | 554,393 | 1,038 | 0,406 | 9,368 |
| \...\...\...\...\...\...\...\...\. |         |       |       |       |
| ..\...\...\...\...\...\...\...\... |         |       |       |       |
+------------------------------------+---------+-------+-------+-------+
| Outlays\...\...\...\...\...\.      | \$      | \$58  | \$64  | +\$5  |
| ..\...\...\...\...\...\...\...\... | 542,006 | 3,957 | 2,188 | 8,231 |
| \...\...\...\...\...\...\...\..... |         |       |       |       |
+------------------------------------+---------+-------+-------+-------+
|                                    |         |       |       |       |
+------------------------------------+---------+-------+-------+-------+
| Full-Time                          | 64,244  | 6     | 6     | -160  |
| Equival                            |         | 7,444 | 7,284 |       |
| ents\...\...\...\...\...\...\...\. |         |       |       |       |
| ..\...\...\...\...\...\...\...\... |         |       |       |       |
+------------------------------------+---------+-------+-------+-------+

Composition of the Budget

This is a pie chart in which each slice represents a portion of the HSH
budget. There are six slices. The first slice, in blue, is labeled
Medicare with 53.0 percent of the budget. The next slice is red and
labeled Medicaid representing 30.0 percent of the budget. The third
slice for Other Mandatory Programs is black and represents 0.4 percent
of the budget. TANF is a light blue slice representing 2.8 percent of
the budget. Children's Entitlement Programs consume 3.1 percent of the
budget, the slice is orange. Finally, the sixth slice is yellow and
represents the Discretionary Programs which make up 10.7 percent of the
total HHS budget.

HHS Budget by Operating Division

(dollars in millions)

+---------------------------------+----------+-------+-------+-------+
|                                 | **[200   | **    | **    | **2   |
|                                 | 4]{.unde | [2005 | [2006 | 006** |
|                                 | rline}** | ]{.un | ]{.un |       |
|                                 |          | derli | derli | *     |
|                                 |          | ne}** | ne}** | *[+/- |
|                                 |          |       |       | 2005  |
|                                 |          |       |       | ]{.un |
|                                 |          |       |       | derli |
|                                 |          |       |       | ne}** |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Food & Drug Administration:     |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Program                         | \$1,695  | \$    | \$    | +\$80 |
| Level                           |          | 1,801 | 1,881 |       |
| \...\...\...\...\...\...\...\.. |          |       |       |       |
| .\...\...\...\...\...\...\..... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Budget                          | 1,386    | 1,450 | 1,500 | +50   |
| Auth                            |          |       |       |       |
| ority\...\...\...\...\...\...\. |          |       |       |       |
| ..\...\...\...\...\...\...\.... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Outlays\...\...\...\.           | 1,379    | 1,317 | 1,475 | +158  |
| ..\...\...\...\...\...\...\...\ |          |       |       |       |
| ...\...\...\...\...\...\...\... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Health Resources & Services     |          |       |       |       |
| Administration:                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Budget                          | 6,682    | 6,890 | 6,047 | -843  |
| Auth                            |          |       |       |       |
| ority\...\...\...\...\...\...\. |          |       |       |       |
| ..\...\...\...\...\...\...\.... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Outlays\...\...\...\.           | 6,634    | 6,637 | 6,529 | -108  |
| ..\...\...\...\...\...\...\...\ |          |       |       |       |
| ...\...\...\...\...\...\...\... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Indian Health Service:          |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Budget                          | 3,072    | 3,135 | 3,198 | +63   |
| Auth                            |          |       |       |       |
| ority\...\...\...\...\...\...\. |          |       |       |       |
| ..\...\...\...\...\...\...\.... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Outlays\...\...\...\.           | 3,057    | 3,009 | 3,324 | +315  |
| ..\...\...\...\...\...\...\...\ |          |       |       |       |
| ...\...\...\...\...\...\...\... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Centers for Disease Control &   |          |       |       |       |
| Prevention:                     |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Budget                          | 4,440    | 4,572 | 4,017 | -555  |
| Auth                            |          |       |       |       |
| ority\...\...\...\...\...\...\. |          |       |       |       |
| ..\...\...\...\...\...\...\.... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Outlays\...\...\...\.           | 4,259    | 4,490 | 4,436 | -54   |
| ..\...\...\...\...\...\...\...\ |          |       |       |       |
| ...\...\...\...\...\...\...\... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| National Institutes of Health:  |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Budget                          | 28,028   | 2     | 2     | +146  |
| Auth                            |          | 8,594 | 8,740 |       |
| ority\...\...\...\...\...\...\. |          |       |       |       |
| ..\...\...\...\...\...\...\.... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Outlays\...\...\...\.           | 25,759   | 2     | 2     | +     |
| ..\...\...\...\...\...\...\...\ |          | 7,467 | 8,563 | 1,096 |
| ...\...\...\...\...\...\...\... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Substance Abuse & Mental Health |          |       |       |       |
| Services:                       |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Budget                          | 3,234    | 3,268 | 3,215 | -53   |
| Auth                            |          |       |       |       |
| ority\...\...\...\...\...\...\. |          |       |       |       |
| ..\...\...\...\...\...\...\.... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Outlays\...\...\...\.           | 3,112    | 3,191 | 3,239 | +48   |
| ..\...\...\...\...\...\...\...\ |          |       |       |       |
| ...\...\...\...\...\...\...\... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Agency for Healthcare Research  |          |       |       |       |
| & Quality:                      |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Program                         | 304      | 319   | 319   | 0     |
| Level                           |          |       |       |       |
| \...\...\...\...\...\...\...\.. |          |       |       |       |
| .\...\...\...\...\...\...\..... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Budget                          | 0        | 0     | 0     | 0     |
| Auth                            |          |       |       |       |
| ority\...\...\...\...\...\...\. |          |       |       |       |
| ..\...\...\...\...\...\...\.... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Outlays\...\...\...\.           | 69       | 0     | 0     | 0     |
| ..\...\...\...\...\...\...\...\ |          |       |       |       |
| ...\...\...\...\...\...\...\... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Centers for Medicare & Medicaid |          |       |       |       |
| Services:                       |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Budget                          | 455,511  | 48    | 56    | +8    |
| Auth                            |          | 0,444 | 5,060 | 4,616 |
| ority\...\...\...\...\...\...\. |          |       |       |       |
| ..\...\...\...\...\...\...\.... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Outlays\...\...\...\.           | 448,631  | 48    | 54    | +5    |
| ..\...\...\...\...\...\...\...\ |          | 7,603 | 3,719 | 6,116 |
| ...\...\...\...\...\...\...\... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Administration for Children &   |          |       |       |       |
| Families:                       |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Budget                          | 48,594   | 4     | 4     | -     |
| Aut                             |          | 9,198 | 4,947 | 4,251 |
| hority\*\...\...\...\...\...\.. |          |       |       |       |
| .\...\...\...\...\...\...\..... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| Outlays\...\...\...\.           | 46,125   | 4     | 4     | -62   |
| ..\...\...\...\...\...\...\...\ |          | 7,086 | 7,024 |       |
| ...\...\...\...\...\...\...\... |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
|                                 |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| \* In FY 2004 Temporary         |          |       |       |       |
| Assistance to Needy Families    |          |       |       |       |
| includes \$2 billion for the    |          |       |       |       |
| Contingency Fund to             |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| remain available for five       |          |       |       |       |
| years; and \$500 million for    |          |       |       |       |
| employment achievement bonuses  |          |       |       |       |
| providing                       |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+
| \$100 million peryear to the    |          |       |       |       |
| States.                         |          |       |       |       |
+---------------------------------+----------+-------+-------+-------+

+-----------------------------------+---------+-------+-------+-------+
|                                   | *       | **    | **    | **2   |
|                                   | *[2004] | [2005 | [2006 | 006** |
|                                   | {.under | ]{.un | ]{.un |       |
|                                   | line}** | derli | derli | *     |
|                                   |         | ne}** | ne}** | *[+/- |
|                                   |         |       |       | 2005  |
|                                   |         |       |       | ]{.un |
|                                   |         |       |       | derli |
|                                   |         |       |       | ne}** |
+-----------------------------------+---------+-------+-------+-------+
| Administration on Aging:          |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Budget                            | 1,374   | 1,393 | 1,369 | -24   |
| Authority\...\...\.               |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Outl                              | 1,342   | 1,367 | 1,379 | +12   |
| ays\...\...\...\...\...\...\...\. |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
|                                   |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Health Information and Technology |         |       |       |       |
| Initiative:                       |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Budget                            | 0       | 0     | 75    | +75   |
| Authority\...\...\.               |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Outl                              | 0       | 0     | 39    | +39   |
| ays\...\...\...\...\...\...\...\. |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
|                                   |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Medicare Hearings and Appeals:    |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Budget                            | 47      | 58    | 80    | +22   |
| Authority\...\...\.               |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Outl                              | 47      | 58    | 68    | +10   |
| ays\...\...\...\...\...\...\...\. |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
|                                   |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Departmental Management/Civil     |         |       |       |       |
| Rights/                           |         |       |       |       |
|                                   |         |       |       |       |
| PHSSEF\*:                         |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Budget                            | 2,766   | 2,751 | 2,822 | +71   |
| Authority\...\...\.               |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Outl                              | 2,369   | 2,455 | 3,047 | +592  |
| ays\...\...\...\...\...\...\...\. |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
|                                   |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Office of Inspector General:      |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Budget                            | 39      | 40    | 40    | 0     |
| Authority\...\...\.               |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Outl                              | 21+     | 40    | 40    | 0     |
| ays\...\...\...\...\...\...\...\. |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
|                                   |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Program Support Center            |         |       |       |       |
|                                   |         |       |       |       |
| (Retirement Pay, Medical          |         |       |       |       |
| Benefits, and Misc. Trust Funds): |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Budget                            | 403     | 425   | 444   | +19   |
| Authority\...\...\.               |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Outl                              | 385     | 417   | 454   | +37   |
| ays\...\...\...\...\...\...\...\. |         |       |       |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
|                                   |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Proprietary Receipts:             |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Budget                            | -1,183  | -     | -     | +32   |
| Authority\...\...\.               |         | 1,180 | 1,148 |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Outl                              | -1,183  | -     | -     | +32   |
| ays\...\...\...\...\...\...\...\. |         | 1,180 | 1,148 |       |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Budget                            | \$      | \$58  | \$66  | +7    |
| Authority\...\...\.               | 554,393 | 1,038 | 0,406 | 9,368 |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| *Emergency Response Fund          | *\      | *\$0* | -\$   | -     |
| (Non-                             | $2,818* |       | 2,818 | 2,818 |
| add)\...\...\...\...\...\...\...* |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| *Non-Emergency Relief Fund        | *\$5    | *     | \$66  | +8    |
| (N                                | 51,575* | \$581 | 3,224 | 2,186 |
| on-add)\...\...\...\...\...\....* |         | ,038* |       |       |
+-----------------------------------+---------+-------+-------+-------+
|                                   |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Outl                              | \$      | \$58  | \$64  | +5    |
| ays\...\...\...\...\...\...\...\. | 542,006 | 3,957 | 2,188 | 8,231 |
| ..\...\...\...\...\...\...\...\.. |         |       |       |       |
| .\...\...\...\...\...\...\...\... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
|                                   |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| Full-Time                         | 64,244  | 6     | +6    | -160  |
| Equivalents                       |         | 7,444 | 7,284 |       |
| \...\...\...\...\...\...\...\...\ |         |       |       |       |
| ...\...\...\...\...\...\...\..... |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| *Commissioned Corps Detailed      | *1,005* | *1    | *+1   | 0     |
| Outside HHS\...\...\....*         |         | ,262* | ,262* |       |
+-----------------------------------+---------+-------+-------+-------+
|                                   |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+
| \* Public Health and Social       |         |       |       |       |
| Services Emergency Fund           |         |       |       |       |
+-----------------------------------+---------+-------+-------+-------+

HHS FY 2006 PARTS

(dollars in millions)

to be added

Composition of the HHS Budget

(Dollars in millions)

+----------------------------------+---+---+-------+-------+-------+-------+
|                                  |   |   | **    | **    | **    | **2   |
|                                  |   |   | [2004 | [2005 | [2006 | 006** |
|                                  |   |   | ]{.un | ]{.un | ]{.un |       |
|                                  |   |   | derli | derli | derli | *     |
|                                  |   |   | ne}** | ne}** | ne}** | *[+/- |
|                                  |   |   |       |       |       | 2005  |
|                                  |   |   |       |       |       | ]{.un |
|                                  |   |   |       |       |       | derli |
|                                  |   |   |       |       |       | ne}** |
+----------------------------------+---+---+-------+-------+-------+-------+
|                                  |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Mandatory Programs (Outlays):    |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Medicare\...\...\...\...         |   |   | \$26  | \$29  | \$34  | +5    |
| \...\...\...\...\...\...\...\... |   |   | 5,062 | 0,310 | 0,412 | 0,102 |
| \...\...\...\...\...\...\...\... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Medicaid\...\...\...\...         |   |   | 17    | 18    | 19    | +     |
| \...\...\...\...\...\...\...\... |   |   | 6,231 | 8,497 | 2,718 | 4,221 |
| \...\...\...\...\...\...\...\... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Temporary Assistance for Needy   |   |   | 1     | 1     | 1     | +65   |
| Families\...\...\.....           |   |   | 7,725 | 8,099 | 8,164 |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Foster Care & Adoption           |   |   | 6,340 | 6,474 | 6,561 | +87   |
| Assist                           |   |   |       |       |       |       |
| ance\...\...\...\...\...\...\... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| State Children\'s Health         |   |   | 4,607 | 5,343 | 6,233 | +890  |
| Insurance                        |   |   |       |       |       |       |
| \...\...\...\...\...\...\...\... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Child Support                    |   |   | 3,815 | 3,934 | 4,031 | +97   |
| Enforcement\...\...\...\         |   |   |       |       |       |       |
| ...\...\...\...\...\...\...\.... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Child                            |   |   | 2,695 | 2,718 | 2,718 | 0     |
| Care\...\...\...\                |   |   |       |       |       |       |
| ...\...\...\...\...\...\...\...\ |   |   |       |       |       |       |
| ...\...\...\...\...\...\...\.... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Social Services Block            |   |   | 1,752 | 1,764 | 1,762 | -2    |
| Grant\...\...\...                |   |   |       |       |       |       |
| \...\...\...\...\...\...\...\... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Other Mandatory                  |   |   | 1,113 | 1,373 | 2,038 | +665  |
| Programs\...\...\...             |   |   |       |       |       |       |
| \...\...\...\...\...\...\...\... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Proprietary                      |   |   | [-1,1 | [-1,1 | [-1,1 | [+    |
| R                                |   |   | 83]{. | 80]{. | 48]{. | 32]{. |
| eceipts\...\...\...\...\...\...\ |   |   | under | under | under | under |
| ...\...\...\...\...\...\...\.... |   |   | line} | line} | line} | line} |
+----------------------------------+---+---+-------+-------+-------+-------+
| **Subtotal, Mandatory            |   |   | **\   | **\   | **\   | **    |
| (Outlays                         |   |   | $478, | $517, | $573, | \$56, |
| )\...\...\...\...\...\...\....** |   |   | 157** | 332** | 489** | 157** |
+----------------------------------+---+---+-------+-------+-------+-------+
|                                  |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Discretionary Programs (BA):     |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Food & Drug                      |   |   | \$    | \$    | \$    | +\$50 |
| Administration\...\...\.         |   |   | 1,386 | 1,450 | 1,500 |       |
| ..\...\...\...\...\...\...\..... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Health Resources & Services      |   |   | 6,600 | 6,809 | 5,972 | -     |
| Administration\...\.....         |   |   |       |       |       | \$837 |
+----------------------------------+---+---+-------+-------+-------+-------+
| Indian Health                    |   |   | 2,922 | 2,985 | 3,048 | +\$63 |
| Service\...\...\...\...\...\...  |   |   |       |       |       |       |
| \...\...\...\...\...\...\...\... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Centers for Disease Control and  |   |   | 4,440 | 4,572 | 4,017 | -     |
| Prevention\...\...\...           |   |   |       |       |       | \$555 |
+----------------------------------+---+---+-------+-------+-------+-------+
| National Institutes of           |   |   | 2     | 2     | 2     | +     |
| Health\...\...\.                 |   |   | 7,878 | 8,444 | 8,590 | \$146 |
| ..\...\...\...\...\...\...\..... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Substance Abuse & Mental Health  |   |   | 3,234 | 3,268 | 3,215 | -\$53 |
| Services\...\...\...             |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Agency for Healthcare Research & |   |   | 0     | 0     | 0     | \$0   |
| Quality\...\...\...              |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| *AHRQ Program Level              |   |   | *304* | *319* | *319* | \$0   |
| (No                              |   |   |       |       |       |       |
| n-Add)\...\...\...\...\...\....* |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Centers for Medicare & Medicaid  |   |   | 2,963 | 3,267 | 3,257 | -\$10 |
| Services\...\...\....            |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Administration for Children &    |   |   | 1     | 1     | 1     | -     |
| Families\...\...\...\...\.....   |   |   | 3,356 | 3,845 | 3,126 | \$719 |
+----------------------------------+---+---+-------+-------+-------+-------+
| Administration on                |   |   | 1,374 | 1,393 | 1,369 | -\$24 |
| Aging\...\...\...\...\.          |   |   |       |       |       |       |
| ..\...\...\...\...\...\...\..... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Office of the                    |   |   | 442   | 451   | 434   | -\$17 |
| Secretary\*\...\...\...\...\.    |   |   |       |       |       |       |
| ..\...\...\...\...\...\...\..... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Health Information               |   |   | 0     | 0     | 75    | +\$75 |
| Technology\...\                  |   |   |       |       |       |       |
| ...\...\...\...\...\...\...\.... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Medicare Hearings and            |   |   | 47    | 58    | 80    | +\$22 |
| Appeals\.                        |   |   |       |       |       |       |
| ..\...\...\...\...\...\...\..... |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| PHSSEF\...\...\...\...           |   |   | [2,1  | [2,3  | [2,4  | [+\$  |
| \...\...\...\...\...\...\...\... |   |   | 64]{. | 39]{. | 28]{. | 89]{. |
| \...\...\...\...\...\...\...\... |   |   | under | under | under | under |
|                                  |   |   | line} | line} | line} | line} |
+----------------------------------+---+---+-------+-------+-------+-------+
| **Subtotal, Discretionary        |   |   | **    | **    | **    | **    |
| (BA)\.                           |   |   | \$66, | \$68, | \$67, | -\$1, |
| ..\...\...\...\...\...\...\...** |   |   | 806** | 882** | 112** | 771** |
+----------------------------------+---+---+-------+-------+-------+-------+
|                                  |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| Medicare Eligible Healthcare     |   | 2 |       | 33    | 34    | +\$1  |
| Accruals (Com. Corps)\...\....   |   | 7 |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
|                                  |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| **Total, Discretionary           |   |   | **    | **    | **    | **    |
| (BA)\*\*\..                      |   |   | \$66, | \$68, | \$67, | -\$1, |
| .\...\...\...\...\...\...\....** |   |   | 833** | 915** | 146** | 770** |
+----------------------------------+---+---+-------+-------+-------+-------+
|                                  |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| **Subtotal, Discretionary        |   |   | **    | **    | **    | *     |
| (                                |   |   | \$63, | \$66, | \$68, | *\$2, |
| Outlays)\...\...\...\...\.....** |   |   | 849** | 625** | 699** | 074** |
+----------------------------------+---+---+-------+-------+-------+-------+
|                                  |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| **Total, HHS                     |   |   | **\   | **\   | **\   | **+   |
| Outlays\...\...\...\...\...\.    |   |   | $542, | $583, | $642, | \$58, |
| ..\...\...\...\...\...\...\...** |   |   | 006** | 957** | 188** | 231** |
+----------------------------------+---+---+-------+-------+-------+-------+
|                                  |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| \* Including the Office of the   |   |   |       |       |       |       |
| Inspector General and the Office |   |   |       |       |       |       |
| for Civil Rights                 |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| \*\*Discretionary amounts shown  |   |   |       |       |       |       |
| reflect adjustments for          |   |   |       |       |       |       |
| comparability and services       |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+
| provided by other agencies in    |   |   |       |       |       |       |
| support of Medicare.             |   |   |       |       |       |       |
+----------------------------------+---+---+-------+-------+-------+-------+

OVERVIEW OF THE FDA BUDGET

(numeric table)

  --------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------
                                                                                                                                                                                                               **2006**

                                                                                                                                    **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**   **[+/-
                                                                                                                                                                                                               2005]{.underline}**

  **Salaries & Expenses:**                                                                                                                                                                                     

  Foods\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                 \$465                    \$495                    \$522                    +\$28

  Animal Drugs and Feeds\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                           105                      115                      118                      +3

  Human Drugs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                             513                      537                      556                      +19

  Biologics\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                    180                      184                      191                      +7

  Medical Devices\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                               252                      277                      289                      +12

  National Center for Toxicological Research\...\...\...\...\.....                                                                  40                       40                       41                       +1

  Field Inspections and Analysis (non-add)\...\...\...\...\...\....                                                                 535                      560                      590                      +30

  Other Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                             124                      124                      127                      +3

  FDA Consolidation at White Oak\...\...\...\...\...\...\...\...\...\...\....                                                       2                        21                       22                       +1

  Export/Certification Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                         [7]{.underline}          [7]{.underline}          [8]{.underline}          [+1]{.underline}

  **Subtotal, Salaries & Expenses\...\...\...\...\...\...\...\...\...\...\....**                                                    **\$1,688**              **\$1,801**              **\$1,874**              **+\$73**

  Buildings and Facilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                      7                        0                        +7                       +7

                                                                                                                                                                                                               

  **Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....**                                        **\$1,695**              **\$1,801**              **\$1,881**              **+\$81**

                                                                                                                                                                                                               

  **[Less User Fees]{.underline}:**                                                                                                                                                                            

                                                                                                                                                                                                               

  Prescription Drug User Fee Act (PDUFA)\...\...\...\...\...\....                                                                   -\$250                   -\$284                   -\$305                   -\$21

  Medical Device User Fees (MDUFMA)\...\...\...\...\...\...\.....                                                                   -32                      -34                      -40                      -6

  Animal Drugs User Fee Act (ADUFA) \...\...\...\...\...\...\...\...                                                                -5                       -8                       -11                      -3

  Mammography Quality Standards Act (MQSA)\...\...\...                                                                              -17                      -17                      -17                      0

  Export/Certification Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                         [-7]{.underline}         [-7]{.underline}         [-8]{.underline}         [-1]{.underline}

  **Subtotal, User Fees\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                                   **-\$310**               **-\$350**               **-\$381**               **-\$31**

                                                                                                                                                                                                               

  **Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\.....**                                                     **\$1,386**              **\$1,450**              **\$1,500**              **+\$50**

                                                                                                                                                                                                               

  **Biodefense (non-add):**                                                                                                                                                                                    

  *Food Defense\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....*                           *\$116*                  *\$150*                  *\$180*                  *+\$30*

  *Medical Product Countermeasures\...\...\...\...\...\...\...\...\...\...*                                                         *53*                     *57*                     *57*                     *0*

  *Security\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...*                *[7]{.underline}*        *[7]{.underline}*        *[7]{.underline}*        *[0]{.underline}*

  *Subtotal, Biodefense (non-add)\...\...\...\...\...\...\...\...\...\...*                                                          *\$175*                  *\$214*                  *\$244*                  *+\$30*

                                                                                                                                                                                                               

  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...   10,210                   10,446                   10,242                   -204
  --------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------

Food and Drug administration

The Food and Drug Administration protects the public health by assuring
the safety, efficacy, and security of human and veterinary drugs,
biological products, medical devices, our nation\'s food supply,
cosmetics, and products that emit radiation. The FDA also advances the
public health by helping to speed innovations that make medicines and
foods more effective, safer, and more affordable; and helping the public
get the accurate, science-based information they need to use medicines
and foods to improve health.

The FY 2006 budget request for the Food and Drug Administration (FDA) is
\$1.9 billion, a program level increase of \$81 million over FY 2005 and
\$614 million over FY 2001. Of the funds requested, the budget proposes
\$1.5 billion in budget authority, while \$381 million will be derived
from industry-specific user fees. Significant increases are included to
secure our nation\'s food supply from the risks of contamination and for
the Office of Drug Safety to ensure the safety and effectiveness of
approved drugs already on the market. The budget also supports increased
funding for the premarket review of medical devices as well as drugs and
biologics, while continuing to provide funding for the FDA consolidation
at White Oak and restoring FDA-wide facilities repair funds.

Protecting the Food Supply

Since 9/11, FDA has strengthened the nation\'s defenses against the risk
of deliberate contamination of our food supply. Approximately 80 percent
of our country\'s food is under FDA\'s direct regulatory oversight, and
the agency has committed substantial effort and resources to combat
threats prior to the occurrence of a terrorist event.

In FY 2006, FDA will continue to ensure consumers are protected against
intentional and accidental risks that threaten our food supply. Within
the FY 2006 budget, the Foods program requests a total of \$522 million,
a \$28 million increase over FY 2005 devoted to food defense. The Animal
Drugs and Feeds program protects the health and safety of all food
producing, companion, or other non-food animals; and assures that food
from animals is safe for human consumption. This program is responsible
for ensuring the availability of safe and effective veterinary drugs and
has the primary role in Bovine Spongiform Encephalopathy (BSE) or \"Mad
Cow\" disease prevention efforts. The budget includes \$118 million in
the Animal Drugs and Feeds program, a \$3 million increase over FY 2005.

**Food Defense:** The FY 2006 budget requests a \$30 million increase
over FY 2005, for a total of \$180 million devoted to protecting the
American people against attacks on the national food supply. This
request is a part of a continuing effort with the Department of
Agriculture (USDA) and the Department of Homeland Security (DHS) to
coordinate all strategies used to combat the threat of intentional food
contamination. Within the increase, \$20 million will be directed to
enhance the laboratory surge capacity and national coverage of the Food
Emergency Response Network (FERN). FERN is a nationwide network of
Federal and State laboratories dedicated to testing for biological,
chemical and radiological threat agents. While FDA and USDA are building
FERN surge capacity, the agency will continue work with DHS to award new
funds to existing State labs in geographic regions with the greatest
need according to current threat assessments. The budget request will
dramatically increase FDA\'s ability to rapidly test threat agents and
respond to terrorist attacks.

In addition to laboratory preparedness, \$6 million of this request will
fund research based on food vulnerability threat assessments developed
in collaboration with USDA. This research will focus on closing
mission-critical knowledge gaps in food defense through development of
technologies able to detect and prevent threats to the food supply. FDA
will continue its support of the government-wide biosurveillance effort
with a \$3 million increase, for a total of \$5 million dedicated to
providing the earliest possible detection of the intentional release of
deadly pathogens into food, water, or the environment. This increase
will help coordinate existing food surveillance capabilities with public
health and environmental officials at the State and national levels
under a unified system. Finally, \$1 million of the request will be used
for central response coordination through the Office of Crisis
Management.

**Animal Drugs Premarket Review:** The budget includes \$11 million
derived from industry-specific fees, an increase of \$3 million over FY
2005. These funds will allow FDA to improve review times on 90 percent
of original new animal drug applications by 40 days, while maintaining
the safety of approved animal drugs.

Human Drugs and Biologics

In FY 2006, the budget includes \$747 million for the Human Drugs and
Biologics, an increase of \$19 million for the Human Drugs program and
an increase of \$7 million in the Biologics program. Of the total
spending on these activities, \$288 million will be from
industry-specific user fees. These funds will ensure the safety and
efficacy of new and existing human drugs and biologics -- helping to
make medicines safer, more affordable and more available. All new drugs
will be evaluated for safety and efficacy before entering the market,
and monitoring efforts will be directed toward the 10,000 drugs that are
already on the market to be sure they continue to meet the highest
standards of safety and efficacy. In addition, existing and emerging
biological products, including whole blood and blood products; vaccines;
and therapeutic products, including cells, gene therapies, and tissues
will be assessed for safety and effectiveness. In FY 2004, FDA approved
534 new and generic drugs and biological products, many of which
represent significant therapeutic advances.

**Drug Safety:** The budget includes an increase of \$6.5 million,
including \$1.5 million in PDUFA user fees, over FY 2005 for the Office
of Drug Safety, for a total of \$33 million. This represents a 147
percent increase in funds for this office since FY 2001. With increased
resources in FY 2006, FDA plans to hire additional staff to increase
personnel dedicated to evaluating and communicating drug safety risks to
the healthcare community and the American Public. FDA also plans to use
additional staff to establish policies and processes regarding safety
reviews and risk management, manage increased drug safety monitoring
workload and internal communications, and increase scientific expertise
available to explore safety risks and signals in various populations.
Further, FDA intends to apply more funding to obtaining access to a wide
range of clinical, pharmacy and administrative databases. Given the
highly fragmented healthcare system in the United States, there is no
single healthcare database that the Agency can rely upon to widely
monitor drug adverse events. As each drug has its own indication(s) that
may result in its differential use in different populations, it is
essential that the Center for Drug Evaluation and Research have access
to a wide range of databases to adequately assess drug safety.

FDA will continue its efforts to improve the timeliness and availability
of drug safety information and will seek alternative strategies for
managing drug safety issues. FDA will also increase the use of external
experts in evaluating post-marketing safety issues. The agency\'s
actions will be harmonized with the emerging results of an Institute of
Medicine (IOM) Study of the Drug Safety System. The IOM committee
conducting this study will examine the role of FDA within the health
care delivery system and recommend measures to enhance the confidence of
Americans in the safety and effectiveness of their drugs.

**Prescription Drug User Fee Act (PDUFA):** The budget includes \$305
million from the Prescription Drug User Fee Act (PDUFA) fees, of which
\$279 million is available for the Human Drugs and Biologics programs
and the remaining \$26 million for costs related to the management and
operations of the program. During renegotiation of the PDUFA agreement
in 2002, FDA sought and received the statutory authority to expend user
fees on postmarket risk management. The PDUFA program has since
substantially increased the amount of funds devoted to maintaining the
safety standards essential to the public\'s health. These fees have also
enabled the provision of more technical assistance, advice, and rapid
responses to special inquiries during the drug development period and
after drugs are approved for sale. As a result, industry has been able
to shorten the time needed for drug development and continually improve
the safety profile of marketed drugs.

Medical Devices

The FY 2006 budget includes an increase of \$12 million, for a total of
\$289 million to ensure medical devices are safe and effective. This
level of funding is consistent with the intent of the Medical Devices
User Fee and Modernization Act of 2002 (MDUFMA), which provides a total
of \$40 million in industry-specific user fees for devices work across
FDA.

This request for the Medical Devices program will lead to marked
improvement in application review performance while maintaining the
consistent quality and safety of approved medical device products. In FY
2006, FDA expects to meet goals stipulating that the agency must review
and make decisions on 80 percent of all original premarket medical
device applications within 150 and 320 days respectively. These are the
most challenging review goals to date, with goals becoming even more
ambitious in FY 2007. Additional funding will also be directed towards
medical device postmarket safety efforts. MDUFMA fees contribute to the
evaluation of postmarket studies required as a condition of medical
device approval, and the compilation, development, and review of
postmarket information to identify safety and effectiveness issues.

Facilities

Headquarters Consolidation:

The FY 2006 budget request includes a total of \$22 million in resources
directed to move and fit out costs for the new FDA consolidated facility
the General Services Administration (GSA) is constructing in White Oak,
MD. This funding is needed for completion of the project\'s next phase,
which includes the Center for Devices and Radiological Heath (CDRH)
Engineering and Physics Laboratory and the data center consolidation.
These resources will be directed to relocation costs, including move and
fit-out of the CDRH lab and communications and data equipment for the
consolidated data center. The FY 2006 GSA budget includes \$128 million
primarily for construction of the second of two Center for Drug
Evaluation and Research buildings to be occupied in FY 2007 and the
second phase of construction for the consolidated data center.

Buildings and Facilities:

In FY 2006, the budget seeks \$7 million to pay for repair and
maintenance for FDA-owned facilities nation-wide. FDA inventory includes
approximately 40 buildings in 16 separate locations, plus field offices
and newly established BSL-3 laboratories. Funding was paused in FY 2005,
as FDA utilized carryover balances from the prior year to pay for
facility repair.

Management Improvements

In FY 2006, FDA proposes a budget structure change in order to enhance
the agency\'s ability to respond to emerging situations without being
hindered in performing mission critical activities. The two major
changes are the establishment of a single budget line item for the
agency\'s field inspection and analysis activities (Office of Regulatory
Affairs), and changing the display and management of facility rent costs
by incorporating rental expenses into program estimates. By making these
alterations, the budget will allow greater flexibility in how resources
are allocated in response to crisis situations, eliminate the need for
many reprogramming requests to Congress, and more accurately portray the
cost of operating each program.

FDA will also seek management efficiencies through a \$5 million
streamlining of information technology efforts and a \$1.5 million
administrative reduction.

To accomplish this, the agency will spur consolidation of information
technology activities and reduce administrative expenses outside the
user fee-funded areas. Both of these management improvements support the
President\'s Management Agenda.

Overview of the HRSA budget\
numeric table (dollars in millions)

  --------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------
                                                                                                                                                                                                                                 **2006**

                                                                                                                                                      **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**   **[+/-
                                                                                                                                                                                                                                 2005]{.underline}**

                                                                                                                                                                                                                                 

  Health Centers\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....             \$1,618                  \$1,734                  \$2,038                  +\$304

  *(Health Center Judgment Fund - non-add)\...\...\...\...\...\...\...\...\...\...\...\...\...\.....*                                                 *45*                     *45*                     *45*                     *0*

  Free Clinics Medical Malpractice Coverage\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                         5                        0                        0                        0

  Healthy Community Access Program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                      83                       83                       0                        -83

  Nurse Training Programs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                        142                      151                      150                      -1

  National Health Service Corps\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                           170                      132                      127                      -5

  Health Professions Training Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                 245                      252                      0                        -252

  Scholarships for Disadvantage Students/Workforce Information & Analysis\...                                                                         48                       48                       11                       -37

  Children\'s Hospitals Graduate Medical Education\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                            303                      301                      200                      -101

  Bioterrorism Hospital Preparedness\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                 515                      491                      483                      -8

  Bioterrorism Medical Training, Curriculum Development\...\...\...\...\...\...\...\...\...\....                                                      28                       28                       28                       0

  Ryan White HIV/AIDS Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                 2,065                    2,073                    2,083                    +10

  *(AIDS Drug Assistance Program - non-add)\...\...\...\...\...\...\...\...\...\...\...\...\.....*                                                    *749*                    *788*                    *798*                    *+10*

  Rural Health\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....          142                      144                      29                       -115

  Maternal and Child Health Block Grant\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                     730                      724                      724                      0

  Healthy Start\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....          98                       102                      97                       -5

  Family Planning\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...             278                      286                      286                      0

  Traumatic Brain Injury\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                    9                        9                        0                        -9

  Poison Control\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....            24                       23                       23                       0

  EMS for Children\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....               20                       20                       0                        -20

  Organ Transplantation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                   25                       24                       23                       -1

  Bone Marrow Donor Registry\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                              23                       26                       23                       -3

  Cord Blood Stem Cell Bank\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                          10                       10                       0                        -10

  Telehealth\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....        4                        4                        4                        0

  Black Lung/Radiation Exposure Compensation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                              8                        8                        8                        0

  Hansen\'s Disease Services Programs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                   20                       20                       19                       -1

  Health Care Facilities/Other Improvement Projects\...\...\...\...\...\...\...\...\...\...\...\...\...                                               371                      483                      0                        -483

  State Planning Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                  15                       11                       0                        -11

  Universal Newborn Hearing Screening/Trauma/Sickle Cell\...\...\...\...\...\...\...\...\....                                                         13                       13                       0                        -13

  Program Management\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                      155                      153                      151                      -2

  National Practitioner Data Bank (User Fee)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                         16                       16                       16                       0

  Health Integrity & Protection Data Banks (User Fee)\...\...\...\...\...\...\...\...\...\...\.....                                                   [4]{.underline}          [4]{.underline}          [4]{.underline}          [0]{.underline}

  **Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                            **\$7,187**              **\$7,373**              **\$6,527**              **-\$846**

  [Less Funds Allocated From Other Sources:]{.underline}                                                                                                                                                                         

  User Fees\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....             -20                      -20                      -20                      0

  PHS Evaluation Funds (Ryan White)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                         -25                      -25                      -25                      0

  Public Health and Social Service Emergency Fund\...\...\...\...\...\...\...\...\...\...\...\....                                                    [-543]{.underline}       [-519]{.underline}       [-511]{.underline}       [+8]{.underline}

  Subtotal, Funds from Other Sources\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                         -588                     -564                     -555                     +8

  **Total, Discretionary Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                                               **\$6,599**              **\$6,809**              **\$5,972**              **-\$838**

  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   1,878                    2,034                    2,002                    -32
  --------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------

Health Resources and Services administration

The Health Resources and Services Administration provides national
leadership, program resources, and services needed to improve access to
culturally competent, quality health care.

The FY 2006 budget requests \$6.5 billion for the Health Resources and
Services Administration (HRSA), a net decrease of \$846 million from the
FY 2005 level. HRSA is the principal Federal agency charged with
increasing access to basic health care for those who are medically
underserved. HRSA\'s portfolio of programs and initiatives focus on
services through health centers, the Ryan White CARE Act programs,
placing physicians in underserved areas, maternal and child health
programs, and support for the next generation of nurses. Collectively,
these and other programs provide direct services to improve access to
care for more than 20 million uninsured or underserved individuals. The
HRSA budget supports programs that have shown success in providing
direct health care and reduces or eliminates funding for programs that
have failed to demonstrate results or are similar to other activities.

Expanding Access to Quality Health Care

**Health Centers:** The budget will complete the President\'s commitment
to create 1,200 new or expanded health center sites to serve an
additional 6.1 million people by 2006. A total of 2.4 million additional
individuals will receive health care in 2006 through 578 new or expanded
sites in rural areas and underserved urban communities. In addition, the
President has established a new goal to help every poor county in
America in need that lacks a health center and can support one. The
budget includes \$26 million to fund 40 new health center sites in high
poverty counties. A total of \$2.0 billion is requested for the Health
Centers program, \$304 million over the FY 2005 level.

By the end of FY 2006, the Health Centers program will deliver
high-quality, affordable primary and preventive health care to over 16
million patients at more than 4,000 sites across the country. In 2006,
health centers will serve an estimated 16 percent of the Nation's
population who are at or below 200 percent of the Federal poverty level.

Health centers are effectively targeted to eliminate health disparities
and provide a range of essential services. Forty percent of health
center patients have no health insurance and 64 percent are racial or
ethnic minorities. Further, 83 percent of health centers provide
pharmacy services on site or by paid referral, 83 percent provide
preventive dental care, and 74 percent provide mental health and
substance abuse services.

In 2004, it is estimated that health centers will employ approximately
8,300 physicians and dentists and 15,500 other health care clinicians
including nurse practitioners and midwives -- 33 percent more physicians
and dentists than in FY 2001, and almost 30 percent more clinicians. The
budget request includes \$45 million in no-year funding for the Health
Centers Federal Tort Claims Program, which provides medical malpractice
coverage for the increasing number of health center employees.

**OPEN BAR CHART**

**The FY 2006 request completes the President's initiative to expand
access to health care for the uninsured and underserved by creating
1,200 new or expanded health center sites and serving 6.1 million more
people.**

**First bar chart shows the Goal for 1,200 New or Expanded site in years
2002, 2004, and 2006. The goal is exceed in 2006 with 1,350 new or
expanded sites.**

**The second bar chart shows the Goal for patients served at 6.1
million. The Goal is reached in 2006 with 6.1 million patients served.**

**END BAR CHART**

**Ryan White, HIV/AIDS:** The Ryan White CARE Act provides services to
approximately 571,000 individuals each year with little or no insurance.

The FY 2006 request provides a total of \$2.1 billion for Ryan White
activities to ensure a comprehensive approach to address the health
needs of persons living with HIV/AIDS. In 2004, the President
articulated his commitment to reauthorize the Ryan White CARE Act by
outlining key principles to strengthen this legislation. These
principles include prioritizing lifesaving services for individuals
living with HIV/AIDS, including HIV/AIDS medications and primary care;
providing more flexibility to target resources to areas that have the
greatest needs; and, encouraging the participation of any provider,
including faith-based and other community organizations that show
results, recognizing the need for State and local planning and ensuring
accountability by measuring progress. The request will support a
comprehensive approach to address the health needs of persons living
with HIV/AIDS, consistent with the reauthorization principles.

**OPEN TEXT BOX**

Ryan White CARE Act Accomplishments

-   AIDS mortality has decreased as lives have been extended with
    HIV/AIDS medications -- many of which have been purchased through
    the AIDS Drug Assistance program.

-   Ryan White CARE Act grantees have served clients who reflect the
    demographics of the epidemic; data shows that the disease now
    disproportionately impacts minority communities.

-   Comprehensive approaches have been developed all across the country
    recognizing that HIV/AIDS now affects all States, urban, suburban,
    and rural communities.

**CLOSE TEXT BOX**

**Maternal and Child Health Block Grant:** The budget provides \$724
million for the Maternal and Child Health (MCH) Block Grant. The MCH
Block Grant supports Federal and State partnerships that provide
gap-filling prenatal health services to more than 2.5 million women and
primary and preventive care to more than 22.7 million children,
including over 1.1 million children with special health care needs.
These services include direct health care services for children with
special health care needs, the promotion of health and safety in child
care settings, and enabling services such as home visiting and nutrition
counseling.

**Family Planning:** The budget maintains the FY 2005 level of \$286
million for Family Planning. This program supports a network of more
than 4,500 clinics nationwide that provide access to a wide array of
reproductive health care and preventive health care services, such as
pap tests and breast exams to nearly five million people, primarily
low-income women. Counseling and education regarding abstinence are
required for all adolescent clients in this program.

**Healthy Start and Poison Control:** The request includes \$97 million
for the Healthy Start program, which supports community driven programs
in targeted high risk communities to reduce the incidence of risk
factors that contribute to infant mortality. The budget also includes
\$23 million for the Poison Control program, which this year\'s
Performance Assessment Rating Tool (PART) assessment found, has
demonstrated progress in reducing emergency room visits due to
poisoning, its long term goal.

Developing A Health Professions Workforce for the 21st Century

Today, the Nation faces a shortage of approximately 150,000 nurses in
our hospitals and other health care facilities. As the population
continues to grow and age and medical services advance, the need for
nurses will continue to increase. A report issued by the Department in
2002, Projected Supply, Demand, and Shortages of Registered Nurses:
2000-2020, predicted that the nursing shortage is expected to grow to 29
percent by 2020, compared to a 6 percent shortage in 2000.

The budget requests \$150 million for nursing education programs, an
increase of almost 80 percent since FY 2001. Within this total is a \$10
million, or nearly 30 percent, increase over last year for grants to
increase the number of baccalaureate prepared nurses and to improve the
quality of nursing practice for those already in the workforce through
education, practice, and retention grants. At this level, approximately
40 new grants will be awarded.

The request provides \$31 million to support approximately 860 loan
repayments and scholarships that will reduce the financial barrier to
nursing education for all levels of professional nursing students. The
budget also includes \$21 million for nursing workforce diversity, \$43
million for advanced nursing education, and maintains over \$8 million
in loans for nurse faculty and support for comprehensive geriatric
education. These programs will support the recruitment, education, and
retention of an estimated 10,700 nurses and nursing students.

Approximately 53 million people reside in communities without access to
primary health care due to financial, geographic, cultural, language,
and other barriers. Since 1972 when the first 20 clinicians were
assigned to serve in underserved communities, the National Health
Service Corps (NHSC) has made nearly 26,000 health professionals
available to serve in underserved areas across the country. In addition,
the NHSC works with the Health Center program to help meet its provider
needs. Currently, half of NHSC clinicians serve in health centers. The
budget maintains the current field strength of more than 4,000
clinicians in 2006. Through the enactment of the American Jobs Creation
Act of 2004, HRSA will no longer reimburse loan repayment recipients for
the tax payment. The FY 2006 request includes \$127 million for the NHSC
program.

The budget provides \$200 million for the Children\'s Graduate Medical
Education program. This level will provide children\'s hospitals with
substantial resources to train doctors. In 2006, hospitals will receive
an estimated per resident payment of \$51,145 to support a total of
about 4,100 medical interns, residents, and fellows in 61 children\'s
teaching hospitals.

In addition, the request includes \$10 million for the Scholarships for
Disadvantaged Students program. In 2006, this program will support 2,893
scholarships.

Preparing America\'s Health Care System and Providers for Bioterrorism

The Hospital Preparedness program directly supports States' efforts to
enhance their capability to provide critical emergency care to
America\'s populations in response to acts of terrorism and other public
health emergencies. The budget requests \$483 million in FY 2006 to
continue progress towards the goal of 100 percent of States having the
necessary surge capacity plans, including elements of the health care
provider workforce and pharmaceutical and laboratory services. As of the
end of 2004, 89 percent of States had reached the goal of having plans
in place.

In FY 2006, HHS will emphasize performance objectives in relation to the
risks and consequences of terrorism. As part of the National
Preparedness Goal called for by Homeland Security Presidential Directive
8, HHS is developing performance metrics to help ensure that hospitals
and public health departments are emergency ready. These metrics focus
on receipt of emergency case reports, incident reporting, laboratory
agent testing, patient care, and increasing surge capacity.

Within the \$483 million, \$25 million is included to create a
state-of-the-art emergency care capability designed to respond to a
terrorist attack or other incident requiring mass casualty care and/or
containment of infectious agents, in one or more metropolitan areas.
Funds would be awarded competitively based on, among other factors,
threat analysis, quality of design and operational plan, and financial
sustainability of the project beyond the Federal funding period.

In addition, HRSA will continue to define a system to ensure that
volunteer health professionals are able to respond in the event of a
mass casualty event. The Emergency System for Advance Registration of
Volunteer Healthcare Personnel is a State-based system, which allows for
the pre-registration of volunteer healthcare personnel who wish to
respond to an emergency or mass casualty event. The system will enable
users to verify the license and other credentials of volunteer health
providers.

The budget also includes \$28 million for Bioterrorism Training and
Curriculum Development to prepare health care providers across the
Nation stand ready for a bioterrorism event. The program includes two
components: continuing education for health professionals, funded at
\$25 million; and curriculum development in health professions schools,
funded at \$3 million.

Supporting Transplantation

This year celebrates the 50th anniversary of the first successful organ
transplant in Boston, Massachusetts. Moving forward from the successes
achieved since that first kidney transplant, President Bush signed the
Organ Donation and Recovery Improvement Act of 2004 which builds on
existing efforts, including the Organ Donation Breakthrough
Collaborative and the Gift of Life initiative. The budget includes \$23
million to support the Organ Transplantation program.

Consistent with this new authority, HRSA will provide grants to
qualified organ procurement organizations to support the coordination of
organ donation activities; fund the development and implementation of a
program to provide reimbursement for subsistence expenses to donating
individuals who lack the resources to pay for these expenses; and
provide grants to States to develop and improve donor registries. This
year, a PART assessment found that the Organ Transplantation program
balances the benefits of a system operated by a private organization,
the transplantation network, with the need for Federal oversight to
ensure public accountability for use of the limited number of deceased
donor organs.

The FY 2006 budget requests \$23 million to for the National Bone Marrow
Donor Registry, which enables patients to search for a suitable,
unrelated bone marrow donor. This year, a PART assessment found the
National Bone Marrow Donor Registry program to be effective at
increasing recruitment and the number of donors on the Registry. The
budget does not seek additional funding for the Cord Blood Stem Cell
Bank. Almost \$20 million will be available to implement the program
when the Institute of Medicine (IOM) completes a study on the optimal
design for this new effort in 2005. By the end of FY 2006, approximately
19,000 new cord blood units will be added to the National inventory,
representing an increase of 24 percent over the current level of
approximately 80,000 units.

Eliminating Underperforming Programs

This budget represents a thoughtful analysis of overall available
resources. Funding for programs which are similar to other activities or
have failed to demonstrate results is reduced or eliminated and priority
is given to support more targeted efforts to provide direct health
services. In addition, the request eliminates nearly \$483 million in FY
2005 one-time projects, representing almost half of the reduction from
the FY 2005 level.

A number of HRSA programs are unable to demonstrate outcomes or provide
services similar to other programs. This year, PART reviews found that
the Traumatic Brain Injury program did not document an impact on
improving the health or well being of individuals with traumatic brain
injury and that the Emergency Medical Services for Children program was
unable to demonstrate meaningful results. The Traumatic Brain Injury and
Emergency Medical Services for Children programs are not funded in FY
2006.

The recently enacted Medicare Prescription Drug, Improvement, and
Modernization Act will mean greater access to hospitals, health
professionals, and other medical services for rural seniors. The budget
reduces \$115 million in HRSA rural programs which were found to be
similar to numerous other HHS programs that provide resources to rural
areas.

The budget refocuses resources on programs that provide direct services
to communities in need, including through the Health Centers program.
Since FY 2001, over \$400 million has been awarded to Healthy
Communities Access Program grantees to improve coordination and quality
of health care; however, only 15 percent of those funds can be used for
direct services. Similarly, over the same time period, \$60 million has
been awarded to allow States to develop plans to increase health
insurance coverage through the State Planning Grant program. Funding for
these programs is not included in the FY 2006 budget. In addition, the
Universal Newborn Hearing program is not funded in FY 2006. The primary
purpose of this program is not to finance screenings, but rather
state-wide efforts to manage and track newborn screening activities and
for training. The Maternal and Child Health Block Grant provides States
with the flexibility to fund these activities.

The budget maintains support for nursing programs and health workforce
information and analysis, and funds scholarships for disadvantaged
students. A previous PART assessment found that, after 40 years of
funding, Health Professions programs have not demonstrated an impact on
placing health professionals in underserved areas. Based on this
determination, the Admini-stration proposes the elimination of most
health professions grants in order to direct resources to activities
that are capable of placing health care providers in medically
underserved communities.

Program Management and Other Activities

The budget requests \$151 million for program management. Resources will
enable HRSA to manage and operate a wide array of Federal programs as
well as to fund Federal pay cost increases. The budget includes a total
administrative cost savings of \$12 million including \$5 million from
the National Health Services Corps and \$4 million from transplantation
programs.

The request also includes \$30 million for Telehealth, Hansen\'s
Disease, Black Lung, and Radiation Exposure Compensation.

INDIAN HEALTH SERVICE OVERVIEW

NUMERIC TABLE

  ------------------------------------------------------------------------------------------------------------------ ------------------------ ------------------------ ------------------------ ---------------------
                                                                                                                                                                                                **2006**

  \`                                                                                                                 **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**   **[+/-
                                                                                                                                                                                                2005]{.underline}**

  Indian Health Service:                                                                                                                                                                        

  Clinical Services\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                        \$2,653                  \$2,723                  \$2,851                  +\$128

  *Contract Health Services (Non-Add)\...\...\...\.....*                                                             *479*                    *498*                    *525*                    *+27*

  Preventive Health\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                            107                      110                      119                      +9

  Contract Support Costs\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                    267                      264                      269                      +5

  Tribal Management/Self-Governance\...\...\...\...\...\.....                                                        8                        8                        8                        0

  Urban Health\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                      32                       32                       33                       +1

  Indian Health Professions\...\...\...\...\...\...\...\...\...\...\...\...\...                                      31                       30                       31                       +1

  Direct Operations\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                          61                       62                       63                       +1

  Diabetes Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                        [150]{.underline}        [150]{.underline}        [150]{.underline}        [0]{.underline}

                                                                                                                                                                                                

  Subtotal, Services Program Level\...\...\...\...\...\...\.....                                                     \$3,309                  \$3,379                  \$3,524                  +\$145

                                                                                                                                                                                                

  Indian Health Facilities:                                                                                                                                                                     

  Health Care Facilities Construction\...\...\...\...\...\...\.....                                                  \$94                     \$89                     \$3                      -\$86

  Sanitation Construction\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                   93                       92                       94                       +2

  Facilities & Environmental Health Support\...\...\....                                                             138                      142                      151                      +9

  Maintenance & Improvement\...\...\...\...\...\...\...\...\...\...\...                                              55                       55                       56                       +1

  Medical Equipment\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                              [17]{.underline}         [17]{.underline}         [18]{.underline}         [+1]{.underline}

                                                                                                                                                                                                

  Subtotal, Facilities Program Level\...\...\...\...\...\...\....                                                    [\$397]{.underline}      [\$395]{.underline}      [\$322]{.underline}      [-\$73]{.underline}

                                                                                                                                                                                                

  **Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\....**                                  **\$3,706**              **\$3,774**              **\$3,846**              **+\$72**

                                                                                                                                                                                                

  [Less Funds Allocated From Other Sources]{.underline}:                                                                                                                                        

  Health Insurance Collections\...\...\...\...\...\...\...\...\...\...\....                                          -\$628                   -\$633                   -\$642                   -\$9

  Rental of Staff Quarters\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                  -6                       -6                       -6                       0

  Diabetes Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                        -150                     -150                     -150                     0

  **Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\.....**                                      **\$2,922**              **\$2,985**              **\$3,048**              **\$63**

                                                                                                                                                                                                

  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....   15,034                   16,251                   16,251                   0
  ------------------------------------------------------------------------------------------------------------------ ------------------------ ------------------------ ------------------------ ---------------------

Indian Health Service

The Indian Health Service raises the physical, mental, social, and
spiritual health of American Indians and Alaska Natives to the highest
level.

The FY 2006 budget request is \$3.8 billion, a net increase of \$72
million over FY 2005. Indian Health Service (IHS) funding increases are
targeted toward the provision of services to a growing population of
eligible Indian people. IHS will continue to seek ways to become more
efficient and effective in internal operations, helping to leverage
funding towards services while improving service quality.

Agency Description

As part of the Federal government\'s special relationship with Tribes,
IHS provides health care to members of more than 560 Federally
recognized Tribes. An estimated 1.8 million American Indians and Alaska
Natives will be eligible for IHS services in 2006, an increase of 1.6
percent over 2005 and 9.4 percent since 2001.

Care is provided directly in 49 hospitals, over 240 outpatient centers,
and over 300 health stations and Alaska village clinics located
primarily in the Southwest, Oklahoma, the Northern Plains, and Alaska.
Tribes currently operate 15 of the hospitals and 80 percent of the
smaller facilities under self-determination agreements with the Agency.
IHS also contracts with hospitals and health care providers outside of
its own network to provide care for Indian people. In addition to
providing traditional inpatient and ambulatory care, IHS and Tribes
provide extensive disease prevention and health promotion activities,
including sanitation construction to provide water and waste disposal
for Indian homes, diabetes prevention and disease management, injury
prevention, mental health services, and alcohol and substance abuse
treatment and prevention. IHS also funds 34 urban Indian health
organizations which provide access to care for Indians living in urban
areas.

Continuing to Serve a Growing Population

The challenge for IHS is to continue to provide access to quality health
care for an increasing population. Additional funding in the FY 2006
budget is targeted to the provision of additional services.

**Population and the Cost of Providing Care:** The budget includes new
funds to provide for the additional 29,000 people who are expected to
seek services in FY 2006, cover increased pay costs for the Federal and
Tribal employees who provide these services, and meet the rising costs
of providing these servi-ces. Based on past experience, these funds will
pay for a variety of additional services, including 116,000 additional
outpatient visits in IHS and Tribally operated facilities, 7,800
additional outpatient visits purchased from outside the IHS system, and
4,200 additional days of inpatient treatment for alcohol and substance
abuse. Funds will go primarily to Clinical Services -- operation of
hospitals and clinics, purchase of medical care -- but also to other IHS
programs which are providing additional services and are experiencing
increased costs. Tribally operated programs will receive funding on the
same basis as the programs IHS operates directly.

**Opening New Health Facilities:** Additional funds are included to
staff six new outpatient facilities in FY 2006, placing larger and more
modern health facilities in the areas which most need them to provide
additional health services. Tribes have financed construction of two of
these facilities, saving IHS \$22 million in construction costs. When
fully operational, these facilities will increase the number of primary
care visits that can be provided at these sites by nearly 75 percent and
allow the provision of new services -- 24-hour emergency rooms, physical
therapy, wellness centers, upgraded diagnostic imaging and laboratory
services, and expanded dental services. Including these 6 sites, IHS has
opened 13 new health facilities since 2001.

**OPEN TEXT BOX\
Benefits of Improved Blood Control\
**IHS has been able to increase the proportion of its diabetic patients
who maintain good blood sugar control from 25 percent in FY 1997 to 34
percent in FY 2004. This increase is important. NIH-supported clinical
trials have found that an improvement in blood sugar control from poor
to ideal results in a 42 percent decrease in total mortality for people
with diabetes.

This increase was achieved even while the total number of diabetics the
IHS served increased 45 percent during this period.

**CLOSE TEXT BOX**

**Special Diabetes Program for Indians:** Through the Special Diabetes
Program for Indians, IHS provides funds to over 300 Tribes and Indian
organizations. In FY 2006, IHS will award \$150 million -- for a total
of \$650 million in the last five years -- to support diabetes
prevention and disease management at the local level. The program has
substantially increased the availability of services -- physical
activity specialists; registered dieticians and nurses; wellness and
physical activity centers; newer and better medications -- which has led
to a steady increase in the percentage of diabetic patients with ideal
blood sugar control. IHS has recently revised the way it distributes
program funds by adding a competitive element in addition to the
existing formula grant. In November of 2004, IHS awarded \$24 million
competitively, funding 66 Diabetes Program demonstration project grants.
Thirty-six grants were awarded for prevention of diabetes and 30 were
awarded for reduction of cardiovascular disease in people with diabetes.
Successful applicants demonstrated a significant burden of diabetes,
prior demonstrated success at prevention or treatment, the basic health
infrastructure to support planned interventions, and evidence of
successful compliance with past program requirements.

**Urban Indian Health Program:** While most IHS services are provided on
or near reservations, approximately one percent of the budget is used to
provide services to Indian people living in urban areas. Clients of the
Urban Indian program commonly experience barriers in accessing basic
health services; examples of such barriers include poverty, lack of
health insurance, lack of cultural awareness on the part of health
professionals, unemployment, and homelessness. IHS funds a total of 34
Urban Indian health organizations to reduce barriers to access in urban
areas. In FY 2006, Urban Indian health is funded at \$33 million. Urban
Indian health organizations also typically leverage funding in order to
maximize service provision. IHS provides about half of all funding
available to these organizations. Other major funders include Medicaid,
State and local programs, and other Federal programs separate from IHS.
Services provided vary from outreach, referral and case management to
comprehensive care, including: ambulatory medical care; dental services;
community education (health education, transportation, patient
advocacy); alcohol and substance abuse prevention, treatment and
counseling; AIDS and STD information; mental health counseling; and
social services.

**Health Insurance Reimbursements:** In FY 2006, IHS expects to receive
a total of \$642 million in health insurance reimbursements, including
Medicare, Medicaid, and payments from private insurers. This amount
represents an increase of \$9 million over FY 2005 estimated
collections. IHS facilities receive Medicare and Medicaid under a
cost-based methodology developed in close cooperation with the Centers
for Medicare & Medicaid Services. Health insurance collections are an
essential element of the funding that supports IHS hospitals and
clinics. In some cases, insurance revenue represents up to 50 percent of
the operating budget of a given facility. This revenue allows IHS to
hire additional medical staff and supports activities related to
facility operations, such as supplies, equipment, and building utilities
and maintenance.

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA)
included several provisions that benefit the American Indian and Alaska
Native (AI/AN) population. IHS estimates the transitional assistance
credit of \$600 per year for low-income Medicare beneficiaries,
including AI/ANs, could provide \$10 million in new Medicare revenue for
prescription drugs dispensed at IHS facilities in FY 2005. The Medicare
Part D prescription drug benefit program, when implemented in January
2006, will extend outpatient prescription drug coverage to IHS Medicare
beneficiaries and increase Medicare revenues at IHS facilities. Other
sections of the MMA expand the benefits covered under Medicare Part B
for IHS beneficiaries and allow the IHS to pay for additional medical
care by increasing its bargaining power when buying services from
non-IHS Medicare-participating hospitals.

**Construction:** The budget includes a total of \$94 million for
Sanitation Construction to provide safe water and waste disposal systems
to an estimated 20,000 Indian homes. The sanitation program has played a
key role in decreasing the rates of infant mortality, gastroenteritis,
and other environmentally related diseases over the last thirty years.
Consistent throughout HHS, FY 2006 requests for facilities funding focus
on maintenance of existing facilities; no funding is requested to
initiate new projects. A total of \$3 million is included for health
facility construction, sufficient to fully fund the Fort Belknap staff
quarters project. The Fort Belknap project will provide 24 units of new
and 5 units of replacement staff quarters for the Harlem and Hays
outpatient facilities in Montana. Available decent local housing makes
it easier to recruit and retain health professionals at remote sites.

Improving Service Delivery

IHS is continually working to improve its internal operations so as to
target as much funding as possible towards needed services. To this end,
IHS will implement a new organization plan, and continue the
implementation of new information technology to make patient health
records easier to access and track, and to streamline insurance billing
processes.

**Headquarters Reorganization:** Following two years of planning and
tribal consultation, IHS announced a reorganization of its headquarters
in July, 2004. The reorganization eliminated an administrative layer and
moved those offices which had direct contact with Tribes, tribal
organizations, and Urban Indian programs into the Office of the
Director. The goals of the reorganization are: improved management --
with more focus on results rather than oversight; better alignment with
field programs; and improved collaboration between IHS and other HHS
programs -- all leading to improved health care for Indian people.

**Electronic Health Records:** Information technology is vital to
improving the efficiency and quality of health facility operations. By
improving the quality of patient data, facilities are able to both
increase the quality of services and improve operations efficiency. IHS
has been a leader among HHS agencies in the use of information
technology to improve health facility operations. The majority of IHS
facilities currently use a software system that stores patient
information and offers the ability to keep life-long medical records for
patients. This software will be used to create an electronic health
record (EHR) system with clinical case management capabilities for five
diseases prevalent among Indian people: diabetes, coronary vascular
disease, asthma, HIV, and obesity. The EHR will be implemented in 32
sites by the end of 2005 and IHS anticipates full implementation by
2008. The EHR will:

-   Improve patient safety through direct provider order entry;

-   Reduce risk to patients through improved and more legible
    documentation;

-   Strengthen protection of private health information through
    electronic security;

-   Improve quality of care through better documentation of services
    provided to each patient; and

-   Increase cost efficiency through improved billing capabilities.

Indian Self-Determination

Tribes continue to increase the number of IHS programs they operate. In
FY 2006, Tribes will control an estimated \$1.8 billion, or 55 percent
of IHS\'s total budget request. To enable Tribes to develop the
administrative infrastructure critical to their ability to successfully
manage these programs, the budget includes a total of \$269 million for
contract support costs, an increase of \$5 million over FY 2005. The
additional funds will allow IHS to provide contract support costs for
the 20 to 25 additional programs it anticipates Tribes will want to take
over administration of in FY 2006.

As part of the Federal Government\'s special relationship with Tribes,
an HHS-wide budget consultation session is held annually to give Tribal
leaders the opportunity to consult with HHS on budgetary issues which
concern them. In order to bring Indian issues to the attention of all
parts of the department, the Intradepartmental Council on Native
American Affairs was reactivated in 2002. The Council consists of the
heads of all HHS agencies and other senior staff.

**OPEN BAR CHART**

IHS Funds Managed by Tribes

Data is shown as dollars in millions. Funds are demonstrated for FY 2004
(\$1,677 million), FY 2005 (\$1,718), and FY 2006 (\$1,769.)

**CLOSE BAR CHART**

Centers for disease control and Prevention OVERVIEW

Numeric Table

+-----------------------------------+--------+--------+--------+-------+
|                                   | **[2   | **[2   | **[2   | **2   |
|                                   | 004]{. | 005]{. | 006]{. | 006** |
|                                   | underl | underl | underl |       |
|                                   | ine}** | ine}** | ine}** | *     |
|                                   |        |        |        | *[+/- |
|                                   |        |        |        | 2005  |
|                                   |        |        |        | ]{.un |
|                                   |        |        |        | derli |
|                                   |        |        |        | ne}** |
+-----------------------------------+--------+--------+--------+-------+
| [Infectious                       |        |        |        |       |
| Diseases:]{.underline}            |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Infectious                        | 221    | 226    | 225    | -\$1  |
| Diseases\...                      |        |        |        |       |
| \...\...\...\...\...\...\...\...\ |        |        |        |       |
| ...\...\...\...\...\...\...\..... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| HIV/AIDS, STDs & TB               | 964    | 960    | 956    | -4    |
| Prevention\..                     |        |        |        |       |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Immunization:                     |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Current Law:                      |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Section 317 Discretionary         | 469    | 479    | 529    | +50   |
| Program\...\...\...\...\...\....  |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Vaccines For Children Routine     | 1,012  | 1,147  | 1,180  | +33   |
| Vaccinations..                    |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| VFC Stockpiles & Catch-up         | 40     | 488    | 322    | -166  |
| Immunizations\.....               |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Effect of Proposed VFC            |        |        |        |       |
| Improvements:                     |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| V                                 | 0      | 0      | 140    | +140  |
| FC\...\...\...\...\...\...\...\.. |        |        |        |       |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
| \...\...\...\...\...\...\...\.... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Section 317 Discretionary         | [0]    | [0]    | [-100] | [-1   |
| Program\...\...\...\...\...\....  | {.unde | {.unde | {.unde | 00]{. |
|                                   | rline} | rline} | rline} | under |
|                                   |        |        |        | line} |
+-----------------------------------+--------+--------+--------+-------+
| Proposed Law Subtotal,            | \      | \      | \      | -\$42 |
| Immunization\...\...\....         | $1,521 | $2,114 | $2,072 |       |
+-----------------------------------+--------+--------+--------+-------+
| Global                            | 280    | 294    | 306    | +12   |
| Health\...\...\...\...\...\...    |        |        |        |       |
| \...\...\...\...\...\...\...\...\ |        |        |        |       |
| ...\...\...\...\...\...\...\..... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| *Global Disease Detection         | *12*   | *22*   | *34*   | *+12* |
| (non-a                            |        |        |        |       |
| dd)\...\...\...\...\...\...\....* |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| [Bioterrorism:]{.underline}       |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| State and Local                   | 918    | 927    | 797    | -130  |
| Ca                                |        |        |        |       |
| pacity\...\...\...\...\...\...\.. |        |        |        |       |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Upgrading CDC Capacity/Anthrax    | 169    | 157    | 140    | -17   |
| Research\...\...\.....            |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Strategic National                | 398    | 397    | 600    | +203  |
| Stockpile\...\...\...\...\...     |        |        |        |       |
| \...\...\...\...\...\...\...\.... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Biosurveillance                   | [22]   | [79]   | [79]   | [0]{. |
| Init                              | {.unde | {.unde | {.unde | under |
| iative\...\...\...\...\...\...\.. | rline} | rline} | rline} | line} |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Subtotal,                         | \      | \      | \      | +\$56 |
| Bio                               | $1,507 | $1,560 | $1,616 |       |
| terrorism\...\...\...\...\...\... |        |        |        |       |
| \...\...\...\...\...\...\...\.... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| [Health Promotion:]{.underline}   |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Chronic Disease Prevention &      | 818    | 899    | 840    | -59   |
| Health Promotion\...              |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| *Youth Media Campaign (non-add)   | *32*   | *59*   | *0*    | *-59* |
| \...\...\...\...\...\...\...*     |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Birth Defects, Disability &       | 114    | 125    | 124    | -1    |
| Health\...\                       |        |        |        |       |
| ...\...\...\...\...\...\...\..... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| [Health Information and           |        |        |        |       |
| Service:]{.underline}             |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Health                            | 90     | 109    | 109    | 0     |
| Statistics\...\...\...            |        |        |        |       |
| \...\...\...\...\...\...\...\...\ |        |        |        |       |
| ...\...\...\...\...\...\...\..... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Informatics and Health            | 127    | 120    | 115    | -5    |
| Marketing\...\                    |        |        |        |       |
| ...\...\...\...\...\...\...\..... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| [Environmental Health and         |        |        |        |       |
| Injury:]{.underline}              |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Environmental                     | 146    | 148    | 147    | -1    |
| Health                            |        |        |        |       |
| \...\...\...\...\...\...\...\...\ |        |        |        |       |
| ...\...\...\...\...\...\...\..... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Injury Prevention &               | 137    | 138    | 138    | 0     |
| Control\...\...\...\...\..        |        |        |        |       |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Occupational Safety & Health      | 277    | 286    | 286    | 0     |
| \...\...\...\...\                 |        |        |        |       |
| ...\...\...\...\...\...\...\..... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Public Health                     | 29     | 31     | 31     | 0     |
| Research\.                        |        |        |        |       |
| ..\...\...\...\...\...\...\...\.. |        |        |        |       |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Public Health Improvement and     | 233    | 267    | 207    | -60   |
| Leadership\...\...\...\...\....   |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| *One-time Earmarked Projects      | *42*   | *60*   | *0*    | *-60* |
| (non-add)\...\...\...\...\...*    |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Business Services                 | 282    | 279    | 264    | -15   |
| S                                 |        |        |        |       |
| upport\...\...\...\...\...\...\.. |        |        |        |       |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Preventive Health and Health      | 132    | 131    | 0      | -131  |
| Services Block Grant\...          |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Buildings &                       | 260    | 270    | 30     | -240  |
| Facilities\...\.                  |        |        |        |       |
| ..\...\...\...\...\...\...\...\.. |        |        |        |       |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| ATSDR\...\                        | 73     | 76     | 76     | 0     |
| ...\...\...\...\...\...\...\...\. |        |        |        |       |
| ..\...\...\...\...\...\...\...\.. |        |        |        |       |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| User Fees                         | [2]    | [2]    | [2]    | [0]{. |
| \...\...\...\...\...\...\...\...  | {.unde | {.unde | {.unde | under |
| \...\...\...\...\...\...\...\...\ | rline} | rline} | rline} | line} |
| ...\...\...\...\...\...\...\..... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| **Subtotal, Program Level         | **\$7  | **\$8  | **\$7  | **-\$ |
| (proposed                         | ,213** | ,034** | ,543** | 491** |
| law)\...\...\...\...\...\...**    |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| [Less Funds Allocated from Other  |        |        |        |       |
| Sources:]{.underline}             |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| Vaccines for Children Proposed    | -\     | -\     | -\     | -7    |
| Law (mandatory).                  | $1,052 | $1,635 | $1,642 |       |
+-----------------------------------+--------+--------+--------+-------+
| Public Health and Social Service  | -1,507 | -1,560 | -1,616 | -56   |
| Emergency Fund                    |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| PHS Evaluation                    | -212   | -265   | -265   | 0     |
| Transfers\...\...\...\...\...\... |        |        |        |       |
| \...\...\...\...\...\...\...\.... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| User                              | -2     | -2     | -2     | 0     |
| Fees\...\...\...\...\...\...\...  |        |        |        |       |
| \...\...\...\...\...\...\...\...\ |        |        |        |       |
| ...\...\...\...\...\...\...\..... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
| **Total, Proposed Law Discr.      | **\$4  | **\$4  | **\$4  | **-\$ |
| Budget Authority\...\...\.....**  | ,440** | ,572** | ,017** | 555** |
+-----------------------------------+--------+--------+--------+-------+
| FTE\...\...\...\.                 | 8,636  | 8,837  | 9,087  | 250   |
| ..\...\...\...\...\...\...\...\.. |        |        |        |       |
| .\...\...\...\...\...\...\...\... |        |        |        |       |
| \...\...\...\...\...\...\...\.... |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+
|                                   |        |        |        |       |
+-----------------------------------+--------+--------+--------+-------+

Centers for disease control and Prevention

The Centers for Disease Control and Prevention promotes health and
quality of life by preventing and controlling disease, injury, and
disability.

The FY 2006 budget requests a total program level of \$7.5 billion for
the Centers for Disease Control and Prevention (CDC), a net decrease of
\$491 million below the FY 2005 enacted level. This net change includes
programmatic increases of \$339 million, including expanded funding for
influenza vaccine; improvements in childhood immunizations; expanded
global disease detection efforts; and expansions of the Strategic
National Stockpile, including a new focus on portable mass casualty
treatment units. These increases are offset by completed facility
construction projects, one-time projects, reductions in programs that
overlap other areas of CDC, internal management efficiencies, and
one-time costs in the Vaccines for Children (VFC) program. CDC\'s total
program level includes \$1.6 billion in mandatory VFC funding, and \$265
million in Public Health Service evaluation transfers.

An array of new challenges face America\'s public health system: an
aging population; increasing population diversity; global travel that
can spread diseases; bioterrorism threats; and an epidemic of chronic
diseases. At the same time, technology improvements offer CDC new
opportunities to increase program efficiency, including health
information technology, global communication, rapid diagnostic tools,
and public health genomics. As a result, CDC undertook a two-year
reorganization process, the Futures Initiative, to maximize the benefit
CDC provides to the American people in the 21st century. CDC\'s budget
has been realigned to support this new structure.

CDC is reorganizing most of its programs under four coordinating centers
and three coordinating offices. These include Infectious Diseases,
Health Promotion, Public Health and Information Services, Environmental
Health and Injury, Terrorism, Global Health, and Workforce and Career
Development. The coordinating centers and offices lead collaboration
within each thematic area and across other areas of CDC. They work with
CDC\'s Office of the Director to improve business practice efficiency;
ensure high quality, goal-oriented programs; and provide leadership to
operational units. Management and administrative funding has been
consolidated from most program lines into two areas: Public Health
Improvement and Leadership, and Business Services Support. Two units
formerly located in CDC\'s Office of the Director (OD), the Epidemiology
Program Office (EPO) and the Public Health Practice Program Office
(PHPPO), will be relocated to integrate core functions across CDC. For
example, functions within EPO have been consolidated with Health
Information and Services activities, Global Health, and Public Health
Improvement and Leadership. This restructuring is consistent with the
goals of the Futures Initiative, and the findings of a recent PART
review for the Epidemic Services program activity, in that programmatic
and administrative redundancies will be reduced and program functions
will have a clear and coherent purpose.

Infectious Diseases

Three major programs are overseen by the new Infectious Diseases
Coordinating Center: the National Immunization Program; the National
Center for Infectious Diseases; and the National Center for HIV, STD,
and TB Prevention. The President\'s FY 2006 budget includes a total of
\$1.7 billion in discretionary funding for efforts related to the
prevention and control of infectious diseases and to provide
immunization services for children and adults nationwide.

**Immunization:** CDC\'s \$2.1 billion immunization program is focused
on achieving two major health goals of the Nation. CDC seeks to ensure
that at least 90 percent of all two-year olds receive the recommended
series of vaccines, and CDC has also expanded its role in assuring the
adequacy of annual influenza vaccine supplies. This work will be carried
out through two streams of funding: Vaccines for Children (VFC) and the
Section 317 program. The mandatory VFC program provides free vaccine to
approximately 42 percent of the childhood population, including Medicaid
recipients, the uninsured, American Indians and Alaskan Natives, and
children with limited health insurance that does not cover specific
immunizations. VFC also funds the development of a six-month stockpile
of all routinely recommended childhood vaccines. The discretionary
Section 317 program provides funds for State immunization operational
costs and many of the vaccines public health departments provide to
individuals not eligible for VFC.

Influenza Vaccine

CDC\'s agency-wide influenza budget totals \$197 million, nine times
more funding than in FY 2001. A year ago, HHS worked with vaccine
manufacturers to expand production. This was accomplished in part by
making influenza a routinely recommended vaccine for young children, and
setting aside \$40 million in new budget authority in VFC for a
pediatric stockpile of finished doses. In FY 2006, CDC will supplement
the pediatric stockpile with \$30 million in contracts to expand the
production of bulk monovalent influenza vaccine. This will occur through
back-end guarantees to manufacturers to increase influenza supply and
guarantee higher production levels. CDC will also purchase an estimated
additional two million doses of influenza vaccine through a \$20 million
discretionary funding increase.

Near-term action is being taken to improve the availability of influenza
vaccine for this winter and the upcoming (2005-2006) flu season. The
Administration\'s plan reallocates up to \$37 million in FY 2005 to
expand the availability of influenza vaccine for this and the upcoming
(2005-2006) flu season. This includes up to \$25 million in
reallocations from CDC programs the budget proposes to eliminate in FY
2006, and \$12 million provided through the Secretary\'s authority to
transfer funds from accounts in other agencies. Within this amount, \$20
million will be used to expand bulk monovalent vaccine production for
next winter. The remaining \$17 million will be used to finance the
importation of foreign influenza vaccine for this winter under
Investigational New Drug (IND) authorities. This vaccine has been made
available to States, and a contract research organization has been
retained to manage IND process requirements of vaccination drives.

**OPEN PIE CHART**

**First Pie Chart Title: CDC Influenza Funding**

(Dollars in millions)

FY 2006 % Total

Program Activities PB

Bulk Vaccine Stockpile \$30 M 15%

Surveillance, Research & Other \$23 M 12%

317 Routine Purchases \$28 M 14%

Routine Purchases \$76 M 38%

Finished Vaccine Stockpile \$40 M 20%

Subtotal, CDC and VFC \$197

**Second Pie Chart Title: HHS-wide Influenza Funding**

(Dollars in millions)

FY 2006 % Total

Program Activities PB

Pandemic Preparedness \$120 M 27%

CDC Discretionary \$81 M 18%

VFC \$116 M 26%

FDA Research and Licensing \$3 M 1%

NIH Research and Development \$119 M 27%

Total, HHS \$439

**CLOSE PIE CHART**

Childhood Immunization Improvements

Children who are Medicaid recipients, uninsured, American Indians and
Alaskan Natives, and children with limited health insurance that does
not cover specific immunizations are entitled to receive VFC vaccines.
These children, however, must do so at a Community Health Center or a
specially designatedFederally Qualified Health Center. Legislation is
sought to enable these children to obtain VFC vaccines at public health
clinics as well. This improved access is projected to expand the VFC
program by \$140 million while also reducing by \$100 million the demand
for vaccines purchased with discretionary appropriations. The proposed
legislation would also eliminate the price caps on VFC that have
excluded some vaccines from the VFC program. The budget anticipates
substantial FY 2005 progress toward HHS\'s goal of establishing a six
month vendor-managed stockpile of all routinely recommended pediatric
vaccines, and catching up on immunizations that were missed during
vaccine shortages in recent years. With catchup vaccinations finished,
and the stockpile nearing completion, FY 2006 costs will be \$166
million below FY 2005 estimates. The stockpile serves dual purposes:
vaccines from the stockpile can be distributed in the event of a disease
outbreak; and the stockpile will mitigate the effect of any supply
disruptions that might occur on the manufacturing side.

**HIV/AIDS, STD & TB Prevention:** HIV/AIDS, sexually transmitted
diseases (STDs), and tuberculosis (TB) are among the most prevalent,
costly and preventable infectious diseases in the United States. The
President\'s FY 2006 budget request is \$956 million to develop,
implement, and evaluate effective domestic prevention programs for these
diseases through the National Center for HIV, STD, and TB Prevention
(NCHSTP).

Domestic HIV/AIDS Prevention

CDC\'s core set of prevention activities include surveillance and case
reporting, community involvement and intervention, capacity building,
and program evaluation. NCHSTP\'s budget requests \$658 million for
HIV/AIDS prevention. The CDC-wide domestic HIV/AIDS budget of \$727
million also includes funding in school health programs (Chronic
Diseases) and blood disorders programs (Birth Defects, Disability, and
Health).

CDC\'s HIV prevention activities over the past two decades have focused
on helping uninfected persons at high risk for HIV change and maintain
behaviors to keep them uninfected. Despite these efforts, the number of
new HIV infections is estimated to have remained stable, and the number
of people living with HIV continues to increase. In FY 2003, CDC
launched a new prevention initiative, Advancing HIV Prevention (AHP)
that capitalizes on new rapid testing techniques that provide
on-the-spot results. AHP seeks to expand early diagnosis of HIV
infection; facilitate earlier access to quality medical care and
treatment; and provide prevention services to reduce the risk of
transmission to others.

STD and TB Prevention

The STD and TB prevention programs provide grants and technical
assistance to State and local governments and organizations for
prevention and control services, as well as conducting surveillance and
supporting research related to the prevention, control, and elimination
of these diseases. A recent PART review determined that both the STD and
TB activities have a clear purpose and address specific and ongoing
problems. The review suggested some improvements that the programs have
already begun to make, including the distribution of State funding for
TB based on need, rather than historical distributions. The program will
also examine additional ways to better target State and local funding
for STDs.

**Infectious Diseases:** The National Center for Infectious Diseases
works in partnership with State and local public health officials, other
federal agencies, medical and public health professional associations,
infectious disease experts from academic and clinical practice, and
international and public service organizations to prevent illness,
disability, and death caused by infectious diseases in the United States
and around the world. Although modern advances have conquered some
diseases, the outbreaks of severe acute respiratory syndrome (SARS),
avian influenza, West Nile virus, and monkeypox are recent reminders of
the extraordinary ability of microbes to adapt and evolve. The
President\'s FY 2006 budget includes \$225 million to conduct
surveillance, epidemic investigations, epidemiologic and laboratory
research, training, and public education programs to develop, evaluate,
and promote prevention and control strategies for infectious diseases.

A recent PART review indicated that the Infectious Diseases program has
a clear purpose and evidence of its impact on controlling disease. The
program collaborates with a broad range of partners to target resources
and accomplish its mission. The program is measuring progress on new
long-term measures focused on foodborne pathogens, bloodstream
infections, pneumococcal disease, and hepatitis A. The program will also
measure progress in global influenza surveillance and detection as one
key indicator of our preparedness for a pandemic influenza outbreak

Global Health

Every day, two million people cross national borders as tourists,
business travelers, immigrants, or refugees. World trade moves produce
and manufactured goods from one end of the earth to another in a matter
of hours or days. However, disease vectors like mosquitoes have no
regard for borders. Health events far from our shores are significant in
their own right, but also have the potential to influence health within
the United States. As a result, CDC supports a range of efforts to both
track and prevent the international spread of infectious diseases. CDC
has consolidated funding and policy oversight of many of these
activities into a new \$306 million Global Health budget line. While the
Office of Global Health provides policy guidance on the use of funds,
the work is carried out by the operating centers that received these
funds directly in the past.

**Global Disease Detection:** The FY 2006 budget requests \$34 million,
a \$12 million increase, for CDC\'s global disease detection initiative.
This initiative aims to recognize infectious disease outbreaks faster,
improve the ability to control and prevent outbreaks, and to detect
emerging microbial threats. CDC will continue the implementation of a
comprehensive system of surveillance by expanding programs and sites
abroad. Additional activities include the improvement of early warning
systems; researching new viral strains; aiding in collaborations with
multinational organizations; and increasing surveillance.

**Global AIDS:** Through the Global AIDS Program (GAP), CDC works in
partnership with USAID; HRSA; the Departments of State, Labor, and
Defense; other federal agencies; and multilateral and bilateral partners
to ameliorate the global devastation caused by HIV/AIDS. The FY 2006
budget includes \$124 million in direct funding for on-going prevention,
care, treatment, surveillance, and capacity-building programs in 25
countries in Asia, Africa, Latin America, and the Caribbean. CDC is also
a key federal partner in the President\'s Emergency Plan for AIDS Relief
(PEPFAR) that is financed through the Department of State. Approximately
\$185 million in PEPFAR funding was allocated to CDC in FY 2004 from the
Department of State.

**Global Polio and Measles:** CDC\'s request allocates \$137 million for
global polio and measles activities. While tremendous progress has been
made with the number of polio-endemic countries declining from 120 in
1988 to six in 2004, a major international effort continues to strive
for the 2005 eradication goal set by the World Health Organization. If
that goal is achieved, continued vigilance will be required to guard
against reappearance.

Terrorism

The request allocates \$1.6 billion to bioterrorism preparedness, a net
increase of \$56 million over FY 2005. Within this total, priority is
given to direct Federal responsibilities to ensure a sufficient supply
of countermeasures and portable treatment units are available to protect
and care for victims of an attack. The Strategic National Stockpile
(SNS) is funded at \$600 million, an increase of \$203 million above FY
2005. This increase includes \$50 million in funding for the Federal
Mass Casualty Initiative. The SNS will use these funds to purchase,
maintain, and operate portable hospital units that can be deployed to
increase hospital surge capacity in the event of a bioterrorist attack.

The remaining funding will be used to procure commercially available
countermeasures; provide secure, temperature controlled storage for the
wide range of medicines and vaccines in the SNS as well as those being
procured by Project BioShield; replace medical products that are nearing
the end of their useful life; and maintain the capacity to move SNS
assets to any location in the United States within 12 hours.

In January 2004, the Administration set a goal of having sufficient
antibiotics in the SNS to protect 60 million Americans from the effects
of exposure to anthrax. The financing plan included special transfer
authorities in FY 2005 to secure coverage of 50 million people and
purchase the remaining courses necessary to reach the final 10 million
in FY 2006. Since the requested funding flexibilities were not provided
in the FY 2005 appropriation, CDC has modified the SNS operating plan to
stay on track and achieve the 50 million target in FY 2005. HHS plans to
use the Secretary\'s authority to transfer funds between appropriations
to redirect \$12 million from bioterrorism grant programs to the SNS, so
that the anthrax antibiotic coverage goal can be reached on schedule.

Improving biosurveillance continues to be a high priority, with \$79
million provided to continue the interagency biosurveillance initiative.
The centerpiece of CDC\'s efforts in biosurveillance concentrating on
electronic disease surveillance is BioSense. BioSense automatically
analyzes electronically available health data to highlight a potential
public health problem, rather than relying solely on individual case
reports from healthcare providers to local public health officials.
BioSense will provide public health officials with early warnings on
potential outbreaks in their communities. CDC will engage in contracts
with health departments and health systems to expand access to local
information in the highest risk urban areas. In addition to BioSense,
CDC will continue other aspects of the biosurveillance initiative,
including improvements to laboratory reporting capacity and increasing
the number of border health and quarantine stations at ports of entry.

CDC\'s commitment to State and local preparedness remains strong;
between FY 2002 and FY 2006, CDC will have invested a total of \$4.5
billion in this activity. The FY 2006 budget retargets some preparedness
resources, making modest reductions in awards to States, and
concentrating efforts in directed investments that will benefit the
Nation as a whole. Efforts are continuing, as in the Department of
Homeland Security, to ensure that the allocation and use of funds
reflects the best information on risk and needed performance
improvements. For example, CDC will continue the Cities Readiness
Initiative that is essential to ensuring local governments can provide
medicines to their citizens in time to protect them from released
bioterrorism agents. This includes targeted grants and, in FY 2006,
additional funding for cooperative work among CDC, the United States
Postal Service, and participating cities.

Investments in States have markedly improved capacity. The Laboratory
Response Network (LRN) now consists of 134 reference laboratories in all
States, up from 91 in 2001. Most can confirm the presence of anthrax and
tularemia, as well as perform presumptive screening for smallpox. More
than 8,800 clinical laboratory personnel have been trained to play a
role in the detection and reporting of public health emergencies. CDC is
also expanding the number of trained Federal staff that are available to
States to up to 500. (States can request CDC to detail staff in lieu of
a portion of their cash grants.)

In addition to assistance to States and communities, CDC will invest
\$140 million to continue to upgrade its internal capacities by
improving epidemiological expertise in the identification and control of
diseases caused by terrorism, including better electronic communication,
distance learning programs, and cooperative training between public
health agencies and local hospitals. No funding is earmarked for
research on older anthrax vaccines as the project is nearing completion;
funds were redirected into stockpile purchases.

Health Promotion

Chronic diseases - such as heart disease, cancer, and diabetes - are the
leading causes of death and disability in the United States. These
diseases account for 7 out of every 10 deaths and affect the quality of
life of 90 million Americans. Although chronic diseases are among the
most common and costly health problems, they are also among the most
preventable. In addition, birth defects are the leading cause of infant
mortality in the United States. The direct and indirect costs associated
with disabilities in the United States exceeds \$300 billion annually.
The Health Promotion Coordinating Center includes the National Center
for Chronic Disease Prevention and Health Promotion, and the National
Center on Birth Defects and Developmental Disabilities.

The President\'s FY 2006 budget includes a total of \$964 million to
fund a large number of programs that are focused on improving the
quality of medical care targeted at chronic diseases, prevention
programs, and disabilities.

**Chronic Disease Prevention and Health Promotion:** Chronic disease
prevention programs at CDC have grown continually since 2001, as CDC has
broadened its focus beyond preventing infections and seeks to reduce the
human and financial impact of chronic diseases. The budget seeks \$840
million to maintain at the FY 2005 level a wide range of activities,
including support for: programs to promote healthy behaviors; studies to
better understand the causes of these diseases; and surveys to better
monitor the health of the nation. CDC will maintain its focus on
reducing obesity, diabetes, and tobacco use as the \$47 million Steps to
a Healthier US program matures and the newly-funded State tobacco
quitlines become well-established.

Youth Media Campaign (VERB)

The budget does not include funds to continue the VERB: It\'s What You
Do Youth Media Campaign, for which \$59 million was provided in FY 2005.
VERB was originally designed as a 5-year demonstration project; FY 2005
is the fifth year.

**Birth Defects, Developmental Disabilities, Disabilities and Health:**
CDC\'s National Center on Birth Defects and Developmental Disabilities
works to identify the cause of birth defects and developmental
disabilities, to help children develop and reach their full potential,
and to promote the health and well-being among people of all ages with
disabilities. The budget for activities related to Birth Defects,
Developmental Disabilities, Disability and Health for FY 2006 includes
\$124 million. This funding will be used for many disability programs,
including those related to Fetal Alcohol Syndrome, Autism,
attention-deficit/hyperactivity disorder (ADHD), Duchenne and Becker
Muscular Dystrophy, Disability and Health, monitoring developmental
disabilities, limb loss, and spina bifida.

Health Information and Service

The budget for the Health Information and Service Coordinating Center
includes \$224 million for the National Center for Health Statistics
(NCHS) and new centers for Health Marketing and Public Health
Informatics.

**Health Statistics:** The budget requests \$109 million for Health
Statistics, which maintains funding at the FY 2005 level. Major
investments in Health Statistics over the past several years reflect the
importance of the data systems of the National Center for Health
Statistics (NCHS) to track our progress and inform solutions on a myriad
of problems in the public and private health sector. Areas of focus have
been to preserve and modernize the Nation\'s vital statistics system; to
expand contracts with States to purchase birth and death data; and to
move forward with e-government initiatives to update the content of
birth and death records. Additionally, funds have been used to increase
the sample sizes necessary for the National Health and Nutrition
Examination Survey (NHANES) and the National Health Interview Survey
(NHIS) to provide needed information on a wide range of conditions,
diseases, and population subgroups and to address major emerging data
gaps in the National Health Care Survey, such as long-term care and
assisted living facilities.

**Public Health Informatics:** The request includes \$68 million for
Public Health Informatics. Effective public health response involves
many organizations working together and exchanging information. The new
realities of terrorism and naturally occurring disease trends require a
new level of interoperability that facilitates rapid, secure, and
effective communication. The new National Center for Public Health
Informatics is responsible for ensuring that public health departments\'
new disease outbreak detection and reporting systems incorporate the
common standards that facilitate real-time sharing of key data among
public health officials responsible for verifying, investigating, and
responding to outbreaks. The request reflects a \$5 million reduction in
funding for the Public Health Information Network as CDC moves from
standards design to system implementation.

**Health Marketing:** CDC\'s new National Center for Health Marketing
will work to connect the agency\'s research, surveillance, programmatic
services, and communication efforts to CDC\'s customers, the American
public. Funding for the Health Marketing activity in FY 2006 is
requested at \$47 million. The initiatives related to Health Marketing
will enhance communication support and improve outreach to CDC\'s five
priority sectors: public health communities; business and workers;
education; health care; and other federal agencies.

Environmental Health and Injury

The budget for the Environmental Health and Injury Coordinating Center
includes \$285 million to maintain funding levels for the National
Center for Environmental Health and the National Center for Injury
Prevention and Control.

**Environmental Health:** The budget includes \$147 million to maintain
ongoing environmental disease prevention programs. The National Center
for Environmental Health (NCEH) assists State and local health agencies
in developing and increasing their ability and capacity to address
environmental health problems, especially asthma and childhood lead
poisoning. Additionally, NCEH provides complete, timely, and accessible
data on environmentally related diseases and conditions, including
asthma, childhood lead poisoning and genetic diseases; improves the
understanding of risk factors for, and causes of, environmentally
related diseases and conditions; and develops effective prevention
programs. The CDC\'s state-of-the-art environmental laboratories use
modern technology to assess human exposure to environmental chemicals,
and its effects.

**Injury Prevention and Control:** Injuries are the leading cause of
death of children and young adults in the United States. Injury is a
fundamental threat to human health and life, and CDC employs the same
scientific methods that prevent infectious diseases to prevent
injuries - defining the health problem, identifying the risk and
protective factors, and developing and testing prevention strategies.
The budget request for FY 2006 includes \$138 million to support
programs focused on residential fire deaths, intimate partner violence,
non-fatal fall traumatic brain injury, child abuse and neglect, rape
prevention and education, and other injury prevention and control
initiatives.

Occupational Safety and Health

As American workers are getting older and becoming more diverse, working
longer hours, and more workers are in temporary positions, the estimated
annual cost of occupational injuries in the United States has grown to
over \$250 billion. The National Institute of Occupational Safety and
Health (NIOSH) is the primary federal entity responsible for conducting
research and making recommendations for the prevention of work-related
illness and injury. NIOSH translates knowledge gained from research into
products and services that benefit workers\' safety and health in
settings from corporate offices to construction sites and coal mines.
The budget for FY 2006 includes \$286 million for NIOSH activities,
level with FY 2005. This includes work on the National Occupational
Research Agenda (NORA) and personal protective technology and respirator
research for the nation\'s 50 million miners, firefighters, emergency
responders, and health care, agricultural, and industrial workers. In
addition to these ongoing activities, NIOSH assists in the
implementation of the Energy Employees Occupational Illness Compensation
Act of 2000; funds for this activity are provided by the Department of
Labor.

NIOSH\'s recent PART review indicated that the program has a clear
purpose and a well-established mechanism for setting priorities to guide
budget requests and funding decisions through the National Occupational
Research Agenda (NORA). The program is working to further focus its
research efforts on having an impact through a Research to Practice
initiative. In addition, the program will advance its work with the
National Academy of Sciences to develop a standard method of measuring
the impact of their research on the occupational safety and health
field.

Public Health Research

The FY 2006 request includes \$31 million to fund investigator-initiated
prevention research projects. Prevention research at CDC is
population-based, and targeted to health promotion and disease
prevention. All research is proposed by researchers working with
communities, health practitioners, and policymakers, and will address
the need for a multi-disciplinary approach to health marketing, health
communication, and innovative statistical methods to estimate the burden
of disease. Research results are expected to form the basis of public
health policies and best practices for a range of specific populations
and settings.

Public Health Improvement and Leadership

The President\'s Budget for FY 2006 includes \$207 million for Public
Health Improvement and Leadership, a new budget line Congress created to
more transparently reflect CDC\'s programmatic funding. This budget line
funds the Office of the Director, the newly established coordinating
centers, workforce development staff, and the central management costs
in each of the operating Centers, Institute, and Offices at CDC. This
budget line includes an \$8 million Director\'s Discretionary Fund that
will be used to finance developing public needs.

In FY 2005, the Congress also included \$60 million in one-time projects
in this budget line; these projects are not continued in the FY 2006
request.

Business Services Support

The Business Services Support budget activity, as well as the Leadership
and Management sub-budget activity, were created to consolidate CDC\'s
administrative and management costs into two lines and more
transparently reflect CDC\'s programmatic funding. The Business Services
Support line includes a wide range of agency-wide operating costs, such
as rent, utilities, and security. It also funds the business services
functions at CDC (such as grants management, financial management,
facilities management, etc.), and additional mission-support activities.
CDC has made a variety of improvements in its business and management
operations in recent years, as evidenced by recent scores of all green
on the PMA scorecard. CDC consolidated 13 information technology
infrastructure functions into the new Information Technology Services
Office and is consolidating all budget execution functions within CDC\'s
Financial Management Office. Over 40 public and medical professional
inquiry hotlines will be merged into a single integrated customer
service center. The \$15 million reduction in FY 2006 reflects CDC\'s
expectation of continued efficiency improvements under the new
organizational structure.

Preventive Health and Health Services Block Grant

Since 1981, the Preventive Health and Health Services Block Grant has
provided 61 States, tribes, and territories with flexible funding the
grantee could direct as it deemed appropriate. Funding, however, is
often duplicative and overlaps with other CDC programs. As CDC strives
to improve efficiency, existing resources will be directed to programs
which have traditionally addressed similar public health issues.

Modern and Secure Laboratories and Facilities

Since 2001, CDC has initiated or completed the construction of more than
2.7 million square feet of laboratory and other facility space. This
year, CDC is completing an Infectious Disease Laboratory, the Scientific
Communications Center, the Headquarters and Emergency Operations Center,
and the Environmental Toxicology Laboratory. CDC is also initiating
construction of a new Environmental Health office facility. The FY 2006
request allocates \$7.5 million to fund repairs and improvements for
existing facilities, and \$22.5 million to complete construction of the
Ft. Collins, Colorado Vector Borne Infectious Diseases Replacement
Laboratory. No funding is requested to initiate new projects.

The Buildings and Facilities program underwent a PART review for FY
2006. The program uses a master plan of CDC headquarters construction
projects, developed by senior managers from CDC\'s Centers, Institute,
and Offices, to target resources. The program is conducting analyses of
trade-offs between costs, schedule, and risk for construction projects,
and the program has supported targeted studies to guide program
improvements. The program has adopted a new outcome measure that will
track changes in areas such as the productivity and expansion of
laboratory research and techniques resulting from new facilities. The
program will also measure performance on meeting scope, schedule,
budget, and quality targets.

Agency for Toxic Substances and Disease Registry

The request for ATSDR is \$76 million, the same as FY 2005. ATSDR,
managed as part of CDC, is the lead agency responsible for public health
activities related to Superfund sites. ATSDR develops profiles of the
health effects of hazardous substances, assesses health hazards at
specific Superfund sites, and provides consultations to prevent or
reduce exposure and related illnesses. Funds will also be used for the
maintenance costs of the World Trade Center Exposure Registry.

national institutes of Health overview table by institute

numeric table

(dollars in millions)

  --------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------
                                                                                                                                                                                                               **2006**

                                                                                                                                    **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**   **[+/-
                                                                                                                                                                                                               2005]{.underline}**

  Institutes:                                                                                                                                                                                                  

  National Cancer Institute\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                    \$4,736                  \$4,825                  \$4,842                  +\$17

  National Heart, Lung, & Blood Institute\...\...\...\...\...\...\...\...\...                                                       2,878                    2,941                    2,951                    +10

  National Institute of Dental & Craniofacial Research\.....                                                                        383                      392                      393                      +1

  Natl Inst. of Diabetes & Digestive & Kidney Disease\...                                                                           1,821                    1,864                    1,873                    +9

  National Institute of Neurological Disorders & Stroke..                                                                           1,501                    1,539                    1,550                    +11

  National Institute of Allergy & Infectious Diseases\...\...                                                                       4,303                    4,403                    4,460                    +57

  National Institute of General Medical Sciences\...\...\...\...\...                                                                1,905                    1,944                    1,955                    +11

  Natl Inst. of Child Health and Human Development\...\....                                                                         1,242                    1,271                    1,278                    +7

  National Eye Institute\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                               653                      669                      673                      +4

  National Institute of Environmental Health Sciences:                                                                                                                                                         

  Labor/HHS Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                              631                      645                      648                      +3

  VA/HUD Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                            78                       80                       80                       0

  National Institute on Aging\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                       1,024                    1,052                    1,057                    +5

  Natl Inst. of Arthritis & Musculoskeletal & Skin Dis\.....                                                                        501                      511                      513                      +2

  Natl Inst. on Deafness & Communication Disorders\...\...                                                                          382                      394                      397                      +3

  National Institute of Mental Health\...\...\...\...\...\...\...\...\...\...\.....                                                 1,381                    1,412                    1,418                    +6

  National Institute on Drug Abuse\...\...\...\...\...\...\...\...\...\...\...\....                                                 991                      1,006                    1,010                    +4

  National Institute on Alcohol Abuse & Alcoholism\...\...                                                                          428                      438                      440                      +2

  National Institute for Nursing Research\...\...\...\...\...\...\...\...\...                                                       135                      138                      139                      +1

  National Human Genome Research Institute\...\...\...\...\...\....                                                                 479                      489                      491                      +2

  Natl Inst. for Biomedical Imaging & Bioengineering\...\...                                                                        289                      298                      300                      +2

  National Center for Research Resources\...\...\...\...\...\...\...\.....                                                          1,179                    1,115                    1,100                    -15

  Natl Center for Complementary & Alternative Med\...\....                                                                          117                      122                      123                      +1

  Natl Center for Minority Health & Health Disparities\....                                                                         191                      196                      197                      +1

  Fogarty International Center\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                         65                       67                       67                       0

  National Library of Medicine\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                         317                      323                      326                      +3

  Office of the Director\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                              327                      358                      385                      +27

  Buildings & Facilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                              99                       110                      82                       -28

  Nuclear/Radiological Countermeasures Res. (PHSSEF).                                                                               0                        47                       47                       0

  Chemical Countermeasures Research (PHSSEF)\...\...\...\....                                                                       0                        0                        50                       +50

  ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\.....                                                                      [4]{.underline}          [0]{.underline}          [0]{.underline}          [0]{.underline}

  **Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                                  **\$28,040**             **\$28,649**             **\$28,845**             **+\$196**

                                                                                                                                                                                                               

  [Less Funds Allocated from Other Sources:]{.underline}                                                                                                                                                       

  Nuclear/Radiological Countermeasures Res. (PHSSEF).                                                                               \$0                      -\$47                    -\$47                    \$0

  Chemical Countermeasures Research (PHSSEF)\...\...\...\....                                                                       0                        0                        -50                      -50

  ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\.....                                                                      -4                       0                        0                        0

  PHS Evaluation Funds (NLM)\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                              -8                       -8                       -8                       0

  Type 1 Diabetes Research 1/\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                          -150                     -150                     -150                     0

  **Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....**                                     **\$27,878**             **\$28,444**             **\$28,590**             **+\$146**

                                                                                                                                                                                                               

  **Labor/HHS Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\.....**                                             **\$27,800**             **\$28,364**             **\$28,510**             **+\$146**

  **VA/HUD Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                                          **\$78**                 **\$80**                 **\$80**                 **\$0**

                                                                                                                                                                                                               

  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...   17,096                   17,543                   17,547                   +4

                                                                                                                                                                                                               

  1/ These funds were pre-appropriated in the Benefits Improvement and Protection Act of 2000 and P.L. 107-360.                                                                                                
  --------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------

national institutes of Health overview table by mechanism

numeric table

(dollars in millions)

  --------------------------------------------------------------------------------------------------------------------------------- --------------------------- --------------------------- --------------------------- ------------------------
                                                                                                                                                                                                                        **2006**

                                                                                                                                    **[2004]{.underline}**      **[2005]{.underline}**      **[2006]{.underline}**      **[+/-
                                                                                                                                                                                                                        2005]{.underline}**

  Mechanism:                                                                                                                                                                                                            

  Research Project Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                   \$15,165                    \$15,438                    \$15,494                    +\$56

  *\[ \# of Non-Competing Grants \]\...\...\...\...\...\...\...\...\...\...\...\...\...\...*                                        *\[27,030\]*                *\[27,750\]*                *\[27,092\]*                *\[-658\]*

  *\[ \# of New/Competing Grants\]\...\...\...\...\...\...\...\...\...\...\...\...\...\....*                                        *\[10,020\]*                *\[9,216\]*                 *\[9,463\]*                 *\[+247\]*

  *\[ \# of Small Business Grants\]\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...*                                    *[\[2,181\]]{.underline}*   *[\[2,182\]]{.underline}*   *[\[2,191\]]{.underline}*   *[\[+9\]]{.underline}*

  *\[ Total \# of Grants \]\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....*                               *\[39,231\]*                *\[39,148\]*                *\[38,746\]*                *\[-402\]*

                                                                                                                                                                                                                        

  Research Centers\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                          2,541                       2,687                       2,749                       +62

  Research Training\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                            745                         762                         765                         +3

  Research & Development Contracts\...\...\...\...\...\...\...\...\...\...\...                                                      2,820                       2,637                       2,767                       +130

                                                                                                                                                                                                                        

  Intramural Research\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                              2,653                       2,769                       2,792                       +23

  Other Research\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                        2,131                       2,172                       2,180                       +8

  Extramural Research Facilities Construction\...\...\...\...\...\.....                                                             119                         179                         30                          -149

  Research Management and Support\...\...\...\...\...\...\...\...\...\...\...                                                       1,033                       1,079                       1,090                       +11

  National Library of Medicine\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                         317                         323                         326                         +3

  Office of the Director\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                              327                         358                         385                         +27

  Buildings and Facilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                 107                         118                         90                          -28

  NIEHS VA/HUD Appropriation (Superfund)\...\...\...\...\...\....                                                                   78                          80                          80                          \+

  Nuclear/Radiological Countermeasures Res. (PHSSEF).                                                                               0                           47                          47                          0

  Chemical Countermeasures Research (PHSSEF)\...\...\...\....                                                                       0                           0                           50                          +50

  ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\.....                                                                      [4]{.underline}             [0]{.underline}             [0]{.underline}             [0]{.underline}

  **Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                                  **\$28,040**                **\$28,649**                **\$28,845**                **+\$196**

                                                                                                                                                                                                                        

  [Less Funds Allocated from Other Sources:]{.underline}                                                                                                                                                                

  Nuclear/Radiological Countermeasures Res. (PHSSEF).                                                                               \$0                         -\$47                       -\$47                       \$0

  Chemical Countermeasures Research (PHSSEF)\...\...\...\....                                                                       0                           0                           -50                         -50

  ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\.....                                                                      -4                          0                           0                           0

  PHS Evaluation Funds (NLM)\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                              -8                          -8                          -8                          0

  Type 1 Diabetes Research 1/\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                          -150                        -150                        -150                        0

  **Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....**                                     **\$27,878**                **\$28,444**                **\$28,590**                **+\$146**

                                                                                                                                                                                                                        

  **Labor/HHS Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\.....**                                             **\$27,800**                **\$28,364**                **\$28,510**                **+\$146**

  **VA/HUD Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                                          **\$78**                    **\$80**                    **\$80**                    **\$0**

                                                                                                                                                                                                                        

  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...   17,096                      17,543                      17,547                      +4

                                                                                                                                                                                                                        

  1/ These funds were pre-appropriated in the Benefits Improvement and Protection Act of 2000 and P.L. 107-360.                                                                                                         
  --------------------------------------------------------------------------------------------------------------------------------- --------------------------- --------------------------- --------------------------- ------------------------

national institutes of Health

The National Institutes of Health uncover new knowledge that will lead
to better health for everyone.

Major advances in knowledge about life sciences, especially the
sequencing of the human genome, are opening dramatic new opportunities
for biomedical research and heretofore un-imagined prospects for
preventing, treating, and curing disease and disability. Investment in
biomedical research by the National Institutes of Health (NIH) has
driven these advances, and the FY 2006 budget request of \$28.8 billion
seeks to capitalize on the resulting opportunities to improve the health
of the nation.

NIH is the world\'s largest and most distinguished organization
dedicated to maintaining and improving health through medical science.
Its budget is composed of 27 appropriations for its Institutes and
Centers, Office of the Director, and Buildings and Facilities. In FY
2006, nearly 84 percent of the funds appropriated to NIH will flow out
to the extramural community, which supports work by more than 200,000
research personnel affiliated with approximately 3,000 university,
hospital, and other research facilities. About 11 percent of the budget
will support an in-house, or intramural, program of basic and clinical
research activities managed by world-class physicians and scientists.
This intramural research program, which includes the NIH Clinical
Center, gives our nation the unparalleled ability to respond immediately
to health challenges nationally and worldwide. Another 5 percent will
provide for research management and support.

Research Priorities in FY 2006

In fulfilling its mission, NIH strives to maintain a diverse portfolio
of research founded on both public health need and scientific
opportunity. The FY 2006 budget request will allow NIH to address
imperative requirements in biodefense; continue to implement the NIH
Roadmap for Medical Research; accelerate neuroscience research through
enhanced intra-agency collaborations under the NIH Neuroscience
Blueprint; and manage a research initiative on developing chemical
threat countermeasures. Additional support will be provided to continue
progress in promising arenas of science related to specific diseases
such as cancer, cardiovascular disease, HIV/AIDS, diabetes, Parkinson\'s
disease, and Alzheimer\'s disease, while also pursuing whole new avenues
of post-genomics research.

**OPEN BAR CHART**

Chart Title: NIH Total Funding, data shown for FY 2001- FY 2006 as
dollars in millions.

  ----------- ----------- ----------- ----------- ----------- -----------
  2001        2002        2003        2004        2005        2006

  \$20.5      \$23.6      \$27.2      \$28.0      \$28.6      \$28.8
  ----------- ----------- ----------- ----------- ----------- -----------

**CLOSE BAR CHART**

**Biodefense**: For FY 2006, the President\'s Budget proposes a total of
\$1.8 billion for NIH biodefense efforts, a net increase of \$56
million, or 3.2 percent, over FY 2005. When adjusted for non-recurring
extramural facilities construction in FY 2005, research activities in
the NIH biodefense program will increase by \$175 million, or 11
percent. Of the \$1.8 billion total, \$1.7 billion is included within
the NIH appropriations accounts, and \$97 million is budgeted in the
Public Health and Social Services Emergency Fund (PHSSEF) for support of
targeted research activities to develop countermeasures against nuclear,
radiological, and chemical threats.

Our nation\'s ability to detect and counter bioterrorism ultimately
depends heavily on the state of biomedical science. Guided by its
long-range strategic plan that includes short-, intermediate-, and
long-term goals, biodefense research supported by NIH stresses two
overarching, complementary, and urgent components: a) basic research on
the biology of microbial agents with bioterrorism potential and the
properties of the host\'s response to infection and defense mechanisms;
and b) applied research with predetermined milestones for the
development of new or improved diagnostics, vaccines, and therapies
needed to control a bioterrorist-caused outbreak. NIH will continue to
ensure full coordination of these research activities with other Federal
agencies in the war against terrorism.

In just the past three years, NIH has made tremendous strides towards
developing countermeasures to protect all Americans from bioterrorism.
For example, researchers supported by NIH have completed the genomic
sequencing of at least one strain of all Category A, B, and C agents
considered bioterrorism threats. In the area of diagnostics, NIH
researchers have developed a rapid test for the presence of antibodies
to smallpox that is five-to-ten times more sensitive than standard
techniques. An assay has also been developed to simultaneously detect
three priority Category A agents, anthrax, plague, and tularemia, in a
single sample. Human Phase I trials are being conducted for a DNA
vaccine against Ebola, and work is underway on other vaccine candidates
against botulism, tularemia, and plague. NIH has also developed and
expanded contracts to screen new drugs, develop new animal models,
establish a reagent and specimen repository, and provide researchers
with genomic, proteomic, and bioinformatic resources related to
potential bioterrorism agents. NIH is funding almost 150 grants and
contracts with pharmaceutical and biotechnology companies in
collaborative projects to develop high-priority biodefense products.

Biodefense research priorities in FY 2006 include continuing the
clinical development of vaccines for plague, tularemia, Valley Fever,
Ebola, and botulism. NIH will also develop clinical studies of
anti-toxin/antibody treatment for anthrax, and, in partnerships with
industry and academia, accelerate preclinical development of other
promising medical countermeasures, with a focus on therapies. Research
will address the need for protection against both naturally occurring
threats and ones arising from the risk that biotechnology advances could
be used to engineer or modify organisms to evade current medical
countermeasures or enhance their virulence.

The FY 2006 budget also requests \$30 million to continue support for
construction of specialized biosafety laboratories at universities and
institutions across the country that are needed to conduct research on
the highly dangerous and infectious pathogens in the biodefense research
field. Prior to FY 2002, only a few of these specialized laboratories
existed in the United States. With these FY 2006 funds, NIH will have
spent over \$551 million since FY 2003 on extramural biodefense
construction. The \$30 million investment in FY 2006 will fund an
additional Regional Biocontainment Laboratory to support extramural
investigators within a region or metropolitan area, bringing the total
number of National and Regional Biocontainment Laboratories to 18. Also,
these funds will support the construction or renovation of up to six
smaller, local-level laboratories to Biosafety Level 3 (BSL-3)
standards. Once these facilities are completed, NIH will be able to
support over 200 research projects at the same time aimed at developing
medical protection from bioterrorism. The national and regional
facilities will also back up State and Federal public health
laboratories if there is an actual or suspected bioterrorism attack, or
when naturally occurring diseases unexpectedly emerge or re-emerge, such
as avian influenza and SARS.

With the \$97 million budgeted in the PHSSEF for NIH in FY 2006, NIH
will use \$47 million to continue the nuclear/radiological research
effort begun in FY 2005 to improve methods for measuring radiological
exposure and contamination, develop drugs to prevent injury from
radiological exposure, and develop methods or drugs to restore injured
tissues and eliminate radioactive materials from contaminated tissues.
The other \$50 million will be used to support an initiative on
developing new medical countermeasures for chemicals that can be used as
weapons of mass destruction.

**NIH Roadmap for Medical Research:** The FY 2006 budget allocates a
total of \$333 million, an increase of \$98 million over FY 2005, to
continue support for the NIH \"Roadmap\" initiative in accordance with
the strategic plan developed in September 2003. These funds will be used
to target major opportunities and gaps in biomedical research that no
single institute at NIH could tackle alone, but which the agency as a
whole must address in order to overcome barriers and rapidly develop new
disease treatments, prevention strategies, and diagnostics. The Roadmap
is organized into three core themes: New Pathways to Discovery; Research
Teams of the Future; and Re-engineering the Clinical Research
Enterprise. The FY 2006 request includes \$83 million, an increase of
\$23.5 million, in the Office of the Director, and \$250 million, an
increase of \$74 million, in the budgets of the Institutes and Centers
for use in a coordinated effort to support the Roadmap.

**HIV/AIDS Research:** The FY 2006 budget includes a total of \$2.9
billion for HIV/AIDS-related research. This is a net increase of \$12
million, or 0.4 percent over FY 2005. In addition to these funds, the FY
2006 budget includes \$100 million in NIAID to continue HHS
contributions provided since FY 2002 to the Global Fund to Fight
HIV/AIDS, Tuberculosis, and Malaria.

In FY 2006, the NIH HIV/AIDS research program is placing its highest
priority on the goal to develop an HIV/AIDS vaccine. This includes
programs focused on the discovery, development, and pre-clinical and
clinical testing of vaccine candidates. The evaluation of an HIV/AIDS
vaccine will require extensive testing in the United States and in
international settings. An integral component of this effort is the
Global HIV Vaccine Enterprise initiative, which was announced by the
President at the G-8 Summit in Sea Island, Georgia, in June 2004. The
Enterprise will support a virtual consortium of research organizations
around the world to accelerate HIV vaccine development by enhancing
coordination, information sharing, and collaboration globally. In FY
2006, NIH will devote \$49 million, an increase of \$34 million over FY
2005, for the second year of this initiative. In the United States,
these funds will support the Center for HIV/AIDS Vaccine Immunology that
will focus on intensive and highly collaborative projects addressing key
immunological roadblocks to the discovery and development of a safe and
effective HIV/AIDS vaccine.

Other key components of the NIH HIV/AIDS research agenda continue to be
HIV prevention research, including the development of microbicides,
behavioral interventions, and strategies to prevent perinatal
transmissions; therapeutics research to develop simpler, less toxic, and
cheaper drugs and regimens to treat HIV infection and its complications;
international research, particularly to address the critical research
and training needs in developing countries; and research targeting the
disproportionate impact of the AIDS epidemic on racial and ethnic
minority populations in the United States.

**NIH Blueprint for Neuroscience Research:** In FY 2006, NIH will
continue to implement its \"Neuroscience Blueprint\" that is serving as
a framework to enhance the effectiveness of the NIH neurosciences
research agenda, which is supported by 15 Institutes and Centers.
Advances in the neurosciences and the emergence of powerful new
technologies offer many opportunities for Blueprint activities that will
enhance the effectiveness and efficiency of neuroscience research. Over
the past decade, driven by the science, the NIH neuroscience Institutes
and Centers have increasingly joined forces through initiatives and
working groups focused on specific disorders. The Blueprint builds on
this foundation, making collaboration a day-to-day part of how the NIH
does business in neuroscience. By pooling resources and expertise, the
Blueprint can take advantage of economies of scale, confront challenges
too large for any single Institute, and develop research tools and
infrastructure that will serve the entire neuroscience community.

In FY 2005, participating Blueprint Institutes and Centers are
developing an inventory of neuroscience tools funded by NIH and other
government agencies, enhancing training in the neurobiology of disease
for basic neuroscientists, and expanding ongoing gene expression
database efforts, such as the Gene Expression Nervous System Atlas
(GENSAT). In FY 2006, NIH will invest an additional \$26 million on
Blueprint initiatives that include developing genetically engineered
mouse strains specifically for nervous system disease research; training
in critical cross-cutting areas such as neuroimaging and computational
biology; and supporting specialized, interdisciplinary \"core\" centers
that might focus on areas such as animal models, cell culture, computer
modeling, DNA sequencing, drug screening, gene vectors, imaging,
microarrays, molecular biology, or proteomics and their applications to
neuroscience research.

Research Project Grants

The support of basic medical research through competitive,
peer-reviewed, and investigator-initiated research project grants (RPGs)
represents 54 percent of the total NIH budget request for FY 2006.

In FY 2006, the NIH budget provides an estimated \$15.5 billion, a 0.4
percent increase over FY 2005, to fund approximately 38,746 total
projects. This is 402 fewer grants in total than are expected to be
funded in FY 2005. The FY 2006 budget focuses available resources on
funding programmatic increases in non-competing continuation grants to
which NIH had previously committed, and to maximizing the number of
competing RPGs, in lieu of providing inflationary adjustments. Within
the total number of grants, NIH estimates it will support 9,463
competing RPGs in FY 2006, an increase of about 247 over FY 2005.
Excluding the large cohort of HIV/AIDS clinical trials that are cycling
into competing status in FY 2006, the average cost of a competing
research project grant in FY 2006 will be about \$347 thousand,
approximately the same level as in FY 2005.

**OPEN BAR CHART**

First Bar Chart title: Total RPGs

Chart illustrates Number of Grants for FYs 2001-2006

  ------------ ------------ ------------ ------------ ----------- -----------
  2006         2005         2004         2003         2002        2001

  38,746       39,148       39,231       38,219       36,206      34,122
  ------------ ------------ ------------ ------------ ----------- -----------

Second Bar Chart Title: New and Competing RPGs

Chart illustrates Number of Grants for FYs 2001-2006

  ------------ ------------ ------------ ------------ ----------- -----------
  2006         2005         2004         2003         2002        2001

  9,463        9,216        10,020       10,411       9,396       9,101
  ------------ ------------ ------------ ------------ ----------- -----------

**CLOSE BAR CHART**

Facilities Construction

In FY 2006, as discussed above, another \$30 million is requested to
further expand laboratory space in universities and research
institutions around the country critical to biodefense research
activities. The budget also includes a total of \$90 million for other
non-biodefense

intramural facilities projects, such as

general repairs and improvements across the NIH campuses. Consistent
throughout HHS, FY 2006 budget requests for intramural facilities focus
on maintenance of existing facilities.

Management Innovations

To better integrate research across its 27 Institutes and Centers, NIH
is developing additional decision support tools to improve the
management of its large and complex scientific portfolio. This will
allow NIH to more efficiently address important areas of emerging
scientific opportunities and rising public health challenges. This
effort is intended to stimulate accelerated investments in research
involving multiple Institutes and Centers, thereby helping to improve
the nation\'s health.

Substance Abuse and Mental Health Services administration

Overview Table

Numeric table shows dollars in millions)

+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| \`                             | **[2   | **[2   | **[2   | **     |
|                                | 004]{. | 005]{. | 006]{. | 2006** |
|                                | underl | underl | underl |        |
|                                | ine}** | ine}** | ine}** | *      |
|                                |        |        |        | *[+/-2 |
|                                |        |        |        | 005]{. |
|                                |        |        |        | underl |
|                                |        |        |        | ine}** |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Substance Abuse:               |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Substance Abuse Block          | \      | \      | \      | \$0    |
| Gra                            | $1,779 | $1,776 | $1,776 |        |
| nt\...\...\...\...\...\...\... |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Programs of Regional and       |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| National                       |        |        |        |        |
| Significance:\...\...\...      |        |        |        |        |
| \...\...\...\...\...\...\..... |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Treatment\...\                 | 419    | 422    | 447    | +25    |
| ...\...\...\...\...\...\...\.. |        |        |        |        |
| .\...\...\...\...\...\...\.... |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Prevention\.                   | [199]  | [199]  | [184]  | [-15]  |
| ..\...\...\...\...\...\...\... | {.unde | {.unde | {.unde | {.unde |
| \...\...\...\...\...\...\..... | rline} | rline} | rline} | rline} |
+--------------------------------+--------+--------+--------+--------+
| **Subtotal, Substance Abuse    | **\$2  | **\$2  | **\$2  | **+    |
| \                              | ,397** | ,397** | ,407** | \$10** |
| ...\...\...\...\...\...\....** |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Mental Health:                 |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Mental Health Block            | \$434  | \$433  | \$433  | \$0    |
| Grant\...\..                   |        |        |        |        |
| .\...\...\...\...\...\...\.... |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| PATH Homeless Formula          | 50     | 55     | 55     | 0      |
| Grant\...\...\...\...\...\.... |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Programs of Regional and       |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| National                       | 241    | 274    | 210    | -64    |
| Significance\...\...\...\.     |        |        |        |        |
| ..\...\...\...\...\...\...\... |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Children\'s Mental Health      | 102    | 105    | 105    | 0      |
| Services\...\...\...\...\...   |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Protection and                 | [35]   | [34]   | [34]   | [0]    |
| Advocacy\...\...               | {.unde | {.unde | {.unde | {.unde |
| \...\...\...\...\...\...\..... | rline} | rline} | rline} | rline} |
+--------------------------------+--------+--------+--------+--------+
| **Subtotal, Mental Health      | **\    | **\    | **\    | **-    |
| \...\...                       | $862** | $901** | $837** | \$64** |
| \...\...\...\...\...\...\...** |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Program                        | [\$92] | [\$94] | [\$92] | [-\$2] |
| Management\...\...\...\...\.   | {.unde | {.unde | {.unde | {.unde |
| ..\...\...\...\...\...\...\... | rline} | rline} | rline} | rline} |
+--------------------------------+--------+--------+--------+--------+
| **Total, Program               | **\$3  | **\$3  | **\$3  | **-    |
| Level\...\...\...\.            | ,351** | ,392** | ,336** | \$56** |
| ..\...\...\...\...\...\.....** |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| [Less Funds Allocated from     |        |        |        |        |
| Other Sources]{.underline}:    |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| PHS Evaluation                 | -117   | -123   | -121   | +2     |
| Funds\...\...\...\...          |        |        |        |        |
| \...\...\...\...\...\...\..... |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| **Total, Discretionary         | **\$3  | **\$3  | **\$3  | **-    |
| BA\...\...                     | ,234** | ,269** | ,215** | \$54** |
| \...\...\...\...\...\...\...** |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| FTE\...                        | 519    | 558    | 558    | 0      |
| \...\...\...\...\...\...\...\. |        |        |        |        |
| ..\...\...\...\...\...\...\... |        |        |        |        |
| \...\...\...\...\...\...\..... |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+

Substance Abuse and Mental Health Services administration

The Substance Abuse and Mental Health Services Administration builds
resilience and facilitates recovery for people with or at risk for
substance abuse and mental illness.

The FY 2006 budget requests \$3.3 billion for the Substance Abuse and
Mental Health Services Administration (SAMHSA), a net decrease of \$56
million from FY 2005. The request seeks to expand substance abuse
clinical and recovery support services through the President\'s Access
to Recovery State Voucher Program, continue to focus on achieving mental
health systems transformation with the State Incentive Grants for
Transformation, and support State implementation of the Strategic
Prevention Framework to prevent young people from initiating drug use.
Resources are also provided for Federal and State level drug and mental
health data collection activities.

Substance Abuse

An estimated 7.3 million Americans struggle with a serious drug problem
for which treatment is needed. Drug abuse has a significant impact on
individuals, families, and communities. Every day substance use leads to
lost productivity, the transmission of HIV/AIDS and other communicable
diseases, domestic violence, child abuse, criminal involvement, and
premature and preventable deaths. The FY 2006 request supports efforts
to provide effective substance abuse treatment and to stop drug use
before it occurs. The budget includes \$2.4 billion, a net increase of
\$10 million for effective substance abuse treatment and prevention
activities.

**OPEN TEXT BOX**

Access to Recovery

Fourteen States and one Tribal organization were awarded Access to
Recovery funding in FY 2004, the first year of funding for this
Presidential Initiative. The funded entities have identified target
populations that include youth, individuals involved with the criminal
justice system, women, individuals with co-occurring disorders, and
homeless individuals.

Access to Recovery Principles:

-   Consumer Choice -- The process of recovery is a personal one.
    Achieving recovery can take many pathways: physical, mental,
    emotional, or spiritual. With a voucher, people in need of addiction
    treatment and recovery support will be able to choose the programs
    and providers that will help them most. Increased choice protects
    individuals and encourages quality.

-   Outcome Oriented -- Success will be measured by outcomes,
    principally abstinence from drugs and alcohol, and including
    attainment of employment or enrollment in school, no involvement
    with the criminal justice system, stable housing, social support,
    access to care, and retention in services.

-   Increased Capacity -- Access to Recovery will expand the array of
    services available including medical detoxification, inpatient and
    outpatient treatment modalities, residential services, peer support,
    relapse prevention, case management, and other recovery support
    services.

**CLOSE TEXT BOX**

**Opening New Pathways to Recovery:** Effective substance treatment has
been shown to reduce an individual\'s illegal drug use by nearly half
and criminal activity by 80 percent. Treatment also increases employment
and decreases homelessness; results in improved physical and mental
health; and reduces risky sexual behaviors.

The FY 2006 budget proposes a 50 percent increase for the President\'s
Access to Recovery State Voucher program for a total funding level of
\$150 million. Access to Recovery allows individuals seeking clinical
treatment and recovery support services to exercise choice among
qualified community provider organizations, including those that are
faith-based. This program recognizes that there are many pathways of
recovery from addiction. Through Access to Recovery, individuals are
assessed, given a voucher for appropriate services, and provided with a
list of service providers from which they can choose. The proposed FY
2006 increase will expand this innovative program to an additional seven
States, for a total of 22 States participating. These States will have
flexibility to design an approach to focus on areas of greatest need.

The request also includes \$31 million for the Screening, Brief
Intervention, Referral and Treatment program. Through this program,
States are able to expand the continuum of care to include services for
non-dependent drug users. In FY 2006, SAMHSA plans to fund an additional
two States, for a total of nine.

**Promoting Effective Prevention:** National survey data confirm a 17
percent decrease in teenage drug use over the past three years,
resulting in 600,000 fewer youth using illicit drugs. This decrease
represents the lowest levels of teen drug use since the peak levels in
the 1990s and holds promise for the future as most addicted adults begin
using drugs at a young age.

The FY 2006 request continues efforts to achieve the President\'s goal
of reducing illicit drug use. The request prioritizes programs that
build capacity for comprehensive prevention services. Of the \$184
million for Prevention, \$93 million will enhance efforts to implement
the Strategic Prevention Framework. The Strategic Prevention Framework
is a five-step process to promote youth development, reduce risk-taking
behaviors, build on assets, and prevent problem behaviors. The five
steps are: (1) conduct needs assessments; (2) build State and local
capacity; (3) develop a comprehensive strategic plan; (4) implement
evidence-based prevention policies, programs, and practices; and (5)
monitor and evaluate program effectiveness, sustaining what has worked
well. SAMHSA awarded its first Strategic Prevention Framework State
Incentive Grants in FY 2004 to a total of 21 States and Territories.

A recent Program Assessment Rating Tool review identified SAMHSA\'s
competitive prevention grant program as making a unique contribution by
focusing on regional and emerging problems. It also found that funds
were effectively targeted to activities with the best opportunity to
succeed in the areas of greatest need.

**Substance Abuse Block Grant:** A total of \$1.8 billion is requested
for the Substance Abuse Prevention and Treatment (SAPT) Block Grant, the
same level as FY 2005. The SAPT Block Grant provides funding to over
10,500 community-based organizations and is the cornerstone of States\'
substance abuse financing, accounting for at least 40 percent of public
funds expended for prevention and treatment.

Mental Health

The budget includes \$837 million for mental health services, a net
decrease of \$64 million from FY 2005. The request prioritizes Mental
Health Transformation activities, consistent with the recommendations of
the President\'s Commission on Mental Health, through funding for
SAMHSA\'s competitive State Incentive Grants for Transformation and the
Community Mental Health Services Block Grant. For all other
discretionary grant activities, funding is provided to cover all
continuation grants.

**Transforming the Mental Health System:** The final report of the
President\'s Commission on Mental Health, which was released in 2003,
called for a fundamental overhaul of how mental health care is delivered
in America -- to achieve the promise of recovery for families and
children. The FY 2006 budget proposes \$26 million for State Incentive
Grants for Transformation, an increase of \$6 million over FY 2005.
These infrastructure grants will provide support for developing
comprehensive State mental health plans to reduce system fragmentation,
and increase services and supports available to people living with
mental illness.

SAMHSA will award 8 State Incentive Grants for Transformation in FY 2005
and 3 new grants in FY 2006, for a total of 11. New grantees will engage
in State planning and coordination activities, with involvement from
agencies, such as criminal justice, housing, child welfare, labor and
education. In the second year of funding, States will be able to use 85
percent of funds to support programs at the community level as proposed
in their State Plan. The remaining 15 percent will continue to support
planning activities.

In addition, the FY 2006 budget maintains funding for the Community
Mental Health Services Block Grant. The Block Grant is an important
component of SAMHSA\'s transformation efforts, as it is the only Federal
program that provides funds to every State to provide services and
improve the public mental health system. The Block Grant also gives
States a flexible source of services funding to initiate transformation
activities on a state-wide basis.

**Suicide Prevention:** Suicide is currently the 11th leading cause of
death among all age groups, taking the lives of approximately 30,000
Americans each year. It is the third leading cause of death for
adolescents. Studies of youth who have committed suicide have found that
90 percent had a diagnosable mental disorder at the time of their death.
In FY 2006, SAMHSA will continue its efforts to prevent youth suicide.
The request continues the activities authorized under the Garrett Lee
Smith Memorial Act that were funded in FY 2005. It supports state-wide
youth suicide early intervention and prevention strategies in schools,
juvenile justice systems, substance abuse and mental health programs,
foster care systems, and other child and youth support organizations.
The request also provides funding for institutions of higher education
to enhance services for students with mental and behavioral health
problems through educational seminars, hotlines, informational
materials, and training programs. SAMHSA will also provide funding for a
national cross-site evaluation and the Suicide Prevention Resource
Center, which in FY 2005 placed a more detailed emphasis on adolescent
suicide.

**Other Mental Health:** The budget maintains funding for
community-based systems of care for children and youth, State grants
providing outreach and services for homeless individuals through
Projects for the Assistance for Transition from Homelessness, and
protection and advocacy activities. It also provides resources to
increase access to mental health services to some of our most vulnerable
citizens including individuals with co-occurring mental health and
substance abuse disorders, older Americans, and traumatized children.

Program Management

The budget includes \$92 million to maintain staff, and related program
management, and to support activities necessary to effectively
administer a wide array of Federal programs. SAMHSA has improved the
efficiency of its grant programs through contract consolidations and
streamlined grant announcements.

agency for healthcare research and quality overview table

numeric table shows dollars in millions

+-------------------------------------+-------+-------+-------+-------+
|                                     | **    | **    | **    | **2   |
|                                     | [2004 | [2005 | [2006 | 006** |
|                                     | ]{.un | ]{.un | ]{.un |       |
|                                     | derli | derli | derli | **[+/ |
|                                     | ne}** | ne}** | ne}** | -2005 |
|                                     |       |       |       | ]{.un |
|                                     |       |       |       | derli |
|                                     |       |       |       | ne}** |
+-------------------------------------+-------+-------+-------+-------+
|                                     |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| [Health Costs, Quality and Outcomes |       |       |       |       |
| Research]{.underline}               |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| [Patient Safety]{.underline}        |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| Health Information Technology       | \$50  | \$50  | \$50  | \$0   |
| Initiative\...\...\...\...\.....    |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| Other Patient                       | [     | [     | [     | [0]{. |
| Safety\.                            | 30]{. | 34]{. | 34]{. | under |
| ..\...\...\...\...\...\...\...\...\ | under | under | under | line} |
| ...\...\...\...\...\...\...\...\... | line} | line} | line} |       |
+-------------------------------------+-------+-------+-------+-------+
| Subtotal, Patient                   | \$80  | \$84  | \$84  | \$0   |
| Safety\...\...\...\...\.            |       |       |       |       |
| ..\...\...\...\...\...\...\...\.... |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| Comparative Effectiveness           | 0     | 15    | 15    | 0     |
| Research\..                         |       |       |       |       |
| .\...\...\...\...\...\...\...\..... |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| Other Quality and Cost              | [1    | [1    | [1    | [0]{. |
| Effectiveness                       | 66]{. | 62]{. | 62]{. | under |
| Research\...\...\.....              | under | under | under | line} |
|                                     | line} | line} | line} |       |
+-------------------------------------+-------+-------+-------+-------+
| Subtotal, Health Costs, Quality and | \$246 | \$261 | \$261 | \$0   |
| Outcomes                            |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| Medical Expenditures Panel          | 55    | 55    | 55    | 0     |
| Surveys\...\...\                    |       |       |       |       |
| ...\...\...\...\...\...\...\...\... |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| Program                             | [3]{. | [3]{. | [3]{. | [0]{. |
| Support\...\...\...\...\...         | under | under | under | under |
| \...\...\...\...\...\...\...\...\.. | line} | line} | line} | line} |
| .\...\...\...\...\...\...\...\..... |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| **Subtotal, Program                 | **\$  | **\$  | **\$  | **    |
| Lev                                 | 304** | 319** | 319** | \$0** |
| el\...\...\...\...\...\...\...\...\ |       |       |       |       |
| ...\...\...\...\...\...\...\.....** |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
|                                     |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| Less Funds Allocated From Other     |       |       |       |       |
| So                                  |       |       |       |       |
| urces:\...\...\...\...\...\...\.... |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| PHS Evaluation                      | -304  | -319  | -319  | 0     |
| Funds\.                             |       |       |       |       |
| ..\...\...\...\...\...\...\...\...\ |       |       |       |       |
| ...\...\...\...\...\...\...\...\... |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| **Total, Budget                     | **    | **    | **    | **    |
| Authority                           | \$0** | \$0** | \$0** | \$0** |
| \...\...\...\...\...\...\...\...\.. |       |       |       |       |
| .\...\...\...\...\...\...\...\...** |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
|                                     |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+
| FTE\...\...\...\...                 | 290   | 296   | 296   | 0     |
| \...\...\...\...\...\...\...\...\.. |       |       |       |       |
| .\...\...\...\...\...\...\...\...\. |       |       |       |       |
| ..\...\...\...\...\...\...\...\.... |       |       |       |       |
+-------------------------------------+-------+-------+-------+-------+

agency for healthcare research and quality

The Agency for Healthcare Research and Quality promotes health care
quality improvement by conducting and supporting health services
research that develops and presents scientific evidence regarding all
aspects of health care.

The FY 2006 request for the Agency for Healthcare Research and Quality
(AHRQ) provides a total program level of \$319 million, the same as FY
2005. Priority activities include continued efforts to improve patient
safety through the implementation of proven information technologies,
and new comparative effectiveness research anticipated by the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).

AHRQ conducts and sponsors health services research to inform
decision-making and improve clinical care and the organization and
financing of health care. AHRQ evaluates both clinical services and the
system in which these services are provided. This work contributes not
only to improved clinical care, but also to more cost-effective care.
AHRQ supports the translation of research into measurable improvements
in the care Americans receive. AHRQ has forged cooperative relationships
with major health care organizations to ensure that research funded by
the agency is implemented by the major players in the health system. The
agency\'s research agenda is broad and spans from medical informatics to
long-term care; from pharmaceutical outcomes to prevention to responses
to bioterrorism.

**OPEN TEXT BOX**

Five Steps to Safer Health Care

1\. Ask questions if you have doubts or concerns.

2\. Keep and bring a list of ALL the medicines you take.

3\. Get the results of any test or procedure.

4\. Talk to your doctor about which hospital is best for your health
needs.

5\. Make sure you understand what will happen if you need surgery.

*Excerpts from* Five Steps to Safer Health Care. Patient Fact Sheet*.
July 2003. AHRQ Publication No 03-M007. Agency for Healthcare Research
and Quality,*

*Rockville, MD.*

*www.ahrq.gov/consumer/5steps.htm*

**CLOSE TEXT BOX**

Health Costs, Quality, and Outcomes

The President\'s Budget will continue to support improvements through
research on the cost effectiveness and quality of health care by
providing a total of \$261 million. This total includes \$84 million for
Patient Safety and \$15 million for comparative effectiveness research
authorized by the MMA.

**Patient Safety:** The patient safety research portfolio for AHRQ was
dramatically expanded in FY 2001 in response to the Instititute of
Medicine\'s report, To Err Is Human. In FY 2004, AHRQ redirected much of
its patient safety funding to accelerate the adoption of health
information technologies that are proven to reduce medical errors and,
by doing so, reduce the cost of health care. In FY 2005 and FY 2006,
AHRQ will continue to direct \$50 million of its patient safety
resources to information technology investments designed to enhance
patient safety, with an emphasis on small community and rural
hospitals/health care systems. These investments will encourage uptake
of technologies such as computerized physician order entry, computer
monitoring for potential adverse drug events, automated medication
dispensing, computerized reminder systems to improve compliance with
guidelines, handheld devices for prescription information, computerized
patient records, and patient-centered computerized support groups. The
first awards for implementation of these technologies were made in
summer 2004.

AHRQ grants provided up to 50 percent of the total project costs, with a
maximum of \$500,000 per year per project. Working with public and
private partners, AHRQ will use data from Hospital Information
Technology investment demonstrations to make the business case for
adoption of these tools, and help spread proven technology through the
healthcare system.

AHRQ\'s FY 2004 plan laid the groundwork for the challenge the President
has issued to the health care system to enable the majority of Americans
to be able to benefit from secure electronic health records within ten
years. Outside AHRQ, the FY 2006 request includes a new \$75 million
account in the Office of the National Coordinator for Health Information
Technology (ONCHIT) to finance targeted activities needed to bring
together the health care providers in each region to adopt
standards-based, interoperable Electronic Health Records systems.
Reaching the President\'s ten-year goal requires initiating, in FY 2005,
regional collaborations to assist health care providers in the
deployment of interoperable applications. As a result, AHRQ has decided
to direct \$14 million in FY 2005 to jump-start these collaborations in
a number of regions, with funds derived from a combination of an
internal reallocation of \$11.5 million into patient safety and an
additional \$2.5 million provided by the Secretary\'s authority to
transfer limited amounts between agencies. This additional investment
will enhance existing and future efforts in pharmaceutical outcomes,
comparative effectiveness, and improved care delivery. In FY 2006,
continuation of these collaborations will be provided through the new
ONCHIT account.

**OPEN TEXT BOX**

10 Priority Conditions for Comparative Effectiveness Research

-   Ischemic heart disease

-   Cancer

-   Chronic obstructive pulmonary disease/asthma

-   Stroke, including control of hypertension

-   Arthritis and non-traumatic joint disorders

-   Diabetes mellitus

-   Dementia, including Alzheimer's disease

-   Pneumonia

-   Peptic ulcer/dyspepsia

-   Depression and other mood disorders

**CLOSE TEXT BOX**

AHRQ will continue to invest \$10 million on the development of clinical
terminology, messaging standards, and other tools needed to accelerate
the use of cost-effective healthcare information technology. AHRQ will
fund research to identify barriers and practical solutions to the
development and use of health information systems to support quality
improvements and patient safety, since one major obstacle is the lack of
clinical terminology and messaging standards that support
interoperability. These priority projects will support patient safety in
the U.S., develop a common vision for health information technology and
standards across the health care spectrum, and promote and accelerate
efforts needed to make that vision a reality in the U.S.

The remaining \$24 million in AHRQ\'s patient safety budget supports a
variety of activities. AHRQ will continue to work collaboratively with
the Centers for Disease Control and Prevention, the Food and Drug
Administration, and the Centers for Medicare & Medicaid Services, to
develop a common Web interface for medical providers that will both
enhance the usefulness of adverse event information and reduce the
reporting burden for their partners in the health care community.

**Comparative Effectiveness Research:** In FY 2006, AHRQ will continue a
\$15 million research portfolio to develop state-of-the-art information
about the effectiveness of interventions, including prescription drugs,
for ten top conditions affecting Medicare beneficiaries. This work,
authorized by section 1013 of the MMA, is being initiated in FY 2005.
This new initiative is focused solely on conditions that are common and
costly among those whose health care is funded by Medicare, Medicaid,
and the State Children\'s Health Insurance Program. The list of priority
conditions was developed with substantial input from the public and
stakeholders; HHS used both public listening sessions and systems for
receipt of written comments similar to that used to solicit public
comments on regulatory changes under consideration. This research will
take the form of systematic reviews and syntheses of the scientific
literature. Researchers will focus on the evidence of outcomes,
comparative clinical effectiveness and the appropriateness of use of
pharmaceuticals, health care services, and other health care items.

Research and Dissemination Activities Outside Patient Safety:

In FY 2006, AHRQ will invest \$162 million in research and dissemination
activities in prevention, pharmaceutical outcomes, informatics, and
other areas to support the quality and cost-effectiveness of health
care. A number of AHRQ efforts are oriented toward making research
findings accessible. For example, in the CERTs program, studies have
been underway to gather information that Medicaid programs can use to
make coverage and other policy decisions such as drug utilization
review, economic effects of beta- blocker therapy in heart failure, and
prevalence of type 2 diabetes mellitus in children. Under its
Evidence-based Practice Program, AHRQ is developing scientific
information for other agencies and organizations on which to base
clinical guidelines, performance measures, and other quality improvement
tools. For example, one of AHRQ\'s Evidence-based Practice Centers (EPC)
recently issued a report on the effectiveness of laser treatment and
vacuum-assisted closure on wound healing; this research had been
requested by the American Association of Health Plans.

AHRQ will continue to sponsor the U.S. Preventive Services Task Force.
The USPSTF has issued clinical recommendations on colorectal cancer,
breast cancer, osteoporosis, hormone replacement therapy, depression,
and aspirin chemoprevention for patients at risk for heart disease.

Medical Expenditure Panel Surveys

The FY 2006 budget for Medical Expenditure Panel Surveys (MEPS) includes
a request for \$55 million, the same as FY 2005. MEPS is the collection
of detailed, national data on the health care services Americans use,
how much they cost, and who pays for them. It is the only national
source of visit-level information on medical expenditures. MEPS provides
a better understanding of the quality of care the typical patient
receives, and of disparities in the care delivered. MEPS data are
critical for tracking the impact of Federal and State programs,
including the State Children\'s Health Insurance Program (SCHIP),
Medicare and Medicaid.

These surveys also provide a substantial portion of the data used to
develop two reports, required by the agency\'s 1999 reauthorization,
that seek to measure the quality of health care in America and
differences in access to health care services for priority populations.
The National Healthcare Quality Report includes information on patient
assessment of health care quality, clinical quality measures of common
health care services, and performance measures related to outcomes of
acute and chronic disease. The second report -- the National Healthcare
Disparities Report -- highlights populations that are at high risk for
differences in care. These populations include the elderly, people in
inner-city and rural areas, women, children, minorities, low-income
groups, and individuals with special health care needs. AHRQ used a
formal notice and comment process to solicit public comments on the
measures that should be included in the upcoming 2005 report. The
current editions of both reports are available on a new Web site,
[www.qualitytools.ahrq.gov]{.underline}. In addition, the site serves as
a Web-based clearinghouse by providing information for health care
providers, health plans, policymakers, purchasers, patients and
consumers to take effective steps to improve quality.

In FY 2006, AHRQ will be fully funded through inter-agency transfers of
evaluation funds.

centers for medicare & medicaid services

Overview Table

+------------------------------+---------+---------+---------+---------+
|                              | *       | *       | *       | *       |
|                              | *[2004] | *[2005] | *[2006] | *2006** |
|                              | {.under | {.under | {.under |         |
|                              | line}** | line}** | line}** | **[+/-  |
|                              |         |         |         | 2005]   |
|                              |         |         |         | {.under |
|                              |         |         |         | line}** |
+------------------------------+---------+---------+---------+---------+
|                              |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| Current Law:                 |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| Medicare                     | \$      | \$      | \$      | +\      |
| /1\...\...\...\...\...\.     | 301,505 | 333,442 | 401,059 | $67,617 |
| ..\...\...\...\...\...\...\. |         |         |         |         |
| ..\...\...\...\...\...\..... |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| Medicaid                     | 176,231 | 188,272 | 192,562 | +4,290  |
| /2\...\...\...\...\...\.     |         |         |         |         |
| ..\...\...\...\...\...\...\. |         |         |         |         |
| ..\...\...\...\...\...\..... |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| SCHIP\...\...                | 4,607   | 5,343   | 5,434   | +91     |
| \...\...\...\...\...\...\... |         |         |         |         |
| \...\...\...\...\...\...\... |         |         |         |         |
| \...\...\...\...\...\...\... |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| State Grants and             | [4      | [20     | [39     | [+19    |
| Demonstrations\              | 8]{.und | 0]{.und | 9]{.und | 9]{.und |
| ...\...\...\...\...\...\.... | erline} | erline} | erline} | erline} |
+------------------------------+---------+---------+---------+---------+
| **Total Outlays, Current     | **\$48  | **\$52  | **\$59  | **+\$7  |
| Law\...\...                  | 2,391** | 7,257** | 9,454** | 2,197** |
| \...\...\...\...\...\.....** |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| Premiums                     | -32,140 | -38,010 | -55,508 | -17,498 |
| \...\...\...\...\...\...\.   |         |         |         |         |
| ..\...\...\...\...\...\...\. |         |         |         |         |
| ..\...\...\...\...\...\..... |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| Other Offsetting             | [-18    | [       | [       | [       |
| Collections/                 | 9]{.und | 0]{.und | 0]{.und | 0]{.und |
| Receipts\...\...\...\....    | erline} | erline} | erline} | erline} |
+------------------------------+---------+---------+---------+---------+
| **Total Net Outlays, Current | **\$45  | **\$48  | **\$54  | **\$5   |
| La                           | 0,062** | 9,247** | 3,946** | 4,699** |
| w\...\...\...\...\...\....** |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
|                              |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| Proposed Law:                |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| SMI Transfer to Medicaid for | 0       | 0       | 230     | \$230   |
| QIs                          |         |         |         |         |
| \...\...\...\...\...\...\... |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| Medicaid                     | 0       | 225     | 156     | -\$69   |
| Benefits\...\...             |         |         |         |         |
| \...\...\...\...\...\...\... |         |         |         |         |
| \...\...\...\...\...\...\... |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| SCHIP                        | 0       | 0       | 799     | \$799   |
| Benefits\...\...\...\.       |         |         |         |         |
| ..\...\...\...\...\...\...\. |         |         |         |         |
| ..\...\...\...\...\...\..... |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| State Grants and             | [       | [       | [40     | [\$40   |
| Demonstration\...            | 0]{.und | 0]{.und | 0]{.und | 0]{.und |
| \...\...\...\...\...\...\... | erline} | erline} | erline} | erline} |
+------------------------------+---------+---------+---------+---------+
| **Total Proposed             | **\$0** | **      | **\$    | **\$    |
| Law                          |         | \$225** | 1,585** | 1,360** |
| \...\...\...\...\...\...\... |         |         |         |         |
| \...\...\...\...\...\.....** |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
|                              |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| Premiums, Proposed           | \$0     | \$0     | -\$35   | -\$35   |
| Law\...\...\...\...\...      |         |         |         |         |
| \...\...\...\...\...\...\... |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
|                              |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| **Total Net Outlays,         | **\$45  | **\$48  | **\$54  | **\$5   |
| Proposed Law                 | 0,062** | 9,472** | 5,496** | 6,024** |
| /3\...\...\...\....**        |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
|                              |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
|                              |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| 1/ Benefits (including       |         |         |         |         |
| Medicare Transitional Drug   |         |         |         |         |
| Assistance and Medicare      |         |         |         |         |
| Prescription Drug), QIOs,    |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| administration (including    |         |         |         |         |
| State low-income             |         |         |         |         |
| determinations for Medicare  |         |         |         |         |
| Part D), and Medicare        |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| Part B transfer to Medicaid  |         |         |         |         |
| for QIs.                     |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| 2/ Net outlays, without FY   |         |         |         |         |
| 2004/05 outlays for QIs;     |         |         |         |         |
| without FY 2005/06 State     |         |         |         |         |
| low-income determinations.   |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| 3/ Total net outlays equal   |         |         |         |         |
| current outlays minus the    |         |         |         |         |
| impact of proposed           |         |         |         |         |
| legislation                  |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
| and offsetting receipts.     |         |         |         |         |
+------------------------------+---------+---------+---------+---------+
|                              |         |         |         |         |
+------------------------------+---------+---------+---------+---------+

centers for medicare & medicaid services

The Centers for Medicare & Medicaid Services assures health care
security for beneficiaries.

The FY 2006 budget request for the Centers for Medicare & Medicaid
Services (CMS) is \$545.5 billion in net outlays, a \$56.0 billion or
11.4 percent increase over FY 2005. The request finances Medicare,
Medicaid, the State Children\'s Health Insurance Program (SCHIP), the
Health Care Fraud and Abuse Control Program (HCFAC), the Health
Insurance Portability and Accounting Act (HIPAA), and CMS operating
costs.

Our FY 2006 budget request supports several key Presidential and
Secretarial priorities:

-   Implementing the Medicare Prescription Drug, Improvement, and
    Modernization Act of 2003 (MMA) provisions, specifically the
    prescription drug benefit.

-   Investing in information technology (IT) infrastructure to

-   support growth and change in the Medicare and Medicaid programs.

-   Promoting the effective use of IT as a central strategy to improve
    quality and Agency effectiveness.

-   Maximizing program integrity efforts in all our programs.

-   Developing evidence-based approaches to integrating technology with
    medical care; and

-   Improving the quality of health care for all our beneficiaries.

Building upon the success of the Health Insurance Flexibility and
Accountability (HIFA) waivers and SCHIP, the Administration plans to
work diligently with the Congress to develop a Medicaid modernization
plan. This plan would introduce more State flexibility and fiscal
stability into the program. The Administration proposes to provide
States with additional flexibility in Medicaid to further increase
coverage among low-income individuals and families without creating
additional costs for the Federal Government. This proposal would build
on the success of SCHIP to provide acute care for children and families,
as well as efforts to reduce the number of uninsured individuals.

The budget also includes significant new efforts to extend services to
the disabled and those in need of long--term care services through the
New Freedom Initiative. In addition, it provides assistance to
vulnerable populations transitioning from welfare to work through the
extension of the Transitional Medical Assistance Program.

Finally, the budget proposes to restrict the use of intergovernmental
transfers and cap Federal payments to individual State and local
government providers.

**OPEN PIE CHART**

Chart title: FY 2006 Net Outlays

Total=\$545.5 billion. There are 4 slices to illustrate the total CNS
budget. The largest slice represents Medicare at 62 percent. The second
slice, in descending order, represents Medicaid at 35 percent. The third
and fourth slices represent 1 percent each for Administration and SCHIP.

**CLOSE PIE CHART**

medicare modernization act Implementation

On December 8, 2003, the President signed into law the historic Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). MMA
transformed the Medicare program by significantly expanding private
health plan options (Part C) and adding a prescription drug benefit
(Part D) to traditional fee-for-service hospital insurance (Part A) and
supplementary medical insurance (Part B). In 2004, Medicare
beneficiaries benefited from improvements to provide modern,
prevention-oriented health care to our Nation\'s elderly and disabled
populations. In June, the prescription drug discount card began
providing beneficiaries lower prices for their medications, and these
discounts will continue until the full drug benefit is implemented. In
2005, beneficiaries will receive new preventive benefits, such as a
\"Welcome to Medicare\" physical. And, in 2006, for the first time in
the history of Medicare, beneficiaries will be able to participate in a
new benefit that offers outpatient prescription drug coverage. With all
the improvements to Medicare, CMS will conduct extensive outreach
efforts to help seniors understand their new choices. Expanded efforts
through

1-800-Medicare, [www.medicare.gov]{.underline}*,* community-based
organizations, and media outreach will ensure that seniors have the
information they need to select from the many new options available.

Prescription Drug Discount Card

MMA established a temporary prescription drug discount card program to
immediately help Medicare beneficiaries reduce their out-of-pocket
spending on drugs until the full Medicare drug benefit begins in January
2006. Enrollment in the discount card program began in May 2004, and
discounts and transitional assistance began in June 2004. As of June,
CMS had contracted with organizations to make a total of 38 national and
33 regional discount cards available, and amended 83 Medicare Advantage
contracts to include exclusive cards for their members. To date, nearly
6.2 million beneficiaries have enrolled in the discount card program,
and more are enrolling every day. Included in the 6.2 million are the
1.7 million beneficiaries who are currently receiving the \$600
low-income transitional assistance credit in conjunction with their
discount cards.

Seniors are seeing real savings on their prescription drug costs. In
October 2004, CMS found that beneficiaries were obtaining discounted
prices that were about 12 to 21 percent less than the national average
prices for commonly used brand name drugs at retail pharmacies.
Beneficiaries who use generic drugs obtained even larger savings from 28
to 75 percent below typical prices for commonly used generics. And,
low-income beneficiaries who received the \$600 transitional assistance
credit on their discount cards experienced reductions as much as 90
percent off national average retail pharmacy prices when they used the
Medicare discount card together with their transitional assistance.
Independent studies have demonstrated similar results; beneficiaries
save about 20 percent off the retail cost of brand name drugs and up to
60 percent off the cost of generic drugs as a result of the discount
card program.

Voluntary Prescription Drug Benefit

Beginning January 1, 2006, approximately 42.7 million Medicare
beneficiaries will be eligible to enroll in a new subsidized
prescription drug benefit that helps lower out-of-pocket prescription
drug costs. Beneficiaries choose either a new stand-alone private plan
that adds prescription drug coverage to their traditional Medicare
fee-for-service coverage, or beneficiaries can enroll in a private plan
that provides both medical and drug benefits from one source. Success in
this effort requires CMS to establish major new information systems, to
educate and enroll beneficiaries, and to review and approve drug plan
bids.

CMS has been actively preparing to implement this historic new benefit.
CMS published proposed rules in August 2004, and in December, issued
formulary guidance. On January 3, 2005, the United States Pharmacopia
issued model guidelines for drug categories and classes to provide a
standard framework for the development of formularies. Plans\'
formularies are required to provide beneficiaries with a choice of drugs
within each category and class that appropriately reflects current
medical practice. CMS will review individual formularies to ensure that
plans provide access to medically necessary drugs and do not
discriminate against any sub-groups of beneficiaries. Also in December,
the Secretary announced the establishment of 34 prescription drug plan
regions after significant input from stakeholders. These regions
represent the new service delivery areas for the prescription drug plans
beginning in 2006. Most importantly, CMS has taken every opportunity to
receive input from stakeholders about the new drug benefit. In December
2004, CMS held numerous open door forums on sponsor applications,
bidding, formularies, and risk-adjustment, and posted materials on the
[www.cms.hhs.gov]{.underline} website for potential sponsors\' use,
including a draft plan benefit package, solvency standards, bid
instructions, and a pricing tool.

CMS has met, and will continue to meet, many key milestones in 2005 to
ensure that the benefit is implemented on time. In January 2005, CMS
published the final rule establishing the drug benefit. The new rules
ensure the drug benefit will:

-   Offer comprehensive help to those who need it most-- people with
    very high prescription drug costs and people with low incomes-- and
    for those with low incomes, comprehensive help at little or no cost;

-   Give beneficiaries a choice of at least two drug plans that will
    cover a comprehensive set of both brand name and generic drugs;

-   Ensure beneficiaries have convenient access to pharmacies, generally
    within just a few miles or less of their homes;

-   Guarantee that Medicare beneficiaries living in nursing facilities
    will be able to enroll in a drug plan and take advantage of the new
    benefit, since all prescription drug plans will contract with
    long-term care pharmacies; and,

-   Ensure that full benefit dual eligible beneficiaries who have both
    full Medicaid and Medicare benefits are automatically enrolled in a
    drug plan effective January 1, 2006, (with an option to change
    plans) so that they have no gap in coverage during the transition to
    the Medicare benefit.

-   Facilitate enrollment of beneficiaries who have been determined
    eligible for the low-income subsidy but have not chosen a plan.

In upcoming months, CMS will conduct nationwide conferences for
potential sponsors and greatly expand beneficiary education activities.
Plans\' applications are due in March 2005, formulary information is due
in April 2005, and plan bids are due to CMS in June 2005. CMS plans to
approve packages by September, and beneficiary enrollment in the new
drug plans will begin November 15, 2005 and continue until May 15, 2006.

Drug plans will typically cover about half of beneficiaries\' drug
costs, and all beneficiaries will have an

out-of-pocket limit on how much they pay for their prescription drugs.
The proposed beneficiary premium for the new Medicare drug benefit is
designed so that, on average, a non-low income beneficiary pays about 25
percent of the drug premium. The remaining 75 percent will be subsidized
by the Federal Government.

Medicare will provide additional financial assistance to low-income
beneficiaries. Beneficiaries with incomes below 135 percent of poverty
will pay no monthly premium, no deductible, and nominal co-payments per
prescription. Beneficiaries with incomes between 135 and 150 percent of
the Federal Poverty Level will pay reduced premiums, a \$50 deductible,
and reduced cost-sharing.

Medicare will pay subsidies to employers that continue to offer retiree
health benefits to seniors. Medicare will permit employers and unions to
continue providing drug coverage to their Medicare-eligible retirees
while retaining their current plan designs that are at least equivalent
to the standard Part D drug benefit, and allow them to use the retiree
drug subsidy to reduce the cost of providing generous coverage. Sponsors
of employer and union plans who offer a drug benefit as good as, or
better than, Medicare\'s drug benefit will be able to apply for the
subsidy, which is estimated to roughly average \$668 per beneficiary in
2006. Plan sponsors will have to incur costs at least equal to the gross
value of the Part D benefit (taking into account the effect of
beneficiary out-of-pocket spending and beneficiary premiums).

State Effects

Under Part D of MMA, States are relieved of a significant portion of the
costs of providing pharmaceutical benefits to individuals eligible for
both Medicare and Medicaid. States maintain some percentage of the
financial responsibility for providing drugs to these individuals. In
2006, States will be expected to pay 90 percent of this amount. This
percentage will be phased down to 75 percent by FY 2015, where it will
remain thereafter.

States will also participate in the eligibility determination process
for the low-income drug benefit. For the Part D low-income drug benefit,
eligibility will be determined by either the State Medicaid agency, with
States receiving their regular matching funds for associated
administrative costs, or by the Social Security Administration, with
additional funds authorized to cover new administrative costs.

Finally, MMA created a new program to assist States with paying for
uncompensated medical care for undocumented aliens. The law establishes
an annual \$250 million fund, which will be allotted among the States
each year between FY 2005 and 2008. Two-thirds of this money will be
distributed based on the relative percentages of undocumented aliens in
each State and the District of Columbia.

One-third will be allotted among the six States with the largest number
of undocumented alien apprehensions. The amounts set aside for each
State will not be dispersed through the State itself. The law requires
the Secretary to directly pay hospitals, doctors, and other providers
for their otherwise uncompensated costs of providing emergency health
care to undocumented aliens in their respective States.

Medicare Advantage

MMA created the Medicare Advantage (MA) program to offer more choices
and better benefits to Medicare beneficiaries through competition among
private health insurance plans. In 2006, 16 percent of beneficiaries are
expected to be enrolled in private plans, and by 2010, this number is
projected to increase to about 25 percent. Currently, five million
beneficiaries are enrolled in Medicare Advantage. MMA increased payments
to private plans, and plans have been investing these higher payments in
improving benefits for Medicare beneficiaries. Recent studies indicate
that beneficiaries enrolled in a Medicare Advantage plan have overall
savings for their Medicare and non-Medicare benefits of over \$700 per
year in out-of-pocket costs for the average beneficiary and nearly
\$2,000 in savings for those beneficiaries in poor health compared to
traditional Medicare for beneficiaries without supplemental coverage
from an employer or Medicaid.

New regional plans will begin on January 1, 2006, and provide the most
significant expansion to private plan options since the Balanced Budget
Act of 1997. Regional plans will have a network of doctors and hospitals
that contractually agree to provide health care services at a specified
rate but also allow enrollees to go outside the network for care. Unlike
local plans, which serve individual counties and groups of counties
chosen by the plan sponsor, the new regional PPOs will bid to serve one
of 26 regions. The goal of these larger regional markets is to bring
more plan options to rural areas by grouping States together with
similar payment rates and patient care trends, and to achieve a target
population size. These factors, coupled with existing organizational
relationships and learning from plans about their intentions to
participate in the Medicare program in certain areas, were critical in
determining the region design.

CMS has been actively preparing throughout 2004 and will continue in
2005 to seamlessly implement this historic new expansion in private
plans. In 2004, CMS published the proposed rule and guidance to plans as
to how to transition to Medicare Advantage (MA), held open door forums
on bidding and the MA application process, and released draft
applications. In January 2005, CMS published the final rule, and in
upcoming months, CMS will conduct nationwide conferences for potential
sponsors, including benefit package seminars. CMS will accept bids
through June 6, subsequently review marketing materials, and then
approve plans in September. Marketing to beneficiaries can begin in
October, and enrollment will begin on November 15, 2005 and continue
until May 15, 2006. CMS is working to simplify the application process
to make it as efficient and non-duplicative as possible.

Preventive Benefits

MMA introduced a number of provisions that expanded preventive benefits
coverage beginning

January 1, 2005. Beneficiaries whose Medicare Part B coverage begins on
or after January 1, 2005, will be covered for an initial preventive
physical examination within six months of enrollment. This examination
includes counseling or referral with respect to screening and preventive
services such as pneumococcal, influenza, and hepatitis B vaccinations;
screening mammography; screening pap smear and pelvic exam; prostate
cancer screening; colorectal cancer screening; diabetes outpatient
self-management services; bone mass measurement; glaucoma screening;
medical nutrition therapy services; cardiovascular screening blood test;
and diabetes screening test. The diabetes screening test, only given to
beneficiaries at risk for diabetes, includes a fasting plasma glucose
test and other such tests approved by the Secretary.

The cardiovascular screening blood test and the diabetes screening test
do not have a deductible or co-pays (since Medicare pays 100 percent for
clinical laboratory tests), so beneficiaries do not incur any cost. This
is an additional incentive for those with limited resources who might
not otherwise access these benefits.

CMS is also collaborating on education and outreach with the American
Cancer Society, the American Diabetes Association, and the American
Heart Association. The campaign will help maximize attention to
Medicare\'s new preventive benefits and help seniors use them.

Contracting Reform

MMA includes provisions that allow the Secretary to introduce greater
competitiveness and flexibility to the Medicare contracting process. To
ensure a sufficient number of private contractors to administer the
program, the original law setting up Medicare provided prospective
contractors with a number of beneficial provisions such as limiting the
type of contractors, requiring cost contracts, and limiting competition
for specific functions. The new law:

-   Removes the distinction between Part A contractors and Part B
    contractors;

-   Allows the Secretary to renew contracts annually for up to five
    years;

-   Requires that all contracts be re-competed at least every five
    years;

-   Limits contractor liability; and

-   Allows incentive payments to improve contractor performance.

CMS is requesting \$58.8 million to implement Medicare contracting
reform in FY 2006. With this amount, CMS plans to implement an
accelerated strategy that features two cycles of contractor conversions
from the old Title XVIII contracts to the new Medicare administrative
contracts over a period FY 2006 through FY 2008. In FY 2006, CMS will
cover the costs of contractor and data center transitions and
terminations. This accelerated strategy ensures that expected savings
from Medicare contracting reform could come as early as FY 2009.

Fraud and Abuse

MMA includes several provisions to combat health care fraud and abuse in
Medicare and other CMS programs. Highlights of these provisions are:

-   Revision of average wholesale price (AWP) payments for Medicare\'s
    covered outpatient drugs provided in a doctor\'s office to average
    sales price (ASP).

-   Creation of the Program Advisory and Oversight Committee (PAOC) to
    review and provide advice on implementation of the competitive
    bidding program for durable medical equipment (DME), enteral
    nutrition, and off-the-shelf orthotics.

-   Implementation in early FY 2005 of a pilot program to conduct
    National and State background checks on workers in long-term care
    settings. The goal of the pilot is to identify efficient, effective,
    and economical processes for long-term care facilities or providers
    to conduct background checks on employees with direct access to
    residents and patients.

Cost Containment/Long Term Financial Security

Section 801 of MMA requires the Medicare Board of Trustees of the
Hospital Insurance Trust Fund (Part A) and the Supplementary Medical
Insurance Trust Fund (Part B and Part D) to assess whether Medicare\'s
\"excess general revenue funding\" exceeds 45 percent. As defined in the
law, excess general revenue funding is equal to Medicare\'s total
outlays minus dedicated financing (primarily payroll taxes and
premiums). Trustees will be required to include the following
information in their annual reports starting in 2005:

-   General revenue Medicare growth projections as a percentage of the
    total Medicare outlays;

-   Financial analysis of the combined Medicare Part A and Part B trust
    funds if general Medicare revenue funding were limited to 45 percent
    of total Medicare outlays;

-   A determination as to whether there is projected to be \"excess
    general Medicare revenue funding\" for any of the succeeding six
    fiscal years in their annual reports. If there is an affirmed
    determination of excess general Medicare revenue funding for two
    consecutive annual reports, this will be treated as a funding
    warning for Medicare. In the event of a Medicare funding warning the
    law provides special legislative conditions for Medicare legislation
    submitted by the President to Congress;

-   Comparisons with growth trends for gross domestic product, private
    health costs, national health expenditures, and other appropriate
    measures; and

-   Expenditures and trends in expenditures under Part D.

\$1 Billion Implementation Funding

MMA authorized and appropriated \$1 billion in two-year funding for CMS
to implement MMA. CMS is tracking its MMA expenditures by major
provision in the bill as well as by several broad activity categories.
The tables display our actual spending in FY 2004 and estimated spending
in FY 2005 by provision and by activity. In FY 2005, \$25 million will
be transferred to the Office of the Inspector General.

Health Savings Accounts

MMA establishes Health Savings Accounts (HSAs). HSAs allow individuals
with high deductible plans (a deductible of at least \$1,000 for
individual plans and at least \$2,000 for family plans) to contribute up
to the lesser of the deductible amount or \$2,650 for individuals and
\$5,250 for families in 2005 to a tax-advantaged account. The maximum
contribution amount is indexed and increases each year. Individuals may
withdraw money from their HSA on a tax free basis to pay for medical
expenses below the deductible, as well as other qualified medical
expenses such as prescription drugs, over the counter drugs, long-term
care services, and COBRA insurance. Any money used for non-qualified
medical expenses is taxable and subject to an additional 10 percent tax.

Medicare

Medicare provides health insurance to 42.7 million individuals who are
either 65 or older, disabled, or suffer from end--stage renal disease
(ESRD). In FY 2006, spending on Medicare benefits will total \$394
billion.

The Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (MMA) represents the largest transformation of the Medicare program
in a generation, adding a prescription drug benefit and expanded health
care choices to the existing program. The four parts of Medicare are
summarized below.

**OPEN PIE CHART**

Chart title: Medicare Benefits Spending by Service, 2006

  ----------- ------------ ------------ --------- --------- -------- --------- -------- ---------
  Inpatient   Outpatient   Physicians   Managed   Nursing   Home     Hospice   Other    Drug
  Hospital    Hospital     and Other    Care      Homes     Health                      Benefit
                           Suppliers                                                    

  0.3094      0.0517       0.1804       0.1408    0.0406    0.0339   0.0248    0.0689   0.1494
  ----------- ------------ ------------ --------- --------- -------- --------- -------- ---------

**CLOSE PIE CHART**

Part A

-   Medicare Part A pays for inpatient hospital care, skilled nursing
    facility care, home health care related to a hospital stay, and
    hospice care.

-   Individuals with 40 quarters of Medicare-covered employment are
    entitled to Part A without paying a premium.

-   Financing comes primarily from a 2.9 percent payroll tax split
    between employees and employers.

-   The most recent Medicare Trustees report projected the Hospital
    Insurance (HI) Trust Fund\'s insolvency date at 2019.

-   In 2005, beneficiaries will pay a \$912 deductible for a hospital
    stay of 1-60 days, and a \$114 daily coinsurance for days 21-100 in
    a skilled nursing facility.

-   The 2005 Part A premium is \$206 per month for people with 30-39
    quarters of Medicare-covered employment, and \$375 per month for
    people with 29 or fewer quarters of such coverage.

Part B

-   Medicare Part B pays for physician services, outpatient hospital
    services, treatment for ESRD, laboratory services, durable medical
    equipment, certain home health care, and other medical services and
    supplies.

-   Supplementary Medical Insurance (SMI) coverage is voluntary.
    Approximately 95 percent of Medicare\'s beneficiaries are enrolled
    in Part B.

-   Approximately 25 percent of Part B costs are financed by beneficiary
    premiums (\$78.20 per month in 2005), with the remaining 75 percent
    of costs covered by general revenues.

Part C

-   Medicare Part C, the Medicare+Choice program, has changed to the
    Medicare Advantage program under MMA.

-   Medicare Advantage offers beneficiaries a variety of coverage
    options, including traditional HMOs, preferred provider
    organizations (PPO), and private fee-for-service plans.

-   Currently, five million beneficiaries are enrolled in a Medicare
    Advantage plan.

-   Medicare Advantage plans receive a capitated monthly payment to
    provide all Part A and B services, plus whatever additional benefits
    and cost sharing arrangements the plan provides.

Part D

**Prescription Drug Standard Benefit:** In 2006, the standard benefit
offers:

-   a \$250 deductible;

-   a modest average monthly premium estimated at less than \$37, based
    on choice of plan; and,

-   a 75 percent subsidy for drug costs between \$251 and \$2,250.

-   Once a beneficiary pays \$3,600 out-of-pocket (\$5,100 in total
    costs), the Federal Government will pay all costs for covered drugs
    except for nominal cost-sharing.

-   The cost-sharing, once the beneficiary reaches the out-of-pocket
    limit, is equal to the greater of:\
    (1) a co-payment of \$2 for a generic drug or preferred drug / \$5
    for any other drug, or,\
    (2) 5 percent co-insurance.

**Prescription Drug Low-Income Benefit:** In 2006, low-income Medicare
beneficiaries will receive generous assistance in purchasing their
prescription drugs, as follows:

-   All Medicaid full-benefit dual eligible beneficiaries will pay no
    deductible, no premiums, and no co-payments after the out-of-pocket
    limit is reached.

-   Full-benefit dual eligible beneficiaries with incomes at or below
    100 percent of poverty will have co-payments of up to \$1 for
    generics and \$3 for brand name drugs up to the out-of-pocket limit.

-   Full-benefit dual eligible beneficiaries with incomes above 100
    percent of poverty will have co--payments of up to \$2 for generics
    and \$5 for brand name drugs up to the out-of-pocket limit.

-   Institutionalized dual eligibles will pay no premiums, deductibles,
    or cost-sharing.

-   Non-full-benefit dual eligible beneficiaries with incomes below 135
    percent of poverty and assets up to \$6,000 per individual (or
    \$9,000 per couple) in 2006 will have no deductibles, no premiums,
    and co-payments of up to \$2 for generics and \$5 for brand name
    drugs up to the out-of-pocket limit. They will have no co-payments
    for drug costs once their total drug costs reach \$5,100.

-   Non-full benefit dual eligible beneficiaries with incomes below 135
    percent of poverty and assets that exceed \$6,000 but do not exceed
    \$10,000 per individual (or \$9,000 and \$20,000 per couple) in 2006
    will have no premiums, a \$50 deductible, and have nominal cost
    sharing not to exceed 15 percent co-insurance. They will have
    co-payments of up to \$2 for generics and \$5 for brand name drugs
    once their total drug costs reach \$5,100.

-   Non-dual eligible beneficiaries with incomes below 150 percent of
    poverty and assets up to \$10,000 per individual (or \$20,000 per
    couple) in 2006 will have a sliding scale premium subsidy that is
    based on income, a reduced deductible of \$50, and cost-sharing not
    to exceed 15 percent co-insurance for costs up to the out-of-pocket
    threshold. Once these beneficiaries reach total drug costs of
    \$5,100, they will pay only nominal cost-sharing of up to \$2 and
    \$5 co-payments.

-   For non-full-benefit dual eligible beneficiaries, low-income subsidy
    eligibility will be determined by State Medicaid agencies or by the
    Social Security Administration.

Program Assessment Rating Tool (PART)

The Office of Management and Budget (OMB) developed the Program
Assessment Rating Tool (PART) to evaluate programs in a systematic
manner, using numeric scores that rate overall program effectiveness and
highlight strengths and weaknesses. In FY 2003, the Medicare program was
evaluated. Medicare was rated as \"Moderately Effective\" and found to
be strong overall, but needed modernizing to reflect the evolution of
health care since its inception in 1965. With enactment of MMA, many of
these issues have been addressed and new performance measures were added
to reflect these new responsibilities.

The program was not re-evaluated during FY 2004. However, CMS is
addressing the following three recommendations from the PART evaluation:

-   Agency commitment to timely implementation of the Medicare
    Prescription Drug, Improvement, and Modernization Act of 2003;

-   Greater emphasis on sound program and financial management; and

-   More effort to link Medicare payment to provider performance.

Medicare Administrative Improvements

In coming years, HHS will make changes to rationalize several components
of Medicare\'s payment systems. Specialty hospitals, which tend to be
physician-owned and focus on patients with specific medical conditions
or who need surgical procedures, are a small but growing segment of the
health care industry. MedPAC, the Congressional advisory committee for
Medicare issues, conducted extensive research and found that there are
problems in the physician ownership of hospitals and in the way Medicare
pays for hospitals. The Administration will seek to refine the inpatient
hospital payment system and related provisions of regulations to ensure
a more level playing field between specialty and non-specialty
hospitals.

With regard to Medicare Advantage, the Budget will phase in over four
years the savings from the full implementation of risk adjustment
payments to account for different health status of beneficiaries in
Medicare Advantage plans. The phase-in will begin in 2007 and will be
completed by 2010, and is projected to produce savings to the extent
that Medicare Advantage plans serve healthier beneficiaries, on average,
compared to fee-for-service. The Budget also proposes to improve payment
accuracy for patients who are transferred from inpatient hospitals to
post-discharge acute settings, such as nursing facilities. Lastly, HHS
will refine the Skilled Nursing Facility Prospective Payment System in
2006 to ensure appropriate payments for certain high-cost cases.

Health Care Fraud and Abuse Control Program (HCFAC)

The Health Insurance Portability and Accountability Act of 1996 (HIPAA),
established the Health Care Fraud and Abuse Control (HCFAC) Program. For
the first time, the FY 2006 budget proposes to fund the HCFAC program
through both a mandatory and a discretionary funding stream. Proposed FY
2006 total HCFAC funding is \$1.155 billion. Of this amount, \$1.075
billion funds the mandatory portion of the program. The HIPAA statute
capped HCFAC spending at this level since FY 2003. The remaining \$80
million represents new discretionary proposed funding for the program.

The HCFAC program was established to:

-   Coordinate Federal, State, and Local law enforcement programs;

-   Conduct investigations, audits, and evaluations relating to the
    delivery of and payment for health care;

-   Facilitate enforcement of statutes applicable to health care fraud
    and abuse;

-   Provide for the modification and establishment of safe harbors and
    issue advisory opinions and special fraud alerts; and

-   Provide for the reporting and disclosure of final adverse actions
    against health care providers, suppliers, or practitioners.

**HCFAC Mandatory Funds:** The HCFAC Program dedicates \$1.075 billion
from the Medicare Part A Trust Fund combating health care fraud and
abuse. The money is allocated into three major parts: 1) \$720 million
for the Medicare Integrity Program (MIP); 2) \$114 million to Federal
Bureau of Investigation (FBI); and, 3) \$240.6 million in \"wedge\"
funds that are divided among the Department of Justice (DOJ), the HHS
Inspector General, and other HHS agencies, including CMS, AoA, and the
Office of General Counsel (OGC). The programs and projects financed by
these funding streams are used to detect and prevent fraud, waste, and
abuse through investigations and audits, educational activities, and
data analysis. From 1997 to 2003, the HCFAC Account has returned
approximately \$6.2 billion to the Medicare Trust Fund.

The MIP activity in HCFAC provides funds for: medical review; benefits
integrity work to identify and refer patterns of fraud to law
enforcement; provider and HMO audits of cost reports; Medicare secondary
payer activities; and provider education and training. The
Administration has requested an additional \$75 million in discretionary
funding to safeguard the Medicare prescription drug benefit and Medicare
Advantage. These funds will increase total MIP funding to \$795 million
in 2006. For the mandatory funding, MIP is expected to save the Medicare
Trust Funds \$10 billion in FY 2006 through recoveries, claims denials,
and accounts receivable, a 14:1 return on investment.

The FBI uses its \$114 million allocation for health care fraud
enforcement and investigations. In addition, the FBI provides
operational support for national initiatives focusing on pharmaceutical
diversion, chiropractic fraud, medical clinics, and transportation
providers.

The remaining \$240.6 million in wedge monies finance a variety of
anti-fraud and abuse activities. DOJ uses its portion of the wedge for
civil and criminal prosecutions of health care professionals and
providers. The HHS Inspector General uses its share to bring about
judgements and settlements related to health care fraud and abuse and to
work with CMS to develop and implement recommendations to correct
systemic vulnerabilities detected during HHS/OIG evaluations and audits.
The remaining wedge monies go to HHS and are used primarily for: SCHIP
and Medicaid financial management oversight and data analysis projects
to detect patterns of fraud, educational activities at AoA, and
investigative and litigation support at OGC.

**HCFAC Discretionary Funds:** As part of the government-wide approach
to funding program integrity activities, the budget proposes a \$80
million discretionary cap adjustment for HCFAC in FY 2006 and \$120
million in FY 2007, for a total of \$200 million over two years. The
additional HCFAC funds will enhance efforts to safeguard the Medicare
prescription drug benefit and Medicare Advantage program (\$75 million)
and expand efforts for safeguarding the Medicaid and SCHIP programs (\$5
million).

Medicare Error Rate

The Medicare fee-for-service error rate for FY 2004 is 9.3 percent. The
Medicare Integrity Program is the primary source of funds to lower the
Medicare payment error rate. The Department lowered the Medicare payment
error rate from 14 percent in FY 1996 to 6.3 percent in FY 2002 (as
measured by OIG). FY 2003 was the first year that CMS was responsible
for estimating the national Medicare error rate. CMS developed the
Comprehensive Error Rate Testing (CERT) Program and the Health Payment
Medicare Program (HPMP) to estimate the Medicare payment error rate
using a sample size of 140,000-170,000 claims. The OIG used a sample
size of approximately 6,000 claims and produced only one statistically
significant number (the national error rate). CERT/HPMP provides
contractor, provider type, and benefit service-specific error rates at
statistically significant levels. CERT allows CMS to see contractor
level performance data that the agency can use as a tool to manage and
correct payment errors. Reducing the Medicare payment error rate is a
major priority in the Department\'s effort to implement the President\'s
Management Agenda.

The Administration\'s health care fraud, waste, and abuse control
efforts have made remarkable progress in protecting the Medicare Trust
Funds. Medicare Trustee\'s reports have cited our health care fraud,
waste, and abuse control efforts as a contributing factor in slowing
Medicare spending growth. We hope to bring similar success to the
state-administered Medicaid and SCHIP programs as well.

Quality Improvement

Quality Improvement Organizations (QIOs) --previously Peer Review
Organizations-- were established by Title XI, Section 1151 of the Social
Security Act, Part B, to serve the following functions:

-   Improve the quality of care for beneficiaries by ensuring that
    professionally recognized standards of care are met;

-   Enhance program integrity by ensuring that Medicare only pays for
    items that are reasonable and medically necessary; and

-   Protect beneficiaries by addressing individual beneficiary\'s
    complaints, appeals, and case review.

QIOs are a central player in the Administration\'s efforts to improve
the quality of care provided to Medicare beneficiaries. QIOs assist
providers seeking to improve the quality of care delivered in nursing
homes, home health agencies, and physicians offices. These quality
improvement efforts are essential to the Administration's goals to
modernize and strengthen the Medicare program.

In November 2002, HHS and CMS launched the national Nursing Home Quality
Initiative (NHQI). The initiative provides new comparative information
to consumers and resources to facilities all aimed at improving nursing
home quality of care. Since 2002, the number of measures has been
expanded from 8 to 15, reflecting improvements in quality measurement
and endorsement by the National Quality Forum. Over the past two years,
significant improvement has been achieved in a number of the publicly
reported quality measures. The on-going CMS nursing home survey and
certification activities are also part of the NHQI, and have a dedicated
funding stream through the Survey and Certification budget (see the
Program Management, Survey and Certification sections).

The Nursing Home Quality Initiative was followed in the spring of 2003
with Phase I of Home Health Compare, which provides comparative
information on 11 home health quality indicators for beneficiaries in
five demonstration States. Following phase I, HHS and CMS launched a
national Home Health Quality Initiative in November 2003.

CMS is in the process of completing implementation of the Hospital
Quality Alliance, which will provide comparative outcomes data on
hospitals. To date, over 3,800 eligible hospitals have voluntarily
participated. With incentives built into MMA, nearly all eligible
hospitals are participating. The results of these public information
programs will be better informed consumers and providers that are better
able to identify what they must do to improve quality.

CMS and the Administration continue to encourage excellence in care by
exploring provider payment reforms that link quality to Medicare
reimbursement in a cost neutral manner. Such payment reforms would be
flexible enough to support innovations in health care delivery.

On January 15, 2003, a CMS study published in the Journal of the
American Medical Association showed that we are making important
progress in improving health care quality. The study shows that from
1998 to 2000, there has been across-the-board improvement in a series of
health care quality measures tracked by QIOs. For instance, the study
shows that the percentage of diabetic patients screened for cholesterol
problems rose from 56 percent to 74 percent and that the percentage of
patients receiving beta-blockers at hospital discharge, which reduce
complications in patients who have had a heart attack, rose from 72
percent to 79 percent. Despite these improvements, the study reports
that more than a quarter of Medicare beneficiaries still do not receive
important services that could protect them from disease or prolong life.

MMA expanded QIO responsibilities to include work with Medicare
Advantage and Prescription Drug Plans to improve prescription choices
and medication therapy management.

Clinical Laboratory Improvement Amendments of 1988

The Clinical Laboratory Improvement Amendments of 1988 (CLIA) expanded
survey and certification of clinical laboratories from
Medicare-participating and interstate commerce laboratories to all
facilities testing human specimens for health purposes. CLIA also
introduced user fees to finance survey and certification activities at
clinical laboratories. User fees are credited to the Program Management
account but are available until expended for CLIA activities. CMS
determines the workloads of each State survey agency by taking the total
number of laboratories and subtracting waived laboratories, laboratories
issued certificates of provider-performed microscopy, State-exempt
laboratories, and accredited laboratories.

The CLIA program has 184,036 laboratories registered with CMS, 21
percent of which are subject to routine inspection (every two years)
under the program. The remainder are exempted. Workload projections for
the FY 2005-2006 cycle include 20,674 surveys of non-accredited
laboratories, 790 State validation surveys of accredited laboratories,
and approximately 1,502 follow-up surveys and complaint investigations.

Data support the contention that CLIA has improved the overall quality
of laboratory testing in the nation. The number of quality deficiencies
decreased approximately 40 percent from the first laboratory survey to
the second, with further decreases in subsequent surveys.

Medicaid

Medicaid is a jointly-funded, Federal-State program that provides
medical assistance to certain low-income groups. In FY 2006,
approximately 46.3 million individuals, including children, the aged,
blind, and/or disabled, and people who meet eligibility criteria under
the old Aid to Families with Dependent Children (AFDC) program will be
covered by Medicaid. Additionally, many other individuals will receive
Medicaid benefits through waivers and amended State plans with somewhat
higher income eligibility limits. Under current law, the Federal share
of Medicaid outlays is expected to be about \$192.6 billion in FY 2006.
This is a \$4.3 billion (2.3 percent) increase over projected FY 2005
spending.

Background

Under Medicaid, State expenditures for medical assistance are matched by
the Federal government using a formula based on average per capita
income in each State relative to national per capita income. Federal
matching rates for FY 2006 will range from 50 to 76 percent for medical
assistance payments. Overall, the Federal government pays for about 57
percent of total Medicaid expenditures. In addition to medical
assistance payments, the Medicaid appropriation funds the Vaccines for
Children program and the Federal share of Medicaid State and local
administrative costs.

Historically, eligibility for Medicaid has been based on qualifying
under the cash assistance programs of AFDC or Supplemental Security
Income (SSI). With the creation of the Temporary Assistance for Needy
Families (TANF) program in 1996 (which replaced AFDC) eligibility for
Medicaid and cash assistance were de-linked. Medicaid eligibility
remains tied to AFDC program rules in place as of July 16, 1996. All
those who qualify under the 1996 AFDC rules and most SSI recipients,
commonly referred to as the \"categorically eligible,\" must be covered
under State Medicaid programs. States must cover three additional
groups: 1) pregnant women and infants whose family income does not
exceed 133 percent of the Federal poverty level; 2) all children under
the age of 19 living in families with incomes below the poverty level;
and 3) all children under age 6 with incomes below 133 percent of the
Federal Poverty Level. In 2004, the poverty level for a family of three
was \$15,670 in most of the United States (for a family of three in
Alaska, the poverty level was \$19,590 and for a family of three in
Hawaii, the poverty level was \$18,020).

States have the option to cover some individuals not eligible under AFDC
or SSI rules and may cover people at higher incomes by disregarding a
portion of their incomes. States may also cover \"medically needy\"
individuals. Such individuals meet the categorical eligibility criteria,
but have too much income or too many resources to meet the financial
criteria.

Generally, States are required to provide a core of 13 mandatory
services to eligible needy recipients, including: inpatient and
outpatient hospital care; health screening, diagnosis, and treatment for
children; family planning; physician services; and nursing facility
services to individuals over 21. States may also elect to cover any of
over 30 specified optional services such as prescription drugs, clinic
services, dental care, eyeglasses, and services provided in intermediate
care facilities for those with developmental disabilities.

**OPEN CHART**

Chart Title: Distribution of People Served through Medicaid Payments by
Basis of Eligibility, FY 2002

  ----------------------------- ---------------- ------------------------
                                People Served    Payments

  Unknown/Other                 0.01%            4.5%

  Adults                        25.7%            10.9%

  Children                      49.4%            17.4%

  Aged, Blind and Disabled      24.9%            68.0%
  ----------------------------- ---------------- ------------------------

**CLOSE CHART**

Program Developments

Medicaid Growth: Prescription drug spending, nursing home care,
community-based long-term care costs, and payments to health plans are
significant contributors to growth in Medicaid outlays. These
expenditures are expected to continue to contribute to growth in future
years. State programs providing \"enhanced payments\" to institutional
providers have also played a significant role in driving-up Federal
Medicaid costs at an accelerated rate.

**Waivers:** States have sought waivers under section 1115 of the Social
Security Act to expand health care coverage to low-income, uninsured
populations that do not otherwise meet Medicaid eligibility criteria and
to test innovative approaches in health care service delivery. Although
demonstrations vary greatly, most employ a similar overall approach:
expanding the use of managed care for the Medicaid population.

To date, CMS has approved 30 Statewide comprehensive health care reform
demonstrations in 27 States. CMS has also approved two sub-State health
reform demonstrations and 15 demonstrations specifically related to
family planning.

**Health Insurance Flexibility and Accountability:** In August 2001,
President Bush announced the Health Insurance Flexibility and
Accountability (HIFA) demonstration, a new section 1115 initiative. HIFA
enables States to use Medicaid and State Children\'s Health Insurance
Program (SCHIP) funds in concert with private insurance options to
expand coverage to low-income, uninsured individuals, with a focus on
those with incomes at or below 200 percent of the Federal Poverty Level.

A more in-depth discussion of HIFA waivers is included in the SCHIP
section.

**Pharmacy Plus:** The introduction of the Medicare prescription drug
benefit assumed much of the cost of pharmaceutical benefits otherwise
covered by Pharmacy Plus waivers. The Department and CMS continue to
work closely with states that have Pharmacy Plus waivers to enable them
to provide the same level of coverage under the new Medicare
prescription drug program.

Medicaid Legislative Proposals

The following sections contain FY 2006 legislative proposals.

Medicaid and SCHIP Modernization

The Administration proposes to provide States with additional
flexibility in Medicaid to further increase coverage among low-income
individuals and families without creating additional costs for the
Federal Government. This proposal would build on the success of SCHIP to
provide acute care for children and families, as well as current efforts
to reduce the number of uninsured individuals.

A modernized Medicaid system will give States greater flexibility
without the need for burdensome waiver applications. Principles that are
employed in SCHIP and emphasize innovation will be expanded to Medicaid
beneficiaries, while long-term care reforms will build on successful
programs that use consumer direction and home- and community-based care
to improve satisfaction and lower costs. A modernized Medicaid system
will continue to grow at a robust rate to accommodate increases in
health care spending.

New Freedom Initiative Proposals

The President\'s Budget includes six policies that promote home and
community-based care options for people with disabilities. These
policies build on the President\'s New Freedom Initiative, which is part
of a nationwide effort to integrate people with disabilities more fully
into society.

**Money Follows the Person Rebalancing Demonstration:** This proposal is
consistent with the Administration\'s effort to promote the use of
at-home care as an alternative to nursing homes for elderly and disabled
Americans. Under the \"Money Follows the Person\" demonstration, at-home
care combines cost effective benefits with increased independence and
quality of life for the beneficiary.

In this five-year demonstration project, Federal grant funds would pay
for home and community-based waiver services for individuals who move
from institutions into at--home care. These costs would be funded at a
Federal matching rate of 100 percent for the first year of each
individual\'s participation. As a condition of receiving the enhanced
match, the participating State would agree to continue care after the
first year at the regular Medicaid matching rate and to reduce
institutional long-term care. This proposal authorizes \$1.75 billion in
funding for this demonstration over five years.

**Home and Community-Based Care Demonstrations:** The Budget includes
three demonstrations proposals to encourage home and community-based
care for children and adults with disabilities:

-   Community Alternative to Children\'s Residential Treatment
    Facilities: This demonstration enables States to offer home and
    community-based services to children who would otherwise be served
    in psychiatric residential treatment facilities. This 10-year
    demonstration would permit the delivery of intensive mental health
    services for children in their homes and communities and allow the
    Department to evaluate the cost of providing these services outside
    of institutions. The cost for this proposal in FY 2006 is \$5
    million and \$99 million over five years.

-   Respite for Caregivers of Disabled Adults: This proposal creates a
    demonstration that tests whether respite care, or temporary care,
    reduces primary caregiver \"burn-out\" that often leads to
    institutionalization of individuals with disabilities. The cost for
    this proposal in FY 2006 is \$7 million and \$134 million over five
    years.

-   Respite for Caregivers of Children with a Substantial Disability:
    This demonstration allows States to provide respite care to
    caregivers of children with substantial disabilities. The
    demonstration would enable the Department to collect specific data
    about the cost and utilization of respite services for caregivers of
    disabled children. The cost for this proposal in FY 2006 is \$1
    million and \$23 million over five years.

**Spousal Exemption:** This proposal protects Medicaid coverage of an
individual married to a disabled individual participating in a work
incentive program under 1619(b) of the Social Security Act. Currently,
if an individual is Medicaid eligible and the individual\'s spouse
participates in the 1619(b) program, the spouse\'s earnings could cause
the individual to lose his/her Medicaid coverage. This proposal will
cost \$17 million for FY 2006 and \$102 million over five years.

**Presumptive Eligibility**: Establishes a State Medicaid option
allowing presumptive eligibility for institutionally-qualified
individuals who are discharged from hospitals into the community. This
will increase the number of Medicaid beneficiaries who receive home and
community-based services rather than institutional care. This proposal
has no cost associated with it.

Other Medicaid Legislative Proposals

**Extension and Simplification of Transitional Medical Assistance:**
Transitional Medical Assistance (TMA) was created to temporarily extend
health coverage for former welfare recipients after they enter the
workforce. TMA allows families to remain eligible for Medicaid for up to
12 months after they lose welfare cash benefits due to earnings from
work. This provision was enacted along with welfare reform and was
scheduled to sunset in September 2002. Congress has already extended
this program through March 31, 2005. This proposal will extend TMA
benefits through September of 2006.

In addition to this extension, the 2006 President\'s Budget includes
proposals to simplify eligibility for TMA benefits to the low-income
working poor. There are three provisions to the proposal:

-   States will be given the option to offer 12 months of continuous
    coverage to eligible participants.

-   States may waive income reporting requirements for beneficiaries.

-   States that offer Medicaid eligibility for children and families
    with incomes up to 185 percent of poverty may waive TMA assistance
    altogether.

This proposal will cost \$560 million in FY 2006 and \$560 million over
five years.

Partnership for Long Term Care Insurance: Eliminates the legislative
prohibition on developing more Partnership programs. The Partnership for
Long Term Care (LTC) was formulated to explore alternatives to current
long-term care financing by blending public and private insurance. Four
States (California, Connecticut, Indiana, and New York) currently have
partnerships whereby private insurance is used to cover the initial cost
of LTC. Consumers who purchase Partnership-approved insurance policies
can become eligible for Medicaid services after their private insurance
is utilized, without divesting all their assets as is typically required
to meet Medicaid eligibility criteria. This proposal is budget neutral.

**Extension of Premium Assistance to Qualified Individuals:** Under the
Qualified Individuals (QI) program, Medicaid pays Medicare Part B
premiums for Medicare beneficiaries with incomes between 120 and 135
percent of poverty. Part B premiums currently cost a beneficiary \$78.20
per month -- a 17.4 percent increase over 2004. States will continue to
be fully reimbursed for the cost of the program. This one-year extension
is estimated to cost \$230 million in FY 2006.

**Improvements to the Vaccines for Children Program:** Vaccines for
Children (VFC) is a CDC-administered, Medicaid funded program that
administers free vaccines to eligible children. The President\'s Budget
would improve the program by allowing under-insured children to receive
VFC administered inoculations at State and local health departments in
addition to Federally Qualified Health Centers and Rural Health Centers.
This proposal will cost an additional \$140 million in FY 2006 and \$700
million over five years.

**Payment Reforms:** The Administration proposes to further improve the
integrity of the Medicaid matching rate funding mechanism by curbing the
use of financing arrangements that States use to avoid the legally
determined State match requirement. Through various mechanisms,
government providers return Federal Medicaid funds back to the States.
States, in turn, recycle these funds by using them to draw down
additional Federal dollars. The Budget proposes to build on current CMS
efforts to curb these questionable financing practices by matching only
those funds kept by providers as payment for services.

In addition, current law allows States to make Medicaid payments to
providers far in excess of the actual costs of services. States use this
additional money to leverage Federal reimbursements in excess of their
Medicaid matching rate or for other purposes. To avoid this misuse of
funds, the President\'s budget proposes to limit reimbursement levels to
no more than the cost of providing services. These proposals save \$5.9
billion over five years.

**Reforming Provider Taxes:** The budget proposes two changes to the
current law regulating provider taxes. Under current rules, taxes
imposed on providers may not exceed 6 percent of total revenues and must
be applied uniformly across all health care providers in the same class.
The first change proposes to phase down this allowable tax rate from 6
percent to 3 percent. Second, the Budget proposes that managed care
organizations (MCOs) meet the same provider tax requirements as other
classes of health providers. This proposal saves \$231 million in FY
2006 and \$3.17 billion over five years.

**Strengthening Medicaid Reimbursement Policies:** The President's
budget proposes three changes to Medicaid reimbursement policy. First,
the budget proposes to clarify which services may be claimed under
targeted case management (TCM). Second, the Administration seeks lower
reimbursement for TCM services to the administrative matching rate of 50
percent. Currently States are shifting costs into Medicaid that are the
obligation of other programs and are using expanded definitions of
allowable services. These two proposals save \$129 million in FY 2006
and \$3.1 billion over five years.

In addition, the Administration proposes to codify Medicaid "free care"
policy in regulation. Currently, the Medicaid program asserts that
States cannot bill the Federal Medicaid program for any service that
would be provided to non-Medicaid eligible individuals free of charge.
The most prominent example of this type of service is school nurse care.
This regulatory change seeks to codify this policy in regulation to
eliminate any legal ambiguity surrounding this topic. This regulatory
change has no budget impact.

**Reforming Transfer of Assets Requirements:** Current law requires
individuals applying for Medicaid long-term care services to divest all
but a minimum level of assets before becoming eligible. If applicants
transfer assets at below market value to avoid these requirements,
Medicaid rules hold them subject to delays in eligibility. Despite these
sanctions, creative estate planning often allows individuals to garner
Medicaid eligibility status without divesting their assets. The budget
proposes to curtail this practice by tightening existing rules regarding
transfers of assets. This proposal saves \$99 million in FY 2006 and
\$1.48 billion over five years.

**Medicaid Administrative Claiming:** The President\'s budget proposes
to curtail inefficient Medicaid administrative spending patterns by
establishing an allotment for Medicaid administrative claiming. This
proposal saves \$1.13 billion over five years.

**Medicaid and SCHIP Financial Management:** The Department plans to
continue its efforts to root out erroneous and fraudulent uses of
Medicaid and SCHIP funding. Along with an increase in the number of
audits and evaluations of State Medicaid programs, the budget proposes
to allocate \$20 million from the Health Care Fraud and Abuse Account
and \$5 million in discretionary funding to finance this work.

**Amending the Medicaid Drug Rebate Formula:** The Medicaid program
requires all drug

manufacturers to pay a rebate for all drugs covered by Medicaid. The
calculations for this rebate involve a figure called lowest private
market price or best price. This figure functions as a price floor,
which prohibits manufacturers from negotiating deep discounts with large
non-Medicaid purchasers such as hospitals and HMOs. The Administration
proposes replacing best price with a budget neutral flat rebate,
allowing private purchasers to negotiate lower drug prices. This
proposal will have no effect on the Medicaid budget.

**Restructure pharmacy reimbursement:** In a recent House Energy and
Commerce Committee hearing, the members focused their attention on
government overpayment for prescription drugs in Medicaid. The
President\'s Budget proposes a system that more closely aligns pharmacy
reimbursement to pharmacy acquisition costs. This proposal saves \$542
million in FY 2006 and \$5.4 billion over five years.

**Health Insurance Portability and Accountability Act Proposals:**
Congress passed the Health Insurance Portability and Accountability Act
(HIPAA) in 1996 to increase the continuity, portability and
accessibility of health insurance. The President\'s Budget proposes two
legislative changes to ensure that Medicaid and SCHIP beneficiaries
receive the benefits of HIPAA related coverage. The first change
establishes the determination of eligibility for Medicaid or SCHIP as a
qualifying event to allow access to employer-sponsored insurance (ESI).
This change allows families to enroll in ESI through special enrollment
even if they have missed their employer\'s open period for enrollment.
The second change requires SCHIP programs to issue certificates of
creditable coverage, which, in turn, verifies the period of time an
individual is covered by a specific health insurance policy.

Other Legislative Proposals with Medicaid Impacts

**Child Support Enforcement Proposals:** The Administration for Children
and Families (ACF) has proposed two changes that have an effect on the
Medicaid baseline. Both proposals affect the Child Support Enforcement
program. The first proposal would allow States to seek medical child
support for children from both the custodial and non-custodial parent.
States would also be able to enforce these support orders against the
custodial parent. ACF expects this change to increase children\'s access
to private sources of health care.

The second legislative change mandates that all States review child
support orders for Temporary Assistance for Needy Families (TANF)
families every three years. Under current law, States review child
support orders every three years if instructed to do so by the custodial
parent or at the State\'s own discretion. This change would mandate that
States undertake these reviews. ACF believes that required reviews would
result in the discovery of increased levels of private health insurance
among non-custodial parents that could be used to extend coverage to
their children. This increased access to private health insurance would
lead to a decrease in Medicaid costs among TANF families.

These two proposals will be budget neutral in FY 2006, but will save the
Federal Government \$45 million over five years.

**Refugee and Asylee Exemption Extension:** Under current law, most
legal immigrants who entered the country on or after August 22, 1996,
and some who entered prior to that date are not eligible for SSI until
they have resided in the country for five years or have obtained
citizenship. Refugees and asylees on SSI are currently exempted from
this ban for the first seven years they reside in the United States. To
assure that refugees and asylees have ample time to complete the
citizenship process, the President\'s Budget proposes extending the
current seven-year exemption to eight. The proposal will cost the
Federal Government \$40 million in FY 2006 and \$145 million over five
years.

**SSA Initial State Disability Review:** The Social Security
Administration has proposed a management improvement initiative that has
an impact on the Medicaid program. The proposal establishes a standard
for accuracy in SSI disability awards identical to the one that applies
to the Social Security Disability Insurance Program. This provision will
help ensure that only individuals who are disabled will receive SSI
disability benefits and related Medicaid coverage. This program will
save the Medicaid program \$2 million in FY 2006, and \$113 million over
five years.

**Cover the Kids:** This legislative proposal provides \$1 billion in
grants (in the State Grants and Demonstrations account) over two years
to States, schools, and community organizations to enroll and provide
coverage to many eligible, but not enrolled, children in Medicaid and
SCHIP. CMS estimates that this legislative proposal will cost Medicaid
\$389 million in FY 2006 and \$4.1 billion from FY 2006 through FY 2010.

**Medicaid Enrollment Table**

Enrollees in millions

  ------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------
                                                                                                                                                                **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**

  Aged 65 and Over\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                4.2                      4.2                      4.8

  Blind and Disabled\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....               7.7                      7.7                      8.4

  Needy Adults\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....         10.7                     11.1                     11.2

  Needy Children\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....           21.2                     21.7                     21.9

                                                                                                                                                                                                                  

  **Total\*\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**   **43.7**                 **44.7**                 **46.3**

                                                                                                                                                                                                                  

  \* Numbers may not add due to rounding.                                                                                                                                                                         
  ------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------

**Medicaid Outlays TABLE**

Outlays in millions

+---------------------------+---------+----------+----------+---------+
| Current Law:              | *       | **2005** | **2006** | *       |
|                           | *2004** |          |          | *2006** |
|                           |         | *        | *        |         |
|                           | **[     | *[Enacte | *[Reques | **[+/-  |
|                           | Actual] | d]{.unde | t]{.unde | 2005]   |
|                           | {.under | rline}** | rline}** | {.under |
|                           | line}** |          |          | line}** |
+---------------------------+---------+----------+----------+---------+
| Benefits\*\...\           | \$      | \        | \        | \$3,598 |
| ...\...\...\...\...\...\. | 168,172 | $179,160 | $182,759 |         |
| ..\...\...\...\...\...\.. |         |          |          |         |
| .\...\...\...\...\...\... |         |          |          |         |
+---------------------------+---------+----------+----------+---------+
| State Administration      | \$8,059 | \$9,112  | \$9,803  | \$691   |
| \..                       |         |          |          |         |
| .\...\...\...\...\...\... |         |          |          |         |
| \...\...\...\...\...\.... |         |          |          |         |
+---------------------------+---------+----------+----------+---------+
|                           |         |          |          |         |
+---------------------------+---------+----------+----------+---------+
| **Total Net Outlays,      | **\$17  | **\$1    | **\$1    | **\$    |
| Current Law\*             | 6,231** | 88,272** | 92,562** | 4,289** |
| \...\...\...\....**       |         |          |          |         |
+---------------------------+---------+----------+----------+---------+
|                           |         |          |          |         |
+---------------------------+---------+----------+----------+---------+
| \* Includes Vaccines for  |         |          |          |         |
| Children Outlays.         |         |          |          |         |
+---------------------------+---------+----------+----------+---------+
| \*\* Number may not add   |         |          |          |         |
| due to rounding.          |         |          |          |         |
+---------------------------+---------+----------+----------+---------+

state children's health insurance program

The Balanced Budget Act of 1997 created the State Children\'s Health
Insurance Program (SCHIP) under Title XXI of the Social Security Act.

SCHIP is a partnership between Federal and State governments that helps
provide children with the health insurance coverage they need. The
program improves access to health care and the quality of life for
millions of vulnerable children under 19 years of age. SCHIP reaches
children whose families have incomes too high to qualify for Medicaid,
but too low to afford private health insurance.

Title XXI appropriated almost \$40 billion to the program over 10 years
(FY 1998 through FY 2007). States with an approved SCHIP plan are
eligible to receive an enhanced Federal matching rate, which ranges from
65 to 85 percent, drawn from a capped allotment.

States have a high degree of flexibility in designing their programs.
They can implement SCHIP by:

-   expanding Medicaid,

-   creating a new, non-Medicaid Title XXI separate State program, or

-   a combination of both approaches.

Generally, Medicaid-ineligible, uninsured children, who are under 19
years old, in families below 200 percent of the Federal Poverty Level
(FPL), can receive SCHIP benefits.

Implementation and Enrollment

Every State, the District of Columbia, and all five Territories have
approved SCHIP plans. As of January 2005, States have received approval
for 17 Medicaid expansion programs, 18 separate programs, 21 combination
programs, and 226 State plan amendments.

Today, 11 States cover children in families with incomes up to 250
percent of the FPL. Of these States, seven cover children above that
level. Six of the States cover children up to 300 percent of the FPL,
and one State, New Jersey, covers children up to 350 percent of the FPL.

During FY 2003, 5.8 million children enrolled in SCHIP. This represents
an increase of half a million, or 9 percent, over FY 2002 enrollment.

**OPEN TEXT BOX**

HIFA: Expanding Health Care Coverage

In August 2001, the Administration invited States to participate in the
Health Insurance Flexibility and Accountability (HIFA) demonstration
initiative. The main goals of the HIFA initiative are:

-   to encourage innovation in the Medicaid and SCHIP programs;

-   give States the programmatic flexibility to increase health
    insurance; and

-   simplify the waiver process.

States use HIFA demonstrations to expand health care coverage. As of
January 2005, CMS has approved nine SCHIP HIFA demonstrations expanding
coverage to 821,750 people. As of November 2004, 289,000 people were
enrolled in SCHIP HIFA demonstrations.

**CLOSE TEXT BOX**

SCHIP Performance

When SCHIP began in 1997, CMS adopted a goal of enrolling five million
children by FY 2005. Specifically, CMS has set annual target goals for
FYs 2000 through 2003 to enroll at least 1 million new children in SCHIP
and Medicaid per year. CMS has exceeded these enrollment goals every
year.

The Office of Management and Budget developed the Program Assessment
Rating Tool (PART) to evaluate programs in a systematic manner, rating
program effectiveness and highlighting strengths and weaknesses. SCHIP
was assessed using the PART tool in the FY 2004 cycle and it received a
rating of \"Moderately Effective.\" It was then reassessed in the FY
2005 cycle and received a rating of \"Adequate.\" As a result of the
PART findings, CMS developed an SCHIP Action Plan to further strengthen
the program.

SCHIP Reports and Evaluations

Congress required several SCHIP evaluations in statute. Title XXI
required States to assess the operation of their SCHIP State plans and
report to the Secretary by January 1 of each fiscal year. The statute
also directed each State to submit to the Secretary evaluation reports
by March 31, 2000. These reports are available on the Centers for
Medicare & Medicaid Services website, www.cms.hhs.gov. As required by
the statute, the Secretary submitted a report on the States\'
evaluations, which was made available to Congress and the public in
December 2002. In addition to this report to Congress, CMS has planned
future evaluations to examine the SCHIP program in greater detail.

The Balanced Budget Refinement Act of 1999 (BBRA) also required HHS to
conduct an independent evaluation of 10 States. The interim evaluation
report was submitted to Congress in February 2003. A final report is
expected to be presented to Congress in early 2005.

BBRA also directed the Secretary, through the Inspector General, to
evaluate SCHIP every three years. The Office of the Inspector General
(OIG) is instructed to evaluate: 1) State compliance with the
requirement that Medicaid-eligible children are not enrolled in SCHIP,
and 2) State progress made in reducing the number of uninsured children.
The OIG released two reports in February 2001 that fulfill these
requirements. To satisfy the requirement to submit these evaluations
every three years, the OIG released its evaluation of States\' progress
in reducing the number of uninsured children in August 2004. In 2005 the
OIG will release its second evaluation of States\' compliance with the
requirement that Medicaid-eligible children are not enrolled in SCHIP.

As directed by BBRA, the Comptroller General submitted a report to
Congress monitoring these OIG audits. The Comptroller General\'s report
suggests that the OIG expand the study to include a more diverse sample
of States. The scope of the OIG follow-up studies is expanded to more
comprehensively assess the SCHIP program by analyzing a broader array of
States.

SCHIP Waivers

The requirements of Federal law and regulations can be waived by the
Secretary of the Department of Health and Human Services to give States
the programmatic flexibility to increase health insurance coverage and
encourage innovation in their SCHIP programs. Waivers allow States to
improve coverage and quality of services available to beneficiaries.
Using section 1115 of the Social Security Act, States can more
effectively tailor their programs to meet local needs and can experiment
with new approaches to providing health care services to SCHIP
recipients. Section 1115 waivers provide health insurance to uninsured
children, parents, caretaker guardians, pregnant women, and childless
adults.

The Administration has promoted a new section 1115 approach, called the
Health Insurance Flexibility and Accountability (HIFA) waivers, for
States to develop comprehensive insurance coverage for individuals at
twice the Federal Poverty Level and below, using SCHIP and Medicaid
funds. These demonstration waivers target vulnerable, uninsured
populations, such as pregnant women, parents and children on Medicaid
and SCHIP, and other adults with incomes less than twice the Federal
Poverty Level.

As of January 2005, 16 SCHIP Section 1115 waivers were approved for
Alaska, Arizona, California, Colorado, Idaho, Illinois, Maryland,
Michigan, Minnesota, Missouri, New Jersey, New Mexico (2), Oregon, Rhode
Island and Wisconsin. Of these 16 waivers, nine are HIFA demonstration
waivers (Arizona, California, Colorado, Idaho, Illinois, Michigan, New
Jersey, New Mexico, and Oregon).

Legislative Proposals

**Cover the Kids:** This legislative proposal provides \$1 billion in
grants (in the State Grants and Demonstrations account) over two years
to States, schools, and community organizations to enroll and provide
coverage to many eligible, but not enrolled, children in Medicaid and
SCHIP. CMS estimates that this legislative proposal will cost SCHIP
\$129 million in FY 2006 and \$535 million from FY 2006 through FY 2010.

**Medicaid and SCHIP Modernization:** The Administration proposes
modernizing Medicaid and SCHIP by giving States greater flexibility to
tailor their programs to meet the needs of their populations without
complex waiver applications. This proposal builds on current efforts to
reduce the number of uninsured individuals and responds to feedback
about current program structure (please see the Medicaid section for
further details).

**SCHIP Reauthorization and Redistribution:** Under current law, SCHIP
is authorized and appropriated through FY 2007. This legislative
proposal seeks to reauthorize the program early to better target SCHIP
funds in a more timely manner. The proposal would reauthorize SCHIP at
current law levels.

Please see the Medicaid and State Grants and Demonstrations sections for
additional proposals that affect SCHIP.

**SCHIP Outlays Table\
**(dollars in millions)

+----------------------------+---+--------+---------+---------+---------+
|                            |   | **     | *       | *       | *       |
|                            |   | 2004** | *2005** | *2006** | *2005** |
|                            |   |        |         |         |         |
|                            |   |        | **[Pro  | **[Pro  | **[+/-  |
|                            |   |        | jected] | jected] | 2006]   |
|                            |   |        | {.under | {.under | {.under |
|                            |   |        | line}** | line}** | line}** |
+----------------------------+---+--------+---------+---------+---------+
| ***Current Law***          |   |        |         |         |         |
+----------------------------+---+--------+---------+---------+---------+
| Total                      |   | \      | \$5,343 | \$5,434 | +\$91   |
| Ou                         |   | $4,607 |         |         |         |
| tlays\...\...\...\...\...\ |   |        |         |         |         |
| ...\...\...\...\...\...\.. |   |        |         |         |         |
| .\...\...\...\...\...\.... |   |        |         |         |         |
+----------------------------+---+--------+---------+---------+---------+

**Medicaid and SCHIP Proposals Table**

(dollars in millions)

  --------------------------------------------------------------------------------------------------------------------------------- ------------------------ -----------------------------
                                                                                                                                    **[2006]{.underline}**   **[2006-2010]{.underline}**

                                                                                                                                                             

  **MEDICAID PROPOSALS**                                                                                                                                     

  Medicaid and SCHIP Modernization\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                      NA                       NA

  Extension of Transitional Medical Assistance with Modifications\.....                                                             \$560                    \$560

  Extension of Medicare Premium Assistance (QI)\...\...\...\...\...\...\...\...\...\...\...\...                                     \$230                    \$230

  Expansion of Vaccines For Children\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                   \$140                    \$700

  Medicaid/SCHIP as a Qualifying Event for Employer Sponsored Ins.                                                                  \$0                      \$0

  Cover the Kids (Medicaid Impact)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                 \$389                    \$4,053

  Money Follows the Indivdiual Rebalancing Demonstration\...\...\...\...\.....                                                      \$0                      \$500

  Home and Community-Based Care Demos\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                 \$13                     \$256

  Long-Term Care Insurance\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....         \$0                      \$0

  Spousal                                                                                                                           \$17                     \$102
  Exemption\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                              

  Payment                                                                                                                           \$0                      (\$5,869)
  Reforms\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                            

  Phase Down of Safe Harbor Tax\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                (\$231)                  (\$2,768)

  Managed Care Provider Tax Reform\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                     \$0                      (\$399)

  Reduce Targeted Case Management Match to 50 Percent\...\...\...\...\...\.....                                                     (\$129)                  (\$1,049)

  Define Eligible Services for Targeted Case Management\...\...\...\...\...\...\....                                                \$0                      (\$2,035)

  Reform of Transfer of Assets Policy\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                   (\$99)                   (\$1,476)

  Medicaid Administrative Claiming\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                  \$0                      (\$1,130)

  Amend Medicaid Drug Rebate Formula\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                            \$0                      \$0

  Restructure Pharmacy Reimbursement\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                          (\$542)                  (\$5,385)

  Pharmacy Plus Demonstrations\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                \$0                      \$0

                                                                                                                                                             

  **SUBTOTAL MEDICAID PROPOSALS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                                   **\$348**                **-\$13,710**

                                                                                                                                                             

  **OTHER PROPOSALS WITH IMPACT ON MEDICAID**                                                                                                                

  Medical Child Support From Either Parent\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                            \$0                      -\$15

  Child Support Review and Adjustment\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                          \$0                      -\$30

  Refugee Exemption Extension\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....             \$40                     \$145

  SSA Disability Determinations \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...            -\$2                     -\$113

  **SUBTOTAL OTHER PROPOSALS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....**                            **\$38**                 **-\$13**

                                                                                                                                                             

  **ADJUSTEMENT FOR QI TRANSFER FROM MEDICARE\...\...\...\...\....**                                                                **-\$230**               **-\$230**

                                                                                                                                                             

  **TOTAL FOR MEDICAID PROPOSED LAW\...\...\...\...\...\...\...\...\...\...\...\...\....**                                          **\$156**                **-\$13,953**

                                                                                                                                                             

  **SCHIP LEGISLATIVE PROPOSALS**                                                                                                                            

  Cover the Kids (SCHIP Impact)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...             \$129                    \$535

  SCHIP Reauthorization\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   \$670                    \$457

  SCHIP Certificates of Creditable Coverage\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                            \$0                      \$0

  Medicaid/SCHIP as a Qualifying ESI Event\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                              \$0                      \$0

  **TOTAL SCHIP PROPOSALS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                 **\$799**                **\$992**

                                                                                                                                                             

                                                                                                                                                             

  **TOTAL MEDICAID AND SCHIP**                                                                                                      **\$955**                **-\$12,961**
  --------------------------------------------------------------------------------------------------------------------------------- ------------------------ -----------------------------

**State Grants and Demonstrations Table**

(dollars in millions)

  ---------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------
                                                                                                                                                                      **2006**

                                                                                           **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**   **[+/-
                                                                                                                                                                      2005]{.underline}**

                                                                                                                                                                      

  [Budget Authority]{.underline}                                                                                                                                      

  Ticket to Work Grant Programs\...\...\...\...\...\...\...\...\....                       \$77                     \$81                     \$81                     \$0

  Qualified High-Risk Pools Grant Programs\...\...\...                                     \$40                     \$0                      \$0                      \$0

  Background Checks-Direct Patient Access\...\....                                         \$25                     \$0                      \$0                      \$0

  State Pharmaceutical Assistance Program\...\...\...                                      \$0                      \$62                     \$63                     +\$1

  Federal Reimbursement of Emergency Health Services - Undocumented Aliens...............                           \$250                    \$250                    \$0

  Cover the Kids Outreach\...\...\...\...\...\...\...\...\...\...\...\...\...              \$0                      \$0                      \$500                    +\$500

  State Purchasing Pools\...\...\...\...\...\...\...\...\...\...\...\...\...\...           \$0                      \$0                      \$400                    +\$400

  **Total Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\.....**         **\$142**                **\$393**                **\$1,294**              **\$901**

                                                                                                                                                                      

  [Outlays]{.underline}                                                                                                                                               

  Ticket to Work Grant Programs\...\...\...\...\...\...\...\...\....                       \$27                     \$43                     \$38                     -\$5

  Qualified High-Risk Pools Grant Programs\...\...\...                                     \$21                     \$23                     \$40                     +\$17

  Background Checks-Direct Patient Access\...\....                                         \$0                      \$9                      \$8                      -\$1

  State Pharmaceutical Assistance Program\...\...\...                                      \$0                      \$62                     \$63                     +\$1

  Federal Reimbursement of Emergency Health Services - Undocumented Aliens...............                           \$63                     \$250                    +\$187

  Cover the Kids Outreach\...\...\...\...\...\...\...\...\...\...\...\...\...              \$0                      \$0                      \$200                    +\$200

  State Purchasing Pools \...\...\...\...\...\...\...\...\...\...\...\...\.....            \$0                      \$0                      \$200                    +\$200

  **Total                                                                                  **\$48**                 **\$200**                **\$799**                **\$599**
  Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....**                                                                              
  ---------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------

state grants and demonstrations

The Ticket to Work and Work Incentives Improvement Act

Ticket to Work and Work Incentives Improvement Act of 1999 (TWWIIA)
authorized two grant programs designed to assist States in developing
services and supports to aid the competitive employment of people with
disabilities by extending Medicaid coverage to these individuals.
Section 203 of the Act provided an appropriation each year from FY 2001
to FY 2011 for Medicaid Infrastructure Grants. These grants provide
funding to States to build Medicaid infrastructure and supports, conduct
outreach activities, explore new service options, and form partnerships
to improve the employment environment for people with disabilities.
Section 204 provides for an appropriation of \$42 million for each of
the fiscal years from 2001 to 2004, and \$41 million for both FY 2005
and FY 2006 for Demonstration to Maintain Independence projects. The
demonstration program will evaluate the potential benefits of providing
Medicaid services to workers with physical or mental impairments that,
without medical intervention, are likely to result in disability.

In FY 2006, the budget authority provided by statute for the two grant
programs totals \$81.8 million. Medicaid Infrastructure Grants are
authorized and appropriated for \$40.8 million of non-matched Federal
funding. The Demonstration to Maintain Independence and Employment is
authorized and appropriated for \$41 million. States must match Federal
funding for this demonstration program at the normal Federal matching
rate.

Through 2004, 49 entities (48 States and the District of Columbia) were
approved for funding from the Infrastructure Grant Program Section 203
since its inception. There are 31 States with Medicaid buy-ins and three
additional States have plan amendments under review. As of September 30,
2004, there were just over 70,000 workers receiving Medicaid benefits
under the buy-in options. Since January 1, 2000, there has been a
ten-fold increase in participation. A total of 15 States and the
District of Columbia have applied for and will receive continuation
awards in FY 2005. In addition, one State, West Virginia, will continue
to carry-out employment goals for the working disabled population by
spending previous grant awards in FY 2005 through a no-cost extension of
funding. Of the \$35 million (FY 2004) that has been appropriated for
the upcoming grant year, \$21.8 million was granted to States. The
reason for the large discrepancy in the FY 2004 appropriation and
funding amount is that States are enrolling fewer participants in
Medicaid buy-in programs than Congress originally anticipated. Higher
levels of funding are legislatively related to the yearly amount of
Medicaid buy-in service costs expended by a State. States may be
hesitant to enroll individuals in the optional buy-in category because
of budget shortfalls. The remaining funding rolled over into the FY 2005
appropriation. With this funding, the recipients plan to make systemic
changes that will help individuals with disabilities gain employment and
retain their health care coverage. These changes are designed to
increase Medicaid buy-in programs and enhance State personal assistance
service programs.

Six States (Kansas, Louisiana, Minnesota, Mississippi, Rhode Island, and
Texas) and the District of Columbia were awarded Demonstration to
Maintain Independence and Employment grant funding since the program was
started. States implementing demonstration grant programs will provide
Medicaid-equivalent services to targeted populations of working
individuals with disabilities. The demonstration projects will be used
to evaluate the impact of providing Medicaid benefits to a working
person with a potentially severe disability. The State demonstration
projects approved so far will cover individuals with all types of
disabilities including HIV/AIDS and various mental illnesses.

Qualified High-Risk Pools

The Trade Adjustment Assistance Reform Act of 2002 (TAA) established two
grant programs for States to provide health insurance coverage through
high-risk pools. The first program made available a total of \$20
million to States that, as of August 6, 2002, did not already have a
qualified high-risk pool. These funds were used for the creation and
initial operation of pools. The second program made available \$40
million per year for FY 2003 and FY 2004 for grants to States with
existing qualified high-risk pools to be used for the operation of their
pools.

States that did not have existing qualified high-risk pools were given
until March 31, 2004 to apply for up to \$1 million each to create and
initially operate a qualified high-risk pool. The TAA legislation made
available \$20 million in FY 2003 for these \"seed grants.\" Six States
received a total of \$4.2 million in seed grant funding before the
authority lapsed at the end of FY 2004.

The TAA also made available \$40 million per year for FY 2003 and FY
2004 for the States that already operate qualified pools that meet the
requirements of the statute. The FY 2003 money was available until the
end of FY 2004 and the FY 2004 money will be available until the end of
FY 2005. CMS published a Federal Register Notice on May 2, 2003
announcing the availability of funding and inviting States to apply. All
\$40 million was awarded for FY 2003, divided among 19 States. To date,
\$25.5 million of FY 2004 funding has been awarded, divided among
fourteen States. We expect that the remaining \$14.5 million for FY 2004
funding will be awarded before the deadline at the end of FY 2005.

Federal Reimbursement of Emergency Health Services for Undocumented
Aliens

The MMA created a new program to assist States with paying for
uncompensated medical care for illegal aliens. The law establishes an
annual \$250 million fund, which will be allotted among the States each
year between FY 2005 and 2008. Two-thirds of this money will be
distributed based on the relative percentages of undocumented aliens in
each State and the District of Columbia. One third will be allotted
among the six States with the largest number of undocumented alien
apprehensions. The amounts set aside for each State will not be
dispersed through the State itself. The law requires the Secretary to
directly pay hospitals, doctors, and other providers for their otherwise
uncompensated costs of providing emergency health care to undocumented
aliens in their respective States.

Pilot Program for National and State Background Checks on Direct Patient
Access Employees of Long-Term Care Facilities or Providers

Section 307 of the MMA creates a \$25 million pilot program that runs
through the end of FY 2007 to evaluate State and national background
checks of direct patient access employees of long-term care facilities
or providers. On December 22, 2004, CMS selected seven States to
participate in the pilot program: Alaska, Idaho, Michigan, Nevada, New
Mexico, South Carolina, and Wisconsin. Subsequently, South Carolina
withdrew from the program. CMS extended an offer to Illinois (one of the
alternate States) to participate in the pilot and is awaiting their
response. Information gathered from this pilot will inform CMS about the
cost associated with conducting background checks, the impact and
effectiveness of a background check program, and possible unintended
consequences of implementing such a program on a nationwide basis.

State Pharmaceutical Assistance Program

The State Pharmaceutical Assistance Program provides funds to educate
Part D eligible individuals enrolled in the Program about prescription
drug coverage available through Part D of the MMA.

Legislative Proposals

**Cover the Kids:** Despite the availability of health care coverage
through Medicaid and SCHIP, millions of children eligible for these
programs have not enrolled. This proposal will provide \$1 billion in
grants over two years to States, schools, and community organizations
with the aim of enrolling as many Medicaid- and SCHIP-eligible children
as possible.

**State Purchasing Pools:** To help low-income individuals purchase
coverage with the health insurance tax credit, the Administration
proposes providing for establishing purchasing pools. By combining the
purchasing power of individuals and families, these pools would offer
tax-credit recipients an additional affordable health insurance option
and would make it easier and faster to shop for coverage. This proposal
costs \$200 million in FY 2006 and \$1.7 billion over five years.

Program Management overview table

(dollars in millions)

+-------------------------------+--------+--------+--------+---------+
|                               | **     | **     | **[2   | *       |
|                               | [2004] | [2005] | 006]{. | *2006** |
|                               | {.unde | {.unde | underl |         |
|                               | rline} | rline} | ine}** | **[+    |
|                               | \*\*** | \*\*** |        | /-2005] |
|                               |        |        |        | {.under |
|                               |        |        |        | line}** |
+-------------------------------+--------+--------+--------+---------+
|                               |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Medicare Operations           | \      | \      | \      | +\$443  |
| \...\...\...\...\...\...\..   | $1,723 | $1,747 | $2,190 |         |
| .\...\...\...\...\...\...\... |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Survey and                    | 253    | 261    | 261    | \-      |
| Certi                         |        |        |        |         |
| fication\...\...\...\...\...\ |        |        |        |         |
| ...\...\...\...\...\...\..... |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Federal                       | 581    | 586    | 657    | +71     |
| Administr                     |        |        |        |         |
| ation\...\...\...\...\...\... |        |        |        |         |
| \...\...\...\...\...\...\.... |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Resear                        | 79     | 78     | 45     | -33     |
| ch\...\...\...\...\...\...\.. |        |        |        |         |
| .\...\...\...\...\...\...\... |        |        |        |         |
| \...\...\...\...\...\...\.... |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Revitalization                | [30]   | [24]   | [24]   | \-      |
| Plan\...\.                    | {.unde | {.unde | {.unde |         |
| ..\...\...\...\...\...\...\.. | rline} | rline} | rline} |         |
| .\...\...\...\...\...\...\... |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| **CMS Budget Authority        | **\$2  | **\$2  | **\$3  | *       |
| Subt                          | ,665** | ,696** | ,177** | *+481** |
| otal\*\...\...\...\...\....** |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
|                               |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Rescissions\...\...\...\..    | [-28]  | [-24]  | [0]    | [+2     |
| .\...\...\...\...\...\...\... | {.unde | {.unde | {.unde | 4]{.und |
| \...\...\...\...\...\...\.... | rline} | rline} | rline} | erline} |
+-------------------------------+--------+--------+--------+---------+
| Appropriation,                | **\$2  | **\$2  | **\$3  | *       |
| n                             | ,637** | ,673** | ,177** | *+505** |
| et\...\...\...\...\...\...\.. |        |        |        |         |
| .\...\...\...\...\...\...\... |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
|                               |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Adjustments for               |        |        |        |         |
| Comparaabil                   |        |        |        |         |
| ity\...\...\...\...\...\..... |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Appeals Function (Medicare    | -47    | -8     | **-**  | +8      |
| Operations).                  |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| MMA\*\*\...\...\...\...\..    | \$373  | \$602  | **-**  | -\$602  |
| .\...\...\...\...\...\...\... |        |        |        |         |
| \...\...\...\...\...\...\.... |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
|                               |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| CLIA, Data Spending, and      | \$60   | \$45   | \$45   | \-      |
| Reimbusables\...\.....        |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Medicare Advantage/ PDP User  | [12]   | [13]   | [56]   | [+4     |
| Fee activity..                | {.unde | {.unde | {.unde | 3]{.und |
|                               | rline} | rline} | rline} | erline} |
+-------------------------------+--------+--------+--------+---------+
| **Reimbursable Spending       | **     | **     | **\    | *       |
| Sub                           | \$72** | \$58** | $101** | *\$43** |
| total\...\...\...\...\.....** |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| CLIA/Sale of Data User Fees & | -60    | -45    | -45    | \-      |
| Reimb\...\...\...\....        |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Medicare Advantage/PDP User   | [-12]  | [-13]  | [-56]  | [-4     |
| Fee \...\...\...\...\....     | {.unde | {.unde | {.unde | 3]{.und |
|                               | rline} | rline} | rline} | erline} |
+-------------------------------+--------+--------+--------+---------+
| **Reimbursable Income         | **-    | **-    | **-\   | **      |
| Subtotal\                     | \$72** | \$58** | $101** | -\$43** |
| ...\...\...\...\...\...\...** |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
|                               |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| **Comparable BA/Approp.       | **\$2  | **\$3  | **\$3  | **      |
| Level\*                       | ,963** | ,267** | ,177** | -\$89** |
| \*\*\...\...\...\...**        |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
|                               |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| FTE\*\*                       | 4,514  | 4,843  | 4,843  | 0       |
| \*\*                          |        |        |        |         |
| \*\...\...\...\...\...\...\.. |        |        |        |         |
| .\...\...\...\...\...\...\... |        |        |        |         |
| \...\...\...\...\...\...\.... |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
|                               |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| \* Numbers may not add due to |        |        |        |         |
| rounding.                     |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| \*\* Includes funding and FTE |        |        |        |         |
| associated with the Medicare  |        |        |        |         |
| Prescription Drug,            |        |        |        |         |
| Improvement, and              |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Modernization Act of 2003     |        |        |        |         |
| adminstrative funds           |        |        |        |         |
| appropriated in FY 2004 for   |        |        |        |         |
| two years. However,           |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Section 1015(d) of P.L.       |        |        |        |         |
| 108-173 authorizes the        |        |        |        |         |
| President to transfer some of |        |        |        |         |
| these funds from CMS          |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| to SSA.                       |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| \*\*\* The FTE totals exclude |        |        |        |         |
| HCFAC-funded FTEs. CMS will   |        |        |        |         |
| fund the following FTEs from  |        |        |        |         |
| the HCFAC                     |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| account: FY 2004 \-- 3 FTEs;  |        |        |        |         |
| FY 2005 \-- 100 FTEs; FY      |        |        |        |         |
| 2006\--100 FTEs.              |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+

MMA implementation table

In millions

+-------------------------------+--------+--------+--------+---------+
|                               | **[FY  | **[FY  | **[FY  | *       |
|                               | 2      | 2      | 2      | *2006** |
|                               | 004]{. | 005]{. | 006]{. |         |
|                               | underl | underl | underl | **[+    |
|                               | ine}** | ine}** | ine}** | /-2005] |
|                               |        |        |        | {.under |
|                               |        |        |        | line}** |
+-------------------------------+--------+--------+--------+---------+
|                               |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| Medicare Operations           | 325    | 510    | 478    | -32     |
+-------------------------------+--------+--------+--------+---------+
| Federal Administration        | 39     | 59     | 62     | 3       |
+-------------------------------+--------+--------+--------+---------+
| Research                      | [9]    | [33]   | [20]   | [-1     |
|                               | {.unde | {.unde | {.unde | 3]{.und |
|                               | rline} | rline} | rline} | erline} |
+-------------------------------+--------+--------+--------+---------+
| **Total\***                   | **\    | **\    | **\    | **      |
|                               | $373** | $602** | $560** | -\$42** |
+-------------------------------+--------+--------+--------+---------+
|                               |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+
| \* FY 2005 total excludes the |        |        |        |         |
| \$25 million for the Office   |        |        |        |         |
| of the Inspector General.     |        |        |        |         |
+-------------------------------+--------+--------+--------+---------+

program management

The comparable CMS FY 2006 Program Management budget request is \$3.2
billion in budget authority, an \$89 million or 2.7 percent decrease
over FY 2005. However, FY 2004 and FY 2005 are transitional years for
CMS. In FY 2004 and FY 2005 funding is higher to allow for the start-up
activities associated with the MMA. Many of these start-up activities
are expected to be substantially complete by FY 2006, and CMS\' focus
will begin to shift from start-up to oversight and administration. The
shift in activities and changes in funding complicate the comparison of
the FY 2006 request with prior years. The FY 2006 request does not
propose any new user fees.

The FY 2006 budget request includes all funding for CMS operations to
support Medicare, Medicaid, and SCHIP related activities. Also, this
request now includes funding to administer and implement the new MMA
activities as well as the budget, legislative, and management priorities
of the Administration, including: educating beneficiaries about their
health plan and benefit choices; improving financial management
performance through ongoing implementation of the healthcare integrated
general ledger accounting system (HIGLAS); and strategically managing
human resources.

All comparisons in the following sections are on a comparable basis
(e.g., FY 2005 levels include MMA implementation funds).

**Medicare Operations**: The Medicare Operations budget supports a broad
array of activities. The budget is \$2.2 billion, a decrease of \$42.8
million or 1.9 percent below total FY 2005 resources. The Medicare
fee-for-service program is administered by private contractors.
Contractor responsibilities include: processing claims and making
benefit payments; responding to the needs and inquiries of Medicare
beneficiaries and health care providers and suppliers; and developing
and implementing management changes to improve program operations. In
addition, Medicare Operations funds a variety of mission critical
information technology systems. For example, it funds managed care
systems, standard processing systems, and maintenance of current
contractor systems.

CMS Medicare Operations includes:

-   Carriers\' and fiscal intermediaries\' regular activities, such as
    processing claims, holding hearings and appeals, answering
    inquiries, and educating providers and beneficiaries.

-   Activities to keep shared claims processing systems current, Common
    Working File (CWF), and managed care systems maintenance.

-   Funding provider services such as toll-free lines and training, and
    other operational costs.

-   Funding for the Consolidated Information Technology Infrastructure
    Contract (CITIC), the Medicare data communications network, and
    hardware and software maintenance.

-   Funding for implementing legislation such as the Health Insurance
    Portability and Accountability Act of 1996 (HIPAA), the Balanced
    Budget Act of 1997 (BBA), the Balanced Budget Refinement Act of 1999
    (BBRA), the Benefits Improvement and Protection Act of 2000 (BIPA),
    the Federal Financial Management Improvement Act of 1996 (FFMIA),
    the Chief Financial Officers Act of 1990, and the of MMA.

In FY 2006, CMS will process 1.1 billion claims and answer approximately
50 million inquiries. In FY 2006, the unit cost to process a Part A
claim will be \$0.96, the same as the FY 2005 unit cost projection. Part
B unit costs are estimated to remain constant at \$0.65 in FY 2006.

Approximately 53 percent of the FY 2006 Medicare operations program
level request will be spent on processing claims, on-going appeals (as
distinguished from the new appeals process), inquiries, and provider
assistance. Medicare contractors expect a 1 percent decrease in total
claims volume below the FY 2005 estimate due to beneficiaries shifting
from Medicare fee-for-service to Medicare Advantage. Hence, CMS will
spend \$1.2 billion in FY 2006, a 4.3 percent decrease below FY 2005
estimates.

Legislative mandates comprise 34 percent of the Medicare Operations
budget and are funded at \$750 million in FY 2006, a 4 percent decrease
from the FY 2005 spending level. The FY 2006 request for Medicare
Operations MMA activities is \$32.2 million below FY 2005 spending
levels at \$477.6 million. This spending request is consistent with the
commencement of the new Medicare drug benefit beginning on January 1,
2006 and the continuing MMA activities such as Medicare contracting
reform.

Of the remaining spending in Medicare Operations, operations support
spending will be \$265.6 million in FY 2006, an increase of \$37.7
million or 16.5 percent over FY 2005. Enterprise activity spending
remains relatively steady at \$60.6 million, a decrease of just \$1.9
million below FY 2005. Systems maintenance costs will be increasing
\$56.3 million to \$187.9 million in FY 2006. Systems maintenance will
now include the maintenance costs for the portions of HIGLAS\-- the new
health care integrated general ledger accounting system \-- that will be
on-line at the contractor level in FY 2006.

Finally, CMS will provide \$10.1 million towards the Department-wide
Information Technology (IT) Enterprise Infrastructure Fund (\$7.1
million) and Unified Financial Management System (\$3.0 million).

**Federal Administration:** The President\'s Budget requests \$657.4
million for CMS Federal administrative costs. This is an increase of
\$16.5 million or 2.6 percent over FY 2005.

The Program Management budget supports a total of 4,843 FTE, of which
3,209 FTE will staff the central office and 1,634 FTE will staff the
regional offices. The Federal Administration account supports a staffing
level of 4,761 direct FTE, a straight line from FY 2005. Ten additional
FTE are funded in Medicare Operations, and the remaining 72 FTE are
funded through user fees. The FY 2006 budget assumes 500 of CMS total
FTE will be involved in MMA implementation.

This request supports the agency\'s Government Performance and Results
Act (GPRA) goals through the development of a comprehensive workforce
planning process and automated system. CMS is implementing a strategic
human resources (HR) plan to ensure that the agency has the human
capital it needs to accomplish its mission.

CMS requests \$13 million to continue the Healthy Start, Grow Smart
program. This will support the printing costs and postage for a series
of 13 informational brochures in English and Spanish to new mothers
supported by Medicaid. These brochures are distributed at the time of
birth and monthly over the first year of the child\'s life. Each
publication focuses on activities that stimulate infant brain
development and build skills these children need to be successful in
school. In addition, each Healthy Start pamphlet includes vital health
and safety information for new parents. The Healthy Start, Grow Smart
program has disseminated over 20.7 million brochures in 24 States and
the District of Columbia. Approximately 10 percent of the brochures are
in Spanish and 90 percent in English. CMS is also working with the
American Hospital Association to target small rural hospitals, which may
not have the funds to print their own high quality educational materials
for new mothers.

**Research, Demonstrations and Evaluation:** The FY 2006 budget requests
\$45.2 million for the Research, Demonstrations and Evaluation program,
\$65.0 million less than FY 2005. This request includes \$25.5 million
to continue and refine projects initiated in previous years and \$19.7
million for MMA-related activities.

Ongoing research activities include the Medicare Current Beneficiary
Survey, beneficiary information campaign evaluations, refinement and
monitoring of prospective payment systems, and support for legislative
mandates in BBA, BBRA, and BIPA.

The remaining \$19.7 million of the request will support MMA-related
research projects including monitoring beneficiary access to covered
drugs and evaluating numerous demonstrations and pilots mandated by MMA.

The budget does not requets continued funding for Real Choice Systems
Change Grants. After five years, these grants have largely accomplished
ther goals of helping States make improvements to their home and
community-based health care delivery service systems. The President's
New Freedom Initiative provides \$858 million (outlays) to support home
and community-based services for individuals with disabilities.

**Survey and Certification:** The FY 2006 budget request is \$260.7
million, \$2 million more than the 2005 level. Ensuring the safety of
beneficiaries and the quality of care provided in health facilities are
two of CMS most critical responsibilities. CMS contracts with State
agencies to inspect health facilities providing services to Medicare and
Medicaid beneficiaries and to ensure compliance with Federal health,
safety, and program standards.

Included in this total is \$25.7 million to support and implement
activities associated with the Nursing Home Oversight Improvement
Program (NHOIP), such as: investigating, processing, and reporting
complaints that allege actual harm within 10 days; imposing immediate
sanctions on nursing homes found guilty of a second offense that causes
actual harm to residents; developing a systematic, more comprehensive
survey process to more effectively detect critical quality of care
problems; staggering inspection times to include a set amount begun on
weekends and evenings; and focusing surveys on repeat offenders with
serious violations. NHOIP activities are part of the wider CMS Nursing
Home Quality Initiative (NHQI), which receives additional funding from
the Quality Improvement Organizations budget (see the Medicare Quality
Improvement section).

Of the total request, \$244.4 million will allow States to inspect
long-term care facilities and home health agencies at their
legislatively mandated frequencies, as well as maintain the FY 2005
recertification levels for ESRD facilities, non-accredited hospitals,
hospices, rural health clinics, ambulatory surgical centers, outpatient
physical therapy, and outpatient rehabilitation facilities. CMS expects
to complete over 23,200 initial or recertification inspections. In
addition, CMS expects to conduct 52,500 visits in response to
beneficiary or family complaints.

The remaining \$16.3 million will fund base support contract activities.
These activities include maintenance and enhancements to the Online
Survey Certification and Reporting (OSCAR) data system, which contains
information on nursing home survey results and outcomes; support
services for surveying psychiatric hospitals; and curricula development
for surveyor training.

**Revitalization Plan:** The FY 2006 budget request includes \$24.2
million in two-year funds to continue funding efforts by CMS to
revitalize the Agency\'s long-term information technology systems. This
funding level is the same as the FY 2005 appropriation. The Medicare
program has relied on a number of antiquated legacy systems that have
been characterized by the Government Accountability Office (GAO) and the
Department\'s Office of the Inspector General (OIG) as inflexible, not
secure, and obsolete. MMA will require extensive upgrading of CMS
information technology systems.

The Revitalization Plan will continue the process of modernizing the
agency\'s Medicare fee-for-service claims processing systems (\$15.2
million), and modernizing CMS information technology data structure
(\$9.1 million). These modernization efforts improve efficiency, enable
e-gov activities, and improve systems security at CMS, and help prepare
CMS systems for the increase in claims processing as today\'s \"baby
boomers\" become eligible for Medicare benefits.

The Revitalization Plan continues the Agency\'s commitment to provide
the flexibility and security needed to take on the growing workload and
health care options and provide future beneficiaries with the
information that they need to make informed choices.

Program Management Priorities

Implementing the Prescription Drug Benefit and Regional PPOs: In FY
2006, CMS will implement the new Medicare prescription drug benefit and
the new regional Medicare Advantage plans. The first half of FY 2006
encompasses key education and open enrollment periods. Success of this
enormous effort depends on CMS implementing major new information
technology systems, conducting intelligent and focused outreach, and
educating beneficiaries so that they choose the best options to fit
their health needs. In FY 2006, CMS requests \$560 million for MMA
activities, including implementing prescription drug plans, regional
PPOs, the new Medicare preventive benefits, numerous fee-for-service
improvements, and initiating contracting reform.

The National Medicare & You Education Program: Beneficiary education is
a top priority for CMS, especially as CMS implements the new benefit
options. CMS must ensure that beneficiaries have the essential
information they need to make complex and personal choices. Many
beneficiaries have two or more chronic conditions, have less than a high
school education, and many have cognitive impairments. It is vital that
CMS invest resources in reaching the most vulnerable population.

The total FY 2006 budget request for the NMEP is \$318.2 million, a
decrease of \$22.2 million from the FY 2005 level. In FY 2006, over 54
percent of the NMEP funding covers the 1-800-MEDICARE helpline 24 hours
a day, seven days per week. The remaining funds will be used for
beneficiary materials, CMS websites, community-based outreach, the
national advertising campaign, and program support services.

-   The Medicare & You Handbook: In FY 2006, CMS expects to distribute
    more than 42 million handbooks to beneficiaries and stakeholders,
    approximately one million more handbooks than in FY 2005. The
    handbooks are offered in English and Spanish, and in Braille,
    audiocassette, or large print formats. Each month, approximately
    250,000 new beneficiaries receive the handbook as they enroll in
    Medicare.

-   The 1-800-MEDICARE line: This toll-free line provides access to
    customer service representatives in English and Spanish 24 hours a
    day, seven days per week. CMS is anticipating approximately 32
    million calls in FY 2006, an increase of approximately 8.9 million
    calls over the FY 2005 current estimate. Costs include
    telecommunications network management, interactive voice response,
    personnel and training costs of call center operators, and
    fulfillment of requests for printed information. CMS is implementing
    call center technology that will modernize and improve its customer
    service system.

-   The [www.medicare.gov]{.underline} web site: This
    beneficiary-centered web site provides beneficiaries and
    stakeholders a variety of real-time, interactive tools that enable
    users to receive information on their benefits, plans, and medical
    options. The website is integrated into the desktop that the
    1-800-MEDICARE operators use to respond to calls. CMS expects that
    there will be 411 million page views in FY 2006. CMS is investing in
    FY 2005 to be able to support the enrollment demands that will begin
    in FY 2006.

-   National Multimedia Campaign: Under the new prescription drug
    benefit, beneficiaries will have to decide whether to enroll in a
    stand alone drug plan, a Medicare Advantage regional plan that
    offers a prescription drug benefit, keep their retiree drug
    coverage, or choose not to enroll now and possibly pay more for the
    drug benefit if they choose to enroll at a later date. As a result
    of these complexities, the FY 2005 multimedia campaign will employ
    techniques to spread messages at the local level, and to tailor
    messages to meet the needs of specific audiences.

-   Community-Based Outreach: CMS administers and conducts many outreach
    programs including the State Health Insurance and Assistance
    Programs (SHIPs) grants, Regional Education About Choices in Health
    (REACH), and Health Outreach Zeroing In On Needs (HORIZONS).
    Research has shown that beneficiaries prefer one-to-one assistance.
    CMS will continue its successful grant relationship with the SHIPs,
    which are located in all 50 States, the District of Columbia, Guam,
    Puerto Rico, and the Virgin Islands. SHIPs provide one-to-one
    counseling to beneficiaries on complex Medicare-related topics,
    including Medicare entitlement and enrollment, health plan options,
    Medigap and long-term care insurance, Medicaid, and prescription
    drug assistance. During FY 2004, an estimated 1,200 counselors at
    over 1,100 local SHIPs served more than 1.7 million beneficiaries.

**HIGLAS**: One of the Secretary\'s top priorities is to centralize the
Department\'s financial accounting process through its Unified Financial
Management System (UFMS). UFMS is expected to achieve greater economies
of scale, eliminate duplication, mitigate security risks, and provide
timely and accurate financial information. A major component of UFMS is
the Healthcare Integrated General Ledger Accounting System (HIGLAS),
which will perform the accounting for over one billion Medicare claims
processed each year as well as the everyday administrative financial
dealings of CMS. The development of HIGLAS will also help CMS and the
Department to fulfill the financial management portion of the
President\'s Management Agenda.

In FY 2006, the President\'s Budget requests \$149.8 million (\$79.9
million in two-year money in Medicare Operations and \$69.9 million in
systems maintenance costs also in Medicare Operations) for HIGLAS. As
contractors adopt HIGLAS, systems maintenance costs will increase. The
portion of HIGLAS dealing with the agency\'s administrative accounts has
been transferred from Federal Administration to Medicare Operation
keeping all HIGLAS funding in one place and as two-year funding.

CMS began developing HIGLAS in FY 2001. Thus far, CMS has demonstrated
that the application can support the integrated general ledger and
Medicare financial management requirements; conducted performance tests
demonstrating that HIGLAS can process 3.5 million transactions per day
and support 52 Medicare contractors; and begun implementation of HIGLAS
at two pilot contractors in FY 2004 and additional contractors in FY
2005.

In FY 2006, CMS will implement HIGLAS at additional Medicare contractors
as well as roll out the administrative accounting module at CMS central
office, complete other payment management system interfaces, and attain
statutory compliance by accounting for 52 percent of total CMS costs.

**Appeals Reform:** The budget requests \$51.5 million to implement
Medicare appeals reform as required by BIPA Sections 521 and 522 and as
modified by the MMA. Of this total, CMS requests \$44 million for
Qualified Independent Contractors (QICs) to process Medicare
redeterminations originating from both carriers and fiscal
intermediaries (FI). The QICs will begin processing the FI workload in
FY 2005. The carrier workload will be phased in to the QICs in 2006. The
funding requested allows CMS to fund eight QICs. In addition, the budget
also includes \$7 million for enhancements to the Medicare appeals
system and \$0.5 million for national and local coverage determinations.

MMA requires that the Office of the Secretary (DHHS) assume
responsibility for processing cases currently handled by the Social
Security Administration\'s (SSA) administrative law judges (ALJ) by FY
2006. By law, SSA will continue hearing Medicare cases until the
function transfers to the Office of the Secretary. Thus, funds
previously included in the CMS budget request for paying SSA to
adjudicate Medicare claims appeals are now included in the Office of the
Secretary\'s budget request. Please refer to the Medicare Hearings and
Appeals section of the Budget-in-Brief for additional information.

**HIPAA Implementation:** The CMS budget request includes \$39.5 million
for HIPAA implementation activities. CMS was tasked with implementing
the non-privacy administrative simplification provisions of HIPAA. In
October 2002, CMS was also given the responsibility for enforcing the
HIPAA Administrative Simplification security, transactions and code
sets, and identifier standards.

The FY 2006 request includes \$18.3 million to begin activities related
to the National Plan and Provider Enumeration System. Activities include
maintaining the enumeration system and enumerating approximately 1.3
million health care providers. The request also includes funding for
enforcement of HIPAA transactions and code sets, security, and
identifier standards; compliance outreach; implementing local systems
changes, new standards, and technical modifications; and operating and
maintaining the HIPAA data center.

Legislative Proposal for the Discretionary Budget

As part of a government-wide initiative, the Administration is proposing
legislation to add funding in the discretionary budget by increasing
budget caps to increase resources for the Health Care Fraud and Abuse
Control account and the Medicare Integrity Program. This additional
funding will support program integrity efforts for the new activities
under MMA as well as Medicaid.

CMS Performance Highlights

The primary CMS mission is to assure health care security for its
beneficiaries. To ensure that CMS remains a responsive, dynamic, and
relevant government agency that serves its citizens, CMS will continue
to focus attention on citizen-centered governance in FY 2006 and beyond.

Consistent with the principles of the Government Performance and Results
Act (GPRA), CMS has focused on identifying a set of meaningful,
outcome-oriented performance goals that speak to fundamental program
purposes and to the Agency\'s role as a steward of taxpayer dollars.
CMS\' FY 2006 performance budget reinforces CMS, HHS, and Administration
priorities including the HHS Strategic Plan and CMS strategic goals.

Following are some of the CMS performance achievements and advancements
that support important Administration priorities:

**Program Integrity:** CMS program integrity efforts ensure the Medicare
program pays the right amount to a legitimate provider for covered,
reasonable and necessary services that are provided to an eligible
beneficiary. CMS is also committed to assisting interested States in
developing methodologies and conducting pilot studies to measure and
ultimately reduce Medicaid payment error rates.

In 2003, CMS implemented a new method for measuring improper payments.
The new method resulted in a higher rate of provider non-response and a
higher error rate of 9.8 percent. The Comprehensive Error Rate Testing
(CERT) program was initiated in FY 2003 and has produced a national
error rate for each year since its inception. In 2004, CMS began
reporting gross error rates in addition to the net error rates
previously reported. This change was necessary in order to comply with
new Improper Payments Information Act (IPIA) requirements. CMS adjusted
its baseline to reflect the change in reporting. The new baseline is
10.1 percent. In the meantime, CMS will continue to work with its
partners in conducting everyday business of ensuring Medicare claims are
paid properly.

**Quality Improvement**: Improving the quality of care for Medicare
beneficiaries is one of the primary objectives for the Department and
CMS. Several of the Quality Improvement Organizations\' (QIOs) national
quality priorities are reflected in performance goals and represent
health conditions that affect a large number of beneficiaries and impose
a significant burden on the health care system. A sampling of these
conditions are highlighted below:

A key performance goal is to increase the percentage of female Medicare
beneficiaries age 65 and older who receive a biennial mammogram. In FY
2003, 51.3 percent (target 51.5 percent) of female beneficiaries
received a biennial mammogram. CMS believes this rate may represent
under-reporting because of a \"technical claims processing issue.\"

Diabetes is a highly-prevalent condition in the Medicare population.
Many complications of the disease, such as blindness, can be prevented
or delayed with appropriate monitoring and treatment. While continuing
emphasis on diabetic eye exams, CMS is replacing this goal in FY 2006
with a goal to increase the rate of hemoglobin A1c and lipid screening
in this highly prevalent population at high risk for cardiovascular
complications. For FY 2003, CMS exceeded its target (of 68.9 percent) at
69.3 percent.

One of the QIO goals is to protect the health of Medicare beneficiaries
age 65 years and older by increasing the percentage of those who receive
an annual vaccination for influenza and a lifetime pneumococcal
vaccination. For FY 2003, 70.4 percent (target 72.5 percent) received an
influenza vaccination and 66.4 percent (target 67 percent) received a
pneumococcal vaccination. Shortages of vaccination were among the
reasons for not reaching this target.

**OPEN CHART**

Title: Medicare Error Rate

This bar chart illustrates and estimates the FFS Error Rate (in
percentage format) for FY 04, FY 05. FY 06, FY 06, FY 07 and FY 08. For
FY 04, the Target was 4.8 percent and the Actual was 10.1 percent. For
FY 05 the target is 7.9 percent. For FY 06, the target is 6.9 percent.
For FY 07 the target is 5.4 percent. And for FY 08, the target is 4.7
percent.

**CLOSE CHART**

**Children\'s Health Care:** The implementation of State Children\'s
Health Insurance Program (SCHIP) has stimulated enormous change in the
availability of health care coverage for children and in the way
government-sponsored health care is delivered. The energy invested by
States and Territories, communities, and the Federal Government has
resulted in significant expansions in coverage, as well as new systems
for enrolling children in health care coverage.

CMS and States exceeded the FY 2003 goal to increase by 5 percent more
children enrolled in SCHIP or Medicaid over the FY 2002 level. In fact,
CMS and the States increased enrollment by 2,200,000 children or 7.2
percent. The most recent Bureau of Census\' Current Population Survey
(CPS) data (three-year rolling average for FY 2001-FY 2003) suggested
that there were approximately 5.7 million children who lacked health
insurance coverage, down from over 7.5 million in 1997 (FY 1996-FY
1998). In addition, a recent CDC survey found that the percentage of
uninsured children dropped from 13.9 percent in 1997 to 10.1 percent in
2003.

CMS continues to collaborate with States to improve health care delivery
and quality for Medicaid and SCHIP populations using performance
measures. CMS continues to work with States to explore strategies to
effectively use performance measures to quantify and stimulate
measurable improvement in delivering quality health care.

**Beneficiary Education:** In order for Medicare beneficiaries to have
greater knowledge of Medicare and its benefits, CMS is focusing on a
number of educational programs. These programs not only provide
information about Medicare but also gauge the beneficiaries\' awareness
of Medicare benefits.

One performance measure is to improve the effectiveness of disseminating
Medicare information to beneficiaries. In order to help beneficiaries
make informed health care decisions, CMS employs a variety of strategies
through many CMS beneficiary-centered programs to maximize information
channels and to ensure that targeted audiences, are reached with the
\"right information at the right time.\" In FY 2004, CMS continued to
track beneficiary understanding of the Medicare Advantage and
Fee-for-Service programs.

To promote beneficiary and public understanding of CMS and its programs,
CMS developed a goal to improve and measure beneficiary awareness of (1)
the core features of Medicare needed to use the program effectively, and
(2) CMS sources from which additional information can be obtained.

**OPEN TEXT BOX**

FY 2004 CMS Performance Highlights

-   79 percent of the measures were reported.

-   Of the 79 percent of goals reported, 88 percent of the measures met
    or exceeded the target.

-   Approximately 40 percent of the measures supported the President\'s
    Management Agenda.

-   SCHIP has exceeded its enrollment goal every year.

-   At 61.1 percent, CMS surpassed its FY 2003 target of 60.5 percent
    through optimizing the timing of antibiotic administration to reduce
    the frequency of surgical site infection in Medicare beneficiaries.

-   69.3 percent of diabetic beneficiaries received a biennial eye exam,
    exceeding the target of 68.9 percent (FY 2003).

**CLOSE END TEXT BOX**

administration for children and families

discretionary spending overview table

(dollars in millions)

  ------------------------------------------------------------------------------------------------------------------------------------------------------ ------------------------ ------------------------ ------------------------ ---------------------
                                                                                                                                                                                                                                    **2006**

                                                                                                                                                         **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**   **[+/-
                                                                                                                                                                                                                                    2005]{.underline}**

  Head Start\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...     \$6,775                  \$6,843                  \$6,888                  +\$45

  Abstinence Education:                                                                                                                                                                                                             

  Community-Based Abstinence Education\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                                          \$74                     \$104                    \$143                    +\$39

  Abstinence Education Grants to States\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                                  [50]{.underline}         [50]{.underline}         [50]{.underline}         [0]{.underline}

  Subtotal, Abstinence Education\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                               \$124                    \$154                    \$193                    +\$39

  Faith-Based and Community Initiative Programs:                                                                                                                                                                                    

  Compassion Capital Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                  \$48                     \$55                     \$100                    +\$45

  Mentoring Children of Prisoners\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                          50                       50                       50                       0

  Maternity Group Homes\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                0                        0                        10                       +10

  Center for Faith-Based and Community Initiatives\...\...\...\...\...\...\...\...\.....                                                                 [1]{.underline}          [1]{.underline}          [1]{.underline}          [0]{.underline}

  Subtotal, Faith-Based Community Initiative\...\...\...\...\...\...\...\...\...\...\...\...                                                             \$99                     \$106                    \$161                    +\$55

  Refugee:                                                                                                                                                                                                                          

  Refugee and Entrant Assistance\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                           \$394                    \$430                    \$489                    +\$59

  Unaccompanied Alien Children\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                          [53]{.underline}         [54]{.underline}         [63]{.underline}         [+9]{.underline}

  Subtotal, Refugees\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                            \$447                    \$484                    \$552                    +\$68

  Child Welfare Services\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                     290                      290                      290                      0

  Child Welfare Training\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                     7                        7                        7                        0

  Abandoned Infants Assistance Programs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                                    12                       12                       12                       0

  Promoting Safe and Stable Families (discretionary)\...\...\...\...\...\...\...\...\...\.....                                                           99                       98                       105                      +7

  Independent Living (discretionary)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                       45                       47                       60                       +13

  Adoption Incentives\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                    8                        32                       32                       0

  Adoption Opportunities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                         27                       27                       27                       0

  Adoption Awareness\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                       13                       13                       13                       0

  Child Abuse Programs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                       90                       102                      102                      0

  Child Care & Development Block Grant:                                                                                                                                                                                             

  Block Grant\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...            \$2,078                  \$2,073                  \$2,073                  0

  Research and Evaluation Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                         [10]{.underline}         [10]{.underline}         [10]{.underline}         [0]{.underline}

  Subtotal, Child Care\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                             \$2,088                  \$2,083                  \$2,083                  0

  LIHEAP:                                                                                                                                                                                                                           

  Regular Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                            \$1,789                  \$1,885                  \$1,800                  -\$85

  Emergency Contingency Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                         [99]{.underline}         [297]{.underline}        [200]{.underline}        [-97]{.underline}

  Subtotal, LIHEAP\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                           \$1,888                  \$2,182                  \$2,000                  -\$182

  Developmental Disabilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                           165                      168                      168                      0

  Native Americans\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                 45                       45                       45                       0

  Community Services:                                                                                                                                                                                                               

  Community Services Block Grant\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                           \$642                    \$637                    \$0                      -\$637

  Individual Development Accounts\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                               25                       25                       25                       0

  Community Services Discretionary Programs\...\...\...\...\...\...\...\...\...\...\...\.....                                                            [64]{.underline}         [65]{.underline}         [0]{.underline}          [-65]{.underline}

  Subtotal, Community Services \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                             \$731                    \$727                    \$25                     -\$702

  Violence Crime Reduction\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                           129                      129                      129                      0

  Runaway and Homeless Youth\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                     105                      104                      104                      0

  Early Learning Fund \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                   33                       36                       0                        -36

  Social Services Research & Demonstration\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                                   19                       32                       6                        -26

  Federal Administration \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                       [178]{.underline}        [185]{.underline}        [185]{.underline}        [0]{.underline}

                                                                                                                                                                                                                                    

  **Total, Discretionary Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**                                                 **\$13,417**             **\$13,906**             **\$13,187**             **-\$719**

  [Less Funds Allocated from Other Sources:]{.underline}                                                                                                                                                                            

  PHS Evaluation Funds\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                       -11                      -11                      -11                      0

  Abstinence Education Grants to States\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                             -50                      -50                      -50                      0

                                                                                                                                                                                                                                    

  **Total, Discretionary Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\....**                                                     **\$13,356**             **\$13,845**             **\$13,126**             **-\$719**

                                                                                                                                                                                                                                    

  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....   1,338                    1,382                    1,313                    -69
  ------------------------------------------------------------------------------------------------------------------------------------------------------ ------------------------ ------------------------ ------------------------ ---------------------

administration for children and families

The Administration for Children and Families promotes the economic and
social well-being of children, youth, families, and communities, giving
special attention to vulnerable populations, such as children in
low-income families, refugees, Native Americans, and the developmentally
disabled.

The Administration for Children and Families\'s (ACF\'s) over 60
programs provide services to children and families, including Native
Americans, persons with disabilities, and refugees, and communities
through cooperative efforts between Federal, State, local, and Tribal
governments, and through public and private non-profit organizations.
The FY 2006 budget request for ACF totals \$45 billion, a net decrease
of \$4.3 billion, or 9 percent below FY 2005.

[DISCRETIONARY SPENDING]{.underline}

The FY 2006 discretionary budget totals \$13.1 billion, a net decrease
of \$719 million or 5 percent below FY 2005. This decrease primarily
reflects the elimination of programs that have been unable to
demonstrate long-term outcomes.

Head Start

The budget request includes \$6.9 billion for Head Start to provide
919,000 children with services including 62,000 children in Early Head
Start. The budget includes a \$45 million increase to support the
President\'s initiative to improve Head Start by funding nine State
pilot projects to promote coordination of State preschool programs,
child care programs, and Head Start into a comprehensive system of early
childhood programs. Consistent with the President\'s comprehensive Head
Start reauthorization proposal, these new pilot projects will provide
States with assistance to strengthen the program and, through
coordination, improve other preschool programs. ACF will continue to
support the goals of the President\'s Good Start Grow Smart Initiative
to strengthen Head Start by providing information on child development
and early learning to teachers, caregivers, parents, and grandparents
and by closing the gap between research and practice in early childhood
education.

Head Start programs help ensure that children are ready to succeed at
school by supporting the social and cognitive development of children.
Head Start programs provide comprehensive child development services,
including educational, health, nutritional, social, and other services,
to primarily low-income families. They also engage parents in their
child\'s preschool experience by helping them achieve their own
educational and literacy goals as well as employment goals, supporting
parents\' role in their children\'s learning, and emphasizing the direct
involvement of parents in the administration of local Head Start
programs.

Abstinence Education

The budget increases funding for Abstinence Education activities by \$39
million totaling \$206 million. Of this total, ACF will administer \$193
million through two programs -- the Community-Based Abstinence Education
program and the Abstinence Education Grants to States program. Within
the Office of Public Health and Science (OPHS), the budget also includes
\$13 million for the abstinence activities conducted through the
Adolescent Family Life program. By 2008, funding for all abstinence
education programs will increase to a total of \$270 million.

ACF\'s abstinence education programs provide grants to communities and
States to develop and implement abstinence programs. These programs
focus on educating adolescents, ages 12 through 18, and creating a
positive environment within communities to support adolescent decisions
to postpone sexual activity and, where appropriate, mentoring,
counseling, and adult supervision to promote abstinence with a focus on
those groups which are most likely to bear children out of wedlock.

The budget provides up to \$10 million for a public awareness campaign
designed to help parents communicate with their children about health
risks of early sexual activity. ACF and OPHS will work together on the
public awareness campaign efforts. The budget also continues to support
evaluation of abstinence education programs.

Faith-Based and Community Initiative

The budget maintains a commitment to fund faith-based and community
organizations, including a total of \$161 million in ACF to help
grass-roots organizations expand services to their communities, mentor
children of prisoners, and provide a safe place for young pregnant and
parenting mothers. As part of the larger Faith-Based and Community
Initiative, these programs help empower those at the community level who
can best identify the social and health problems to address the unmet
needs of Americans. The Center for Faith-Based and Community Initiatives
works with Agencies across the Department to eliminate barriers in
regulations, rules, internal guidance, policies and procedures, and
practices to the participation of faith-based and other community
organizations; to propose the development of innovative pilot and
demonstration programs; and to expand Charitable Choice provisions.

**Compassion Capital Fund:** The Compassion Capital Fund advances the
efforts of community and charitable organizations, including faith-based
organizations, to increase their effectiveness and enhance their ability
to provide social services where they are needed. Among the priorities
within the 2006 proposal is an emphasis on supporting anti-gang efforts
through community and faith-based organizations. The budget provides
\$100 million, an increase of \$45 million over the FY 2005 level.

In its first two years, the Compassion Capital Fund, which began in FY
2002, awarded intermediary grants to 31 organizations which in turn
awarded over \$24 million in sub-awards to over 1,700 grassroots
organizations. Grants are also directly awarded to faith-based and com-
munity organizations for capacity-building activities, as well as for
research into best practices and to develop a national resource center
and information clearinghouse. These capacity-building mini-grants began
in the second year of the program with 52 awards and grew to 102 awards
the following year.

**Mentoring Children of Prisoners:** The request includes \$50 million,
maintaining the FY 2005 level, to provide grants of up to \$5 million to
enable public and private organizations to establish or expand projects
that provide mentoring for children of incarcerated parents and those
recently released from prison. Grantees are required to become gradually
more self-sufficient through public-private partnerships. These programs
will establish approximately 33,000 mentoring relationships a year.
Nearly 2 million children have a parent in a Federal or State
correctional facility, a number that more than doubled over the 1990s.
Research indicates that children with incarcerated parents are seven
times more likely than the general population to become incarcerated
themselves and are more likely to display a variety of behavioral,
emotional, health, and educational problems.

**Maternity Group Homes:** The budget includes \$10 million for the
Maternity Group Homes program, a recently authorized component of the
Runaway and Homeless Youth program. These funds will support
adult-supervised community-based group homes for young mothers and their
children who cannot live safely with their own families. These women are
vulnerable to abuse and neglect, and often end up in homeless shelters
or on the streets. Grantees will provide a range of coordinated services
such as child care, education, job training, and counseling and advice
on parenting and life skills.

Refugee Programs

**Refugee and Entrant Assistance:** The budget requests \$489 million in
FY 2006 to support services for refugees, asylees, Cubans/Haitians, and
victims of torture and trafficking, \$59 million more than the FY 2005
level. The increase will maintain access to a full eight months of cash
and medical assistance and up to 60 months of social services programs
such as English language training, case management, employment
preparation, and job placement and retention services. The State
Department\'s refugee entrant ceiling for 2006 is 70,000 or 20,000
higher than 2005. Between 1993 and 2003, the employment rate of refugees
increased by almost 70 percent, to a level approaching the U.S.
population as a whole. In addition, the request includes support for
services, including rehabilitation, social, and legal services for those
who have experienced torture as well as benefits and services for up to
1,000 victims of trafficking.

**Unaccompanied Alien Children:** The Unaccompanied Alien Children (UAC)
program provides a safe and appropriate environment for minors until
custody can be transferred to a relative or appropriate guardian or
until the child is returned to his or her country of origin. Since the
program was transferred from the former Immigration and Naturalization
Service in 2003, the Office of Refugee Resettlement has increased the
use of less restrictive shelter and foster care placements, and provided
necessary support for improved medical care. The FY 2006 budget for the
UAC program of \$63 is \$9 million more than the FY 2005 level to meet
anticipated increases in the number of minors in care. Current estimates
indicate that the number of UACs will increase by over 30 percent from
6,200 in FY 2004 to almost 8,200 in FY 2006. In FY 2006, the Office of
Refugee Resettlement will expand the pilot pro bono services program to
a national level and continue efforts to reunite UACs with family
members in the United States.

Child Welfare, Adoption and Child Abuse

The FY 2006 budget includes \$648 million for a range of programs that
support child welfare systems, adoption efforts, and child abuse
prevention.

**Child Welfare:** The Child Welfare programs support States and
localities in their efforts to keep families together. Services offered
include preventive intervention, where appropriate, so that children can
remain in their homes; identifying alternative placements like foster
care when necessary; and reunification services so that a child can
return home. Grants are also provided to develop and improve education
and training programs and resources for child welfare professionals and
to prevent the abandonment of infants and young children exposed to
HIV/AIDS and drugs. The budget requests \$309 million for these efforts.

The Independent Living Education and Training Vouchers program provides
up to \$5,000 for costs associated with college or vocational training
for foster care youth ages 16 to 21. The FY 2006 request of \$60 million
will provide more than 2,600 additional youth with vouchers through this
program. The Promoting Safe and Stable Families program provides funds
for each State to operate a coordinated program of family preservation
services, community-based family support services, time-limited
reunification services, and adoption promotion and support services. The
FY 2006 budget includes a total of \$410 million, of which \$105 million
is financed through discretionary resources, and will be used to expand
services provided to children and families.

**Adoption:** The FY 2006 request includes \$32 million for the Adoption
Incentives program. States can earn bonus payments by increasing the
number of adoptions of children in foster care over previous years. At
the end of FY 2003, there were 523,000 children in foster care, of which
118,000 were waiting to be adopted. Bonuses are based on the total
number of children adopted, the adoption of children with special needs
who are under the age of nine, and, as part of the recent program
reauthorization, the adoption of children over the age of nine. Data
show that once a child waiting for adoption reaches eight or nine years
old, that child is more likely to continue in foster care than to be
adopted. This newest bonus recognizes the current reality and targets
incentives to older children by providing a \$4,000 bonus for each older
child adoption over the baseline regardless of whether the State
qualifies for the other bonuses. Payments can be used toward recruiting
prospective adoptive parents, child welfare staff training, and
post-adoption family support services. The budget also includes \$40
million for grant programs that facilitate the elimination of barriers
to adoption and support adoption efforts, including adoption of children
with special needs, through training and a public awareness campaign.

**Child Abuse:** The most recent annual HHS Child Maltreatment Report
indicates that each year an estimated 896,000 children in the United
States are victims of abuse and neglect. The budget includes a total of
\$102 million for programs to reduce the incidence of child maltreatment
and provide services to those who are victims. The Child Abuse State
Grant program plays a key role in the prevention of child abuse and
neglect including post-investigative services such as individual
counseling, case management, and parent education. Other programs help
complete the continuum of prevention efforts by providing funds for
community-based efforts including general public awareness and education
activities and by supporting research on child maltreatment and training
and technical assistance on improved methods and procedures to prevent
and treat child abuse and neglect. Program Assessment Rating Tool (PART)
assessments completed this year concluded that the State child abuse
prevention and treatment programs address specific and existing needs
and are effectively managed.

Child Care

The Child Care and Development Block Grant (CCDBG) program to States,
Territories, and Tribes provides direct child care assistance payments
to low-income families when the parents work or participate in education
or training. States have flexibility in developing child care programs
and policies that meet the needs of children and parents within each
State. CCDBG also supports research and evaluation of innovative child
care subsidy policies and web-based access to reports, data, and other
research-related information.

ACF\'s most recent data indicates that \$4.8 billion in total Federal
child care funds, including \$2.1 billion in discretionary funds,
provide child care assistance to approximately 1.8 million children each
month. However, when combined with other Federal and related State
funds, child care assistance is available to 2.4 million children,
representing an estimated 28 percent of children eligible under State
rules.

This year, a PART assessment found that CCDBG plays a critical role for
families transitioning from welfare to work and that child care
subsidies expand parental access to a range of care options. The
assessment concluded that the program structure and use of vouchers
maximizes parental choice and creates incentives for States to develop a
single coherent system for families.

Low Income Home Energy Assistance Program

The FY 2006 budget requests a total of \$2 billion for the Low Income
Home Energy Assistance Program. The request includes \$1.8 billion for
formula block grants to States and \$200 million for contingency
funding. The contingency funds are available for release in a heating or
cooling emergency such as extreme temperature or high fuel prices or to
meet energy needs related to a natural disaster.

LIHEAP provides heating and cooling benefits to approximately 4.5
million households each year. Of the households receiving heating
assistance, about one-third include a member 60 years or older, about
half include a person with a disability, half include a child under age
18, and about one-third do not receive any other public assistance.

Developmental Disabilities

Today, there are nearly 4 million Americans with developmental
disabilities. Developmental disabilities are severe, chronic
disabilities attributable to mental and/or physical impairment, which
manifest before age 22 and are likely to continue indefinitely. The
budget requests \$168 million for programs that support partnerships
with State governments, local communities, and the private sector to
assist people with developmental disabilities to reach their maximum
potential through increased independence, productivity, inclusion, and
community integration.

**Disabled Voter Services:** The Voting Access for Individuals with
Disabilities grant programs provide support to States to establish,
expand, and improve access to the election process to the over 20
million individuals with disabilities who are of voting age. Of the
\$168 million for Developmental Disabilities, \$15 million will support
these efforts. Grant awards have supported a range of activities
including developing a training video for election officials, poll
workers, and volunteers on providing assistance to voters with visual
impairments and surveying polling places to determine accessibility
needs.

Native Americans

The programs of the Administration for Native Americans promote the goal
of social and economic self-sufficiency. The budget request includes a
total of \$45 million for these programs which, through direct grants,
contracts, and interagency agreements, provide financial assistance for
social and economic development and governance, training and technical
assistance, and research, demonstration and evaluation. Funds support a
range of projects from establishment of new Tribal employment offices to
the formulation of environmental ordinances and training in the use and
control of natural resources.

Community Services Programs

The budget proposes \$25 million for the Individual Development Accounts
(IDA) program. IDAs are dedicated savings accounts for low-income
individuals that can be used for purchasing a first home, paying for
post-secondary education, or capitalizing a business. This demonstration
program provides grants to agencies that in turn empower low-income
individuals to save by providing matching contributions for savings and
intensive financial counseling and economic literacy education. This
year, a PART assessment found the IDA program to both provide benefits
to low-income and low-wealth families and produce knowledge about the
effects of the Federal asset-based policy on these families.

The FY 2006 budget does not request funds for the Community Services
Block Grant (CSBG) and a number of smaller community services programs.
The CSBG program has been unable to demonstrate results as noted in its
previous PART assessment. The budget also does not request funds for
Community Economic Development, Rural Community Facilities, Community
Food and Nutrition, Job Opportunities for Low-Income Individuals, and
National Youth Sports. The Administration proposes to focus economic and
community development activities through a more targeted and unified
program to be administered by the Department of Commerce.

Other Children and Families Activities

The budget maintains funds for programs that offer safe havens and
access to services for victims of domestic violence and runaway and
homeless youths. This year a PART assessment determined the programs
serving victims of domestic violence allow States flexibility to provide
a combination of shelter stays, related assistance, and non-residential
services. The assessment also indicated that the National Domestic
Violence Hotline is efficiently run and continues to respond to a
steadily increasing number of calls while ensuring consistent quality of
services. Based on the PART findings, ACF, working with an existing
national advisory group, will develop appropriate national
grantee-supported performance outcome measures and demonstrate improved
efficiencies and cost effectiveness.

The FY 2006 budget does not request funds to continue the Early Learning
Fund, which was provided \$36 million in FY 2005. The Administration
continues to target resources on similar activities which promote early
literacy in the Department of Education and the Head Start program.

Research/Federal Administration

There is continuing interest and need for sound research to help guide
efforts to assist low-income families become and remain economically
self-sufficient and to strengthen families. The FY 2006 budget includes
\$6 million in PHS evaluation funds for the Social Services Research and
Demonstration program which will support cutting-edge research and
evaluation projects in areas of critical national interest.

The request includes \$185 million in FY 2006 to support staffing and
maintain activities to administer the programs of ACF. Consistent with
the President\'s Management Agenda, the budget supports efforts to
reduce erroneous and improper payments in several key ACF program areas,
including Child Care, Head Start, and Foster Care, and supports a
continued focus on the Public Assistance Reporting Information System
(PARIS), a voluntary program for States to share public assistance data
to maintain program integrity and detect and reduce erroneous payments.

[acf: entitlement spending overview table]{.underline}

(dollars in millions)

  ---------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ -- ------------------------ --- --------------------- -- ---
                                                                                                                                                                                                                                                     **2006**                 

                                                                                                                                                                   **[2004]{.underline}**   **[2005]{.underline}**      **[2006]{.underline}**       **[+/-                   
                                                                                                                                                                                                                                                     2005]{.underline}**      

  **[Current Law Budget Authority]{.underline}**                                                                                                                                                                                                                              

  TANF\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   \$19,167                 \$17,881                    \$16,689                     -\$1,192                 

  *High Performance Bonus\** non add.......................................\...                                                                                    *\$200*                  *\$1,000*                   *\$0*                        *-\$1,000*               

  TANF Contingency Fund\*\*......................................................\.....                                                                            \$1,958                  \$1,958                     \$0                          -\$1,958                 

  Child Care Entitlement\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                      \$2,732                  \$2,717                     \$2,717                      \$0                      

  Child Support Enforcement & Family Support (net BA)\*\*\*\...\...\...\...\...\...\...\...                                                                        \$4,413                  \$4,074                     \$3,322                      -\$752                   

  Foster Care/Adoption Assistance/Independent Living Program \...\...\...\...\...                                                                                  \$6,814                  \$6,806                     \$6,620                      -\$186                   

  Children\'s Research & Technical Assist (net BA) \...\...\...\...\...\...\...\...\...\...\...\...\....                                                           \$56                     \$45                        \$34                         -\$11                    

  Promoting Safe and Stable Families\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                       \$305                    \$305                       \$305                        \$0                      

  Social Service Block Grant\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                           \$1,700                  \$1,700                     \$1,700                      \$0                      

                                                                                                                                                                                                                                                                              

  **Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....**                     **\$37,345**             **\$36,486**                **\$31,387**                 **-\$4,099**             

                                                                                                                                                                                                                                                                              

                                                                                                                                                                                                                                                                              

                                                                                                                                                                   **[2004]{.underline}**   **[2005]{.underline}**      **[2006]{.underline}**       **[+/-                   
                                                                                                                                                                                                                                                     2005]{.underline}**      

  **[Current Law Outlays]{.underline}**                                                                                                                                                                                                                                       

  TANF\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   \$17,725                 \$18,070                    \$17,918                     -\$152                   

  TANF Contingency Fund ......................................................\...\...\...                                                                         \$0                      \$30                        \$39                         \$9                      

  Child Care Entitlement\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                      \$2,695                  \$2,718                     \$2,718                      \$0                      

  Child Support Enforcement & Family Support (net outlays)\...\...\...\...\...\...\...\...                                                                         \$3,815                  \$3,934                     \$4,081                      \$147                    

  Foster Care/Adoption Assistance/Independent Living Program \...\...\...\...\...                                                                                  \$6,340                  \$6,474                     \$6,619                      \$145                    

  Children\'s Research & Technical Assist (net outlays) \...\...\...\...\...\...\...\...\...\...\...                                                               \$34                     \$49                        \$47                         -\$2                     

  Promoting Safe and Stable Families\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                       \$336                    \$301                       \$305                        \$4                      

  Social Service Block Grant\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                           \$1,752                  \$1,764                     \$1,762                      -\$2                     

                                                                                                                                                                                                                                                                              

  **Total, Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**       **\$32,697**             **\$33,340**                **\$33,489**                 **\$149**                

                                                                                                                                                                                                                                                                              

                                                                                                                                                                                                                                                                              

                                                                                                                                                                                                                                                                              
  ---------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ -- ------------------------ --- --------------------- -- ---

[acf: entitlement spending]{.underline}

The ACF entitlement programs serve some of the Nation\'s most vulnerable
populations through programs such as Temporary Assistance for Needy
Families (TANF), Child Support Enforcement (CSE), the Child Care
Entitlement to States, Foster Care, Adoption Assistance, and Independent
Living. ACF entitlement outlay estimates for FY 2006 are \$33.5 billion,
an increase of \$149 million in entitlement spending from FY 2005. This
overall increase is a combination of a small decrease in TANF outlays
and typical growth in Child Support and Foster Care.

This year\'s budget includes the anticipated reauthorization of TANF and
the Child Care Entitlement to States. In the Child Support Enforcement
program the budget also includes modifications, which increase both
financial collections and medical support to families. In Foster Care,
the budget includes an option for States to receive their foster care
funds in the form of a flexible grant. The Foster Care budget also
clarifies the eligibility definition and modifies the matching rate for
the District of Columbia. Additional information on FY 2006 legislative
proposals can be found in the TANF, CSE, Foster Care, Adoption
Assistance, and Independent Living sections.

Temporary Assistance for Needy Families

The Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (PRWORA) dramatically changed the Nation\'s approach to income
support for low-income families. PRWORA replaced the individual
entitlement to welfare with time-limited assistance and work
requirements. PRWORA also created a new partnership between States and
the Federal Government, giving States considerable flexibility to design
their own TANF programs.

**OPEN TEXT BOX**

The President's TANF Reauthorization Proposal

Strengthens the Federal-State-Tribal-Territories Partnership by
Providing Full Funding and Flexibility:

-   Funds State Family Assistance Grant and Family Assistance Grants for
    Territories at current levels for five years --- \$16.6 billion
    annually.

-   Reinstates authority for Supplemental Grants for Population
    Increases in Certain States --- \$319 million annually.

-   Reauthorizes the Child Care and Development Fund --- \$4.8 billion
    in total mandatory and discretionary funds in FY 2006.

-   Establishes a more accessible contingency fund with more flexible
    Maintenance of Effort requirements, allowing States to count child
    care and separate State program expenditures --- \$2 billion is
    available over five years.

-   Allows for 10 percent transfer to SSBG.

-   Maximize Self-Sufficiency through Work:

-   Requires TANF participants to engage in work-related activities and
    employment for 40 hours a week, with at least 24 hours in direct
    work activities. States have discretion to define other countable
    activities. States may count certain activities like substance abuse
    treatment or rehabilitation as meeting the work requirement for
    three months.

Promote Child-Well Being , Healthy Marriage, and Responsible Fatherhood:

-   Eliminates the bonus to reduce out-of-wedlock births and creates an
    initiative to fund research, demonstrations, and technical
    assistance, targeted to family formation and healthy marriage ---
    \$100 million annually.

-   Establishes matching grant program for States and Tribes to develop
    innovative approaches to promoting healthy marriages ---\$100
    million annually.

-   Provides \$40 million annually in mandatory funds to promote
    responsible fatherhood.

Improve Program Performance:

-   Modifies the reward for high performing States to focus on
    employment--based results ---\$100 million annually.

Program Integration:

-   Enables broader State welfare and workforce program integration
    through new demonstrations. States can request demonstration
    authority to integrate aspects of Federal programs, including
    program eligibility and reporting requirements.

**CLOSE TEXT BOX**

TANF provides approximately \$16.9 billion annually to States,
Territories, and eligible Tribes for the creative programs to help
families transition from welfare to self-sufficiency. States have
tremendous flexibility in determining how to use their TANF dollars.
Since welfare reform, States are spending less on cash assistance
payments and more on education and training, child care, and other work
supports to help families achieve self-sufficiency.

For example, in 1998, States spent 63 percent of combined State and
Federal funds on cash assistance; in FY 2003 States spent 39 percent. In
addition, States may transfer up to a combined 30 percent of their TANF
funding to either the Child Care and Development Fund or the Social
Services Block Grant (SSBG) with not more than 4.25 percent of this
transferred to SSBG. The FY 2005 appropriations bill overrides the 4.25
percent transfer cap and provided for a 10 percent SSBG transfer
authority.

Welfare reform is widely regarded as a success. TANF caseloads continue
to decrease. As of June 2004, 4.7 million individuals received TANF
benefits--- 61.4 percent fewer than in August 1996. From June 2003 to
June 2004 caseloads dropped 4.4 percent for individuals and 3 percent
for families. National data from the Current Population Survey suggest
that even during the economic downturn, women leaving welfare or at risk
for coming onto welfare continue to find employment.

The TANF program expired at the end of FY 2002. To date, Congress has
provided funding through March 31, 2005 for TANF State and Terroritory
Family Assistance Grants, Supplemental Grants, Matching Grants to
Territories, and the Contingency Fund.

TANF Performance

The TANF program achieved success towards its primary goal of moving
TANF recipients from welfare to work and self-sufficiency. In FY 2003:

-   39 percent of adult TANF recipients became newly employed, up from
    36 percent in FY 2002 but short of the target of 44 percent.

-   33 percent of recipients attained higher earnings over two quarters,
    exceeding the target of 29 percent.

-   Job participation rates declined from 30 percent in FY 2002 to 28
    percent in FY 2003. The recent decline in work rates underscores the
    importance of welfare reform reauthorization and strengthening work
    requirements.

TANF Legislative Proposals

The FY 2006 budget reproposes the President\'s FY 2004 and FY 2005 plan
to build on the considerable successes of welfare reform and to
reauthorize TANF. The President\'s proposal strengthens work
requirements while allowing States greater flexibility in determining
what should count as work. The proposal strengthens marriage and
families, making child well-being a central tenet of the legislation
(see the box outlining the President\'s TANF Reauthorization Plan on the
previous page). The President\'s proposal includes \$200 million
annually to promote healthy marriage through demonstrations, research,
and a matching grant program. The FY 2006 Budget also requests \$40
million for the Promotion and Support of Responsible Fatherhood as
mandatory funding.

Child Care Entitlement to States

The Child Care Entitlement to States, which was preappropriated under
PRWORA, is a component of the Child Care and Development Fund (CCDF).
The Child Care Entitlement is composed of mandatory and matching funds.
Two percent of the mandatory entitlement funds are reserved for eligible
Indian Tribes and Tribal organizations. States are mandated to spend at
least 70 percent of the Child Care Entitlement on families receiving
TANF, transitioning from TANF, or at risk of becoming eligible for TANF.
States must also spend a minimum of 4 percent of all child care funds to
improve the quality and availability of healthy and safe child care for
all families.

For FY 2006, the budget funds the Child Care Entitlement at \$2.7
billion. This is equal to the funding level provided in FY 2005. These
funds will continue to provide valuable support for working families who
are moving from welfare to work.

Child Care Performance

The Child Care and Development Fund helps families achieve and maintain
self-sufficiency and improve the overall quality of child care. The
Child Care Bureau collaborates with the Head Start Bureau, Department of
Education, and the Health Resources and Services Administration to
achieve these goals. In addition to improving access and affordability
of child care, the Child Care Bureau is working with States to use early
learning guidelines to improve the school readiness skills of young
children from low-income families.

In the Program Assessment Rating Tool (PART) assessment for the FY 2006
budget, the Child Care Entitlement received a \"Moderately Effective\"
rating. The assessment notes that the program is critical to families
transitioning from welfare to work, and that the program is improving
how it tracks the availability, accessibility, and affordability of
child care for low-income families.

Child Support Enforcement

The Child Support Enforcement (CSE) program is a joint Federal, State,
and local partnership that ensures financial and emotional support for
children from both parents by locating non-custodial parents,
establishing paternity, and establishing and enforcing child support
orders. Child support services, as mandated in Title IV-D of the Social
Security Act, are available for all families with a non-custodial
parent, regardless of whether or not the custodial parent receives
welfare.

Child support collections play an important role for families
transitioning from welfare to self-sufficiency, particularly in light of
time limits on receipt of cash assistance. Families in which a custodial
parent has never received cash assistance, receive all child support
collected on their behalf. State and Federal Governments share child
support collections on behalf of families receiving TANF and some
collections on behalf of former TANF recipients. States can choose to
pass through a portion of the State share of collections to these
families as well.

The Federal Government shares in the financing of this program by
providing a 66 percent match rate for general State administrative costs
and 90 percent for paternity testing. The CSE program also includes a
capped entitlement of \$10 million annually for grants to States to
facilitate non-custodial parents\' access to and visitation of their
children. In addition, States receive incentive payments based on their
performance on five key measures: paternity establishment, support order
establishment, collections on current support, collections on past-due
support, and cost effectiveness. In FY 2006, the Federal Government will
spend an estimated \$4.2 billion for all of these costs.

CSE Performance

The CSE program continues to make impressive gains on order and
paternity establishment, and collections:

-   Child support collections hit a record \$21.2 billion in FY 2003,
    serving an estimated 16 million child support cases.

-   The CSE collected \$1.6 billion in overdue child support from
    Federal income tax refunds in tax year 2003 on behalf of more than
    1.6 million families.

-   CSE established paternity for almost 1.5 million children in FY
    2003.

-   CSE tracks performance using measures that cover the key elements of
    child support enforcement such as paternity and order establishment
    and collection of current and back support.

Highlights include:

-   For every dollar invested in the program in FY 2003, CSE collected
    \$4.32 in child support, far exceeding their target of \$4.25. CSE
    aims to increase the cost-effectiveness ratio to \$4.49 by FY 2006.

-   In FY 2003, CSE achieved a current collection rate of 58 percent,
    meeting their target. This measure tracks regular and timely payment
    of support. CSE seeks to increase the collection rate to 62 percent
    by FY 2006.

In the PART assessments for the FY 2005 budget, CSE received a rating of
\"Effective\" and continues to be one of the highest rated block/formula
grants of all reviewed programs government-wide. This high rating is due
to its strong mission, effective management, and demonstration of
measurable progress toward meeting annual and long term performance
measures.

Child Support Legislative Proposals

The budget anticipates the enactment of the child support provisions
included in the President\'s TANF Reauthorization proposal, as well as
two proposals from FY 2005 budget aimed at improving and increasing the
collection of medical child support (see box outlining these child
support proposals on the following page). These proposals will also
improve automation tools, strengthen existing enforcement tools, and
assist families in gaining self-sufficiency. Overall these proposals
have a significant impact in terms of savings and increased collections
for families:

-   In FY 2006, these proposals will save \$50 million in child support
    administrative costs and increase the Federal share of collections
    by \$13 million. These result in a net Federal savings of \$63
    million while increasing collections to families by \$147 million.

-   Proposals for mandatory review and adjustment and health insurance
    from either parent proposals generate Medicaid savings of \$45
    million over five years.

-   Proposals for optional pass through and disregard; and optional
    simplified distribution have significant Food Stamp savings of \$114
    million over five years.

-   In total, these child support proposals offer an impressive \$3.4
    billion in increased collections to families for a net Federal cost
    of \$52 million over five years.

Children\'s Research and Technical Assistance

The FY 2006 President\'s Budget includes \$49 million to support child
support enforcement training and technical assistance efforts; operation
of the Federal Parent Locator Service (FPLS), which assists States in
locating absent parents; and welfare research. Of this amount, \$34
million will be devoted to: 1) training and technical assistance (\$11
million) and 2) operating FPLS (\$23 million). The funds appropriated
for these activities are equal to 1 and 2 percent respectively of the
Federal share of child support collections during the preceding year.
The remaining \$15 million will fund welfare research as included in the
President\'s TANF reauthorization proposal.

Foster Care, Adoption Assistance, and Independent Living Programs

The FY 2006 budget request for the Foster Care, Adoption Assistance, and
the Independent Living programs is \$6.6 billion. These programs,
authorized by Title IV-E of the Social Security Act, provide essential
services to vulnerable children by supporting safe living environments
and preparing for independence older foster youth who are likely to age
out of the system.

Of the total request, \$4.6 billion will support the Foster Care
program. This is a \$252.5 million decrease from last year\'s request
and includes the effects of the legislative proposals described in the
following section. The funds will be used for maintenance payments and
administrative costs for approximately 230,300 children per average
month, a 1.3 percent decrease over 2005. In addition, States may use the
funds for training and for the operation and development of the
Statewide Automated Child Welfare Information Systems (SACWIS), a
computer-based data and information collection system.

The budget includes \$1.8 billion for the Adoption Assistance program,
which supports families that adopt special-needs children. This is an
increase of \$26.9 million over the FY 2005 request. These funds will be
used to provide maintenance payments to adoptive families,
administrative payments for the costs associated with placing a child in
an adoptive home, and training for professionals and adoptive parents.
The proposed level of funding will support approximately 369,500
children each month.

The budget also contains \$140 million for the Independent Living
Program (ILP), the same as the FY 2005 request. This program funds a
variety of services to ease the transition from foster care for youth
who will likely remain in foster care until they turn 18 and former
foster children between the ages of 18 and 21.

**OPEN TEXT BOX**

Child Support Enforcement Legislative Proposals

Proposals to Enhance and Increase Collection of Medical Child Support:

-   Require health care plan administrator to notify the IV-D agency
    when a child loses health coverage. The Proposal will help alert
    IV-D workers of potential lapses in children\'s coverage so they can
    work to secure alternative coverage, if necessary.

-   Require State child support enforcement agencies to seek medical
    support for children through health insurance available to either
    parent. The proposal recognizes that it may be more suitable for
    some children to be covered under their custodial parent. States
    will have the option to enforce orders against custodial parents.
    This will result in savings to the Medicaid program --- \$ 15
    million over 5 years.

Proposals to Enhance Automation and Significantly Increase Collections
to Families:

-   Federal seizure of accounts in multi-state financial institutions,
    which will enable more families in interstate situations to benefit
    from this data match.

-   Require intercept of gambling proceeds, a significant source of
    untapped income for recovery of overdue child support.

-   Provide for garnishment of Longshore and Harbor Worker\'s
    Compensation Act benefits

-   Provide Federal matching of insurance claims and settlements
    databases for recovery of past due support.

-   Increase funding for access and visitation grants in support of the
    Administration\'s commitment to strengthening fatherhood and
    parenting skills and increasing family stability.

-   Authorize direct Tribal access to Federal Parent Locator Service.

-   Authorize contractors and IV-D Tribes to access tax offset data.

Proposals Under Welfare Reform to Further Assist Families Gain
Self-Sufficiency:

-   Assist families on TANF and formerly on TANF by sharing in the costs
    of State efforts to pass through and disregard child support for
    TANF families; a second proposal simplifies distribution rules for
    the benefit of former TANF families.

-   Require States to review and adjust child support orders at least
    every three years for families receiving TANF.

-   Reduce the threshold for denying passports to non-custodial parents
    owing overdue child support from \$5,000 to \$2,500.

-   Give States the ability to collect past-due child support by
    withholding a limited amount of OASDI payments from beneficiaries,
    if appropriate.

-   Require States to charge a \$25 annual fee to families who have
    never received AFDC or TANF assistance and receive child support
    collections through the IV-D program.

**CLOSE TEXT BOX**

Title IV-E Performance

The Foster Care, Adoption Assistance, and Independent Living programs
demonstrated success in improving safety, permanency, and well-being of
children. Working with the States, the Children\'s Bureau strives to
minimize the disruption to the continuity of family and other
relationships for children in foster care by decreasing the number of
placement settings per year for a child in care. The programs also
provide children in foster care permanency and stability in their living
situations by improving the timeliness of reunification, if possible, or
guardianship and adoption.

The Foster Care program received a rating of \"Adequate\" from the
Program Assessment Rating Tool (PART) in FY 2005. This is an improvement
over the "Results Not Demonstrated" rating received for FY 2004. The
better rating can be attributed to completing adoptions for 268,000
children with child welfare involvement from FY 1997 through FY 2002.
The programs also received a higher rating due to new program
performance measures, an initiative to develop an error rate, and
improved program management. The proposed alternative financing system
for Foster Care, discussed in the next section, would address PART
findings to further improve the program. In the PART assessment for the
FY 2006 budget, ILP received a \"Results Not Demonstrated\" rating
because the program needs to develop a data system to track program
participation and outcomes. HHS is committed to improving PART ratings
in line with the President\'s Management Agenda initiative on Budget and
Performance Integration.

Foster Care Legislative Proposals

The FY 2006 President\'s Budget includes three legislative proposals for
Foster Care and related programs. The alternative funding proposal,
detailed in the Child Welfare Program Option box (see above), would
allow States the option to receive their foster care funding as a
flexible grant over five years to support a continuum of services to
families in crisis and children at risk. This proposal will increase
budget authority by \$36 million in FY 2006, and it is budget neutral
over five years.

The second proposal would clarify the process for determining Title IV-E
eligibility in the Foster Care program. On March 3, 2003, the Court of
Appeals for the 9th Circuit held in Rosales v. Thompson that a child
living with an interim caregiver may be eligible for Title IV-E foster
care even though the child would not have been eligible in the home from
which the child was legally removed. The Rosales decision contravenes
the Department\'s long-standing interpretation of the Social Security
Act that eligibility is based upon the home from which the child is
removed, not the home of the interim caretaker. HHS has never
interpreted the statute to mean that States may consider whether the
child is eligible in either the home from which the child is removed or
the home where the child is living. This proposal would amend the
statute to come into accord with the Department\'s long-standing policy.
This proposal saves \$84 million in FY 2006 and \$399 million over five
years.

**OPEN TEXT BOX**

Child Welfare Program Option Proposal

States That Choose the Grant Option Would Be Able to Use the Funds for:

-   Foster care payments

-   Prevention activities

-   Permanency efforts

-   Case management

-   Administrative activities

-   Training for child welfare staff

-   Other such child welfare activities

Under the Flexible Funding Plan States Will Be Required to:

-   Continue to uphold the child safety protections outlined in the
    Adoption and Safe Families Act,

-   Agree to maintain existing levels of State investment in child
    welfare programs

-   Continue to participate in the Child and Family Services Reviews.

The proposal provides access to the TANF Contingency Fund from which
States may receive additional funding under certain circumstances if a
severe foster care crisis were to arise. A \$30 million set-aside will
be available for Federally recognized Indian Tribes, and a one-third of
one percent set-aside will be available for monitoring and technical
assistance of State foster care programs.

**CLOSE TEXT BOX**

The third proposal brings the Foster Care and Adoption Assistance
matching rate for the District of Columbia in line with the District\'s
matching rate in Medicaid and SCHIP. This would increase the Federal
matching rate for the District of Columbia from 50 percent to 70 percent
and cost the Federal government \$8 million in FY 2006 and \$40 million
over five years.

Promoting Safe and Stable Families

The Promoting Safe and Stable Families (PSSF) program, under Title IV-B
of the Social Security Act is a capped entitlement program to assist
States in coordinating services related to child abuse prevention and
family preservation. These services include community-based family
support, family preservation, time-limited reunification services, and
adoption promotion and support services. States generally must spend at
least 20 percent of their funds on each of the above four categories.
The Adoption and Safe Family Act of 1997 (ASFA) established that a
child\'s health and safety must be of paramount concern in any efforts
made by a State to preserve or reunify a child\'s family. The FY 2006
request for PSSF includes \$305 million in mandatory funds provided by
formula to States.

Social Services Block Grant

The Social Services Block Grant (SSBG), a capped entitlement, under
Title XX of the Social Security Act, provides funds to States for
delivering social services and allows States substantial discretion in
allocating funds in order to best suit their specific needs. SSBG is
funded at \$1.7 billion for FY 2006. This is the same level as FY 2005.
Programs or services that are frequently supported by SSBG funds include
child care, child welfare, home-based services, employment services,
case management, adult protective services, prevention and intervention
programs, and special services for people with disabilities.

ACF: overview table

Child support enforcement: collections and costs

(dollars in millions)

  ----------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ---------------------------- ---------------------------- ---------------------
                                                                                                                                                                     **2005**                     **2006**                     **2006**

                                                                                                                                            **[2004]{.underline}**   **[Estimate]{.underline}**   **[Estimate]{.underline}**   **[+/-
                                                                                                                                                                                                                               2005]{.underline}**

  **Total Collections Distributed:**                                                                                                                                                                                           

  All Families\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....            \$19,410                 \$20,520                     \$21,894                     +\$1,374

                                                                                                                                                                                                                               

  TANF program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                    \$1,977                  \$1,974                      \$2,028                      +\$54

  Federal Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                    \$1,092                  \$1,087                      \$1,097                      +\$10

  State Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                 \$885                    \$887                        \$895                        +\$8

  Foster Care program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                         \$76                     \$78                         \$82                         +\$4

  Federal Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                    \$43                     \$44                         \$46                         +\$2

  State Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                 \$33                     \$34                         \$36                         +\$2

  Total\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   **\$21,463**             **\$22,572**                 **\$24,004**                 **+\$1,432**

                                                                                                                                                                                                                               

  **Administrative Costs:**                                                                                                                                                                                                    

  Federal Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....               \$3,540                  \$3,610                      \$3,716                      +\$106

  State Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...           [\$1,760]{.underline}    [\$1,856]{.underline}        [\$1,913]{.underline}        [+\$57]{.underline}

  Total\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   **\$5,300**              **\$5,466**                  **\$5,629**                  **+\$163**

                                                                                                                                                                                                                               

  Incentive Payment to States\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                              **\$454**                **\$446**                    **\$458**                    **+\$12**

                                                                                                                                                                                                                               

  **Program Costs (Costs minus Distributed Collections ):**                                                                                                                                                                    

  Federal Costs \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....               \$2,859                  \$2,925                      \$3,018                      +93

  State Costs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...           [\$388]{.underline}      [\$489]{.underline}          [\$501]{.underline}          [+12]{.underline}

  Net Costs to Taxpayers\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                              **\$3,247**              **\$3,414**                  **\$3,519**                  **+105**

                                                                                                                                                                                                                               

  NOTE: Program Costs equal the Administrative Costs minus the portion of collections distributed to TANF                                                                                                                      

  and Foster Care Programs. The Federal costs also include incentive payments to States.                                                                                                                                       
  ----------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ---------------------------- ---------------------------- ---------------------

ACF: overview table

TANF legislative proposals

(dollars in millions)

  -------------------------------------------------------------------------------------------------------------------------- -- -------------- ------------------------ ------------------------ ------------------------ -- ----------------------------- -- ------
                                                                                                                                                                                                                             **Five Year**                    

                                                                                                                                               **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**      **[2006-2010]{.underline}**      

                                                                                                                                                                                                                                                              

  **[2006 President\'s Budget, Current Law]{.underline}**                                                                                      **\$19,167**             **\$19,839**             **\$16,689**                **\$86,403**                     

  TANF                                                                                                                                         \$17,209                 \$17,881                 \$16,689                    \$84,445                         
  \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                                                                                                                    

  Contingency Fund\*\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                  \$1,958                  \$1,958                  \$0                         \$1,958                          

                                                                                                                                                                                                                                                              

  **[Legislative Changes, Budget Authority]{.underline}**                                                                                                                                                                                                     

  State and Territory Family Assistance Grants\...\...\...\...\...\...\...\...\...\....                                                                                 \$0                      \$0                         \$0                              

  Matching Grants to Territories\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                                              \$0                      \$0                         \$0                              

  Supplemental Grants \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                                 \$128                    \$319                       \$1,595                          

  Redirect High Performance Bonus\*\*\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                                                      -\$500                   \$0                         -\$500                           

  Family Formation Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                                      \$100                    \$100                       \$500                            

  Research, Demonstration, Technical Assistance\...\...\...\...\...\...\...\....                                                                                        \$100                    \$100                       \$500                            

  Responsible Fatherhood\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                                       \$40                     \$40                        \$200                            

  Elimination of the Illegitimacy Bonus\*\*\*\...\...\...\...\...\...\...\...\...\...\...\.....                                                                         -\$100                   -\$100                      -\$500                           

  Tribal Work Program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                                  \$0                      \$0                         \$0                              

  Contingency Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                                \$42                     \$0                         \$42                             

                                                                                                                                                                                                                                                              

  **SUBTOTAL, Legislative Changes\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....**                                                                    **-\$190**               **\$459**                   **\$1,837**                      

                                                                                                                                                                                                                                                              

  **2006 President\'s Budget, Proposed Policy.........................**                                                        **\$19,167**                            **\$19,649**             **\$17,148**                **\$88,240**                     

                                                                                                                                                                                                                                                              

  **Explanation of decrease from FY 2005 to FY 2006:** In FY 2005, current law estimates assume half-year funding of                                                                                                                                          
  Supplemental Grants and routine appropriations of the High Performance Bonus and the Contingency Fund.                                                                                                                                                      

                                                                                                                                                                                                                                                              

                                                                                                                                                                                                                                                              

  \* FY 2004 and FY 2005 Contingency Funds are prior year funds, not new budget authority.. This funding is                                                                                                                                                   

  available for obligation through FY 2009. FY 2004 no States drew down these funds.                                                                                                                                                                          

  \*\* Current law estimates assume \$1 billion in BA in FY 2005. Under the FY 2004 President\'s Budget,                                                                                                                                                      

  \$500 million will be redirected towards Family Formation Grants.                                                                                                                                                                                           

  \*\*\* PB 06 eliminates the out-of-wedlock bonus and funds TANF research, demonstration, and                                                                                                                                                                

  technical assistance which is geared in part towards Family Formation efforts.                                                                                                                                                                              

                                                                                                                                                                                                                                                              
  -------------------------------------------------------------------------------------------------------------------------- -- -------------- ------------------------ ------------------------ ------------------------ -- ----------------------------- -- ------

ACF: overview table

cse legislative proposals

(dollars in millions)

  ------------------------------------------------------------------------------------------------------------------ -------------------- -------------------------- ----------------------- -------------------- -------------------------- -----------------------
                                                                                                                                                                                                                                             

                                                                                                                     **FY 2006**                                                             **FY 2006-2010**                                

                                                                                                                     [Admin               [Fed. Share                [Collections to         [Admin               [Fed. Share                [Collections to
                                                                                                                     Costs]{.underline}   Collections]{.underline}   Families]{.underline}   Costs]{.underline}   Collections]{.underline}   Families]{.underline}

  Health Insurance from Either Parent\*\*\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                \$0                  \$0                        \$0                     \$3                  \$0                        \$0

  Send COBRA Notice to IV-D Agency\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                      1                    0                          0                       6                    0                          0

  Federal Seizure of Accounts in Multi-State Financial Institutions                                                  1                    4                          67                      4                    52                         934

  Require Intercept of Gaming Proceeds\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                  3                    3                          54                      40                   48                         860

  Provide for Garnishment of Longshore and Harbor Worker\'s                                                                                                                                                                                  

  Compensation Act Benefits\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...          0                    0                          10                      0                    4                          90

  FPLS Access to Insurance Settlement Databases\...\...\...\...\...\...\...\.....                                    0                    0                          1                       0                    6                          116

  Increased Access and Visitation Funding\...\...\...\...\...\...\...\...\...\...\...\...\...                        2                    0                          1                       32                   0                          16

  Direct Tribal Access to Federal Parent Locator Service (FPLS)                                                      0                    0                          0                       0                    0                          101

  Contractor and Tribal Access to Tax Data\...\...\...\...\...\...\...\...\...\...\...\...\...                       0                    0                          0                       0                    0                          0

  Optional Pass Through and disregard above Current Effort\*\*\*..                                                   0                    0                          0                       0                    -92                        169

  Optional Simplified Distribution\*\*\*\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....           0                    0                          0                       0                    -541                       984

  Mandatory Review and Adjustment of Child Support Orders\*\*.                                                       0                    0                          0                       96                   136                        0

  Reduce Threshold for Passport Denial to \$2500\...\...\...\...\...\...\...\...\.....                               0                    1                          3                       0                    9                          35

  \$25 Annual Fee for Never -TANF Cases with Collections\...\...\...\...                                             -57                  0                          0                       -315                 0                          0

  OASDI Benefit                                                                                                      0                    5                          11                      0                    33                         65
  Match\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                                                                                                                     

                                                                                                                                                                                                                                             

  **Also Included in Child Support/Family Support Account**                                                                                                                                                                                  

  Raise the Cap for Repatriation to \$5 million \...\...\...\...\...\...\...\...\...\...\...\...                     [0]{.underline}                                                         [3]{.underline}                                 

                                                                                                                                                                                                                                             

  **Child Suport Enforcement Subtotal\*\...\...\...\...\...\...\...\...\...\...\...\...\...\....**                   -\$50                \$13                       \$147                   -\$131               -\$345                     \$3,369

                                                                                                                                                                                                                                             

  **Current Law                                                                                                      \$3,322                                                                 \$22,008                                        
  \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....**                                                                                                                           

                                                                                                                                                                                                                                             

  **Proposed Law\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**   \$3,272                                                                 \$21,877                                        

                                                                                                                                                                                                                                             

  \* In FY 2006, these proposals save \$50 million in child support administrative costs and increase the Federal                                                                                                                            
  share of collections by \$13                                                                                                                                                                                                               

  million. This results in a net Federal savings of \$63 million while increasing collections to families by \$147                                                                                                                           
  million.                                                                                                                                                                                                                                   

  \*\* The mandatory review and adjustment and health insurance from either parent proposals have Medicaid savings,                                                                                                                          
  \$45 million over five years.                                                                                                                                                                                                              

  \*\*\* The optional pass through and disregard and optional simplified distribution proposals have significant                                                                                                                             
  Food Stamp savings, \$114 million                                                                                                                                                                                                          

  over five years. In total, these child support proposals offer an impressive \$3.4 billion in increased                                                                                                                                    
  collections to families for a net Federal cost of                                                                                                                                                                                          

  \$52 million over five years.                                                                                                                                                                                                              

                                                                                                                                                                                                                                             
  ------------------------------------------------------------------------------------------------------------------ -------------------- -------------------------- ----------------------- -------------------- -------------------------- -----------------------

ACF: overview table

title iv-e child welfare legislative proposals

(dollars in millions)

  ------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -- ----------------------------- -- -----------------------------
                                                                                                                                                                      **Five Year**                    **Ten Year**

                                                                                        **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**      **[2006-2010]{.underline}**      **[2006-2015]{.underline}**

  **2006 President\'s Budget Current Law**                                                                                                                                                             

  Budget Authority\...\...\...\...\...\...\...\...\...\...\...\....                     \$6,814                  \$6,806                  \$6,620                     \$35,955                         \$80,349

  Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....         \$6,340                  \$6,474                  \$6,619                     \$35,786                         \$79,902

                                                                                                                                                                                                       

  **[Legislative Changes:]{.underline}**                                                                                                                                                               

  Child Welfare Program Option                                                                                                                                                                         

  Budget Authority\...\...\...\...\...\...\...\...\...\.....                            \$0                      \$0                      \$36                        \$0                              \$0

  Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...               \$0                      \$0                      \$7                         \$2                              \$1

  Home of Removal                                                                                                                                                                                      

  Budget Authority\...\...\...\...\...\...\...\...\...\.....                            \$0                      \$0                      -\$84                       -\$399                           -\$852

  Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...               \$0                      \$0                      -\$72                       -\$383                           -\$833

  DC Matching Rate                                                                                                                                                                                     

  Budget Authority\...\...\...\...\...\...\...\...\...\.....                            \$0                      \$0                      \$8                         \$40                             \$86

  Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...               \$0                      \$0                      \$7                         \$38                             \$85

  **SUBTOTAL, Legislative Changes**                                                                                                                                                                    

  **Budget Authority\...\...\...\...\...\...\...\...\...**                              **\$0**                  **\$0**                  **-\$40**                   **-\$359**                       **-\$766**

  **Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\.....**                 **\$0**                  **\$0**                  **-\$58**                   **-\$343**                       **-\$747**

                                                                                                                                                                                                       

  **2006 President\'s Budget Proposed Policy**                                                                                                                                                         

  **Budget Authority\...\...\...\...\...\...\...\...\...\...\...\....**                 **\$6,814**              **\$6,806**              **\$6,580**                 **\$35,596**                     **\$79,583**

  **Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...**   **\$6,340**              **\$6,474**              **\$6,561**                 **\$35,443**                     **\$79,155**
  ------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -- ----------------------------- -- -----------------------------

administration on aging

overview table

(dollars in millions)

  --------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------------
                                                                                                                                                                                                                     **2006**

                                                                                                                                          **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**   **[+/-2005]{.underline}**

                                                                                                                                                                                                                     

  National Family Caregiver Support\...\...\...\...\...\...\...\...\...\...\...\...                                                       \$159                    \$162                    \$162                    \$0

                                                                                                                                                                                                                     

  Home and Community-Based                                                                                                                                                                                           

  Supportive Services and Centers\...\...\...\...\...\...\...\...\...\...\.....                                                           354                      354                      354                      0

                                                                                                                                                                                                                     

  Nutrition Services:                                                                                                                                                                                                

  Home-Delivered Meals\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                            \$180                    \$183                    \$183                    \$0

  Congregate Meals\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                   387                      387                      387                      0

  Nutrition Services Incentive Program\...\...\...\...\...\...\...\.....                                                                  [148]{.underline}        [149]{.underline}        [149]{.underline}        [0]{.underline}

  **Subtotal, Nutrition Programs \...\...\...\.....**                                                                                     **\$715**                **\$719**                **\$719**                **0**

                                                                                                                                                                                                                     

  Program Innovations\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                 \$34                     \$43                     \$24                     -\$19

  Aging Network Support Activities\...\...\...\...\...\...\...\...\...\...\...\.....                                                      13                       13                       13                       0

  Protection of Vulnerable Older Americans\...\...\...\...\...\...\...                                                                    19                       19                       19                       0

  Preventive Health Services\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                          22                       22                       22                       0

  Grants for Native Americans\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                             26                       26                       26                       0

  Alzheimer\'s Disease\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                              12                       12                       12                       0

  Program Administration\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                      17                       18                       18                       0

  Senior Medicare Patrols (HCFAC)\...\...\...\...\...\...\...\...\...\...\.....                                                           4                        3                        3                        0

  White House Conference on Aging\...\...\...\...\...\...\...\...\...\...\.....                                                           [3]{.underline}          [5]{.underline}          [0]{.underline}          [-5]{.underline}

                                                                                                                                                                                                                     

  **Total, Program Level\...\...\...\...\...\...\...\...\.....**                                                                          **\$1,378**              **\$1,396**              **\$1,372**              **-\$24**

                                                                                                                                                                                                                     

                                                                                                                                                                                                                     

  [Less Funds Allocated From Other Sources:]{.underline}                                                                                                                                                             

  Senior Medicare Patrols (HCFAC)\...\...\...\...\...\...\...\...\...\....                                                                -\$4                     -\$3                     -\$3                     \$0

  **Total, Budget Authority\...\...\...\...\...\...\...\....**                                                                            **\$1,374**              **\$1,393**              **\$1,369**              **-\$24**

                                                                                                                                                                                                                     

  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   117                      126                      123                      -3

                                                                                                                                                                                                                     
  --------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------------

administration on aging

The Administration on Aging promotes the dignity and independence of
older Americans and helps society prepare for an aging population.

Summary

The FY 2006 budget request for the Administration on Aging (AoA) is
\$1.4 billion. This amount maintains funding for AoA core services at
the FY 2005 level, including community-based supportive services,
elderly nutrition, and caregiver support. It also continues investments
in program innovations to test new models of home and community-based
care. Funding for the White House Conference on Aging, scheduled for
October 2005, was completed in the FY 2005 appropriation.

Over 47 million Americans are age 60 and over, including more than 4.6
million who are age 85 and over, and these numbers are increasing
rapidly with the aging of the baby boom generation. While advances in
medicine and technology are enabling seniors to live longer and more
active lives than ever before, those of advanced age are also at
increased risk of chronic disease and disability. Older Americans with
chronic conditions may be unable to perform basic activities of daily
living, and many of them require assistance to remain at home and avoid
the need for institutional care.

Studies have repeatedly found that if given the choice, older Americans
overwhelmingly express a preference for long-term care services that
allow them to remain at home. AoA is addressing these challenges through
its efforts to create a more balanced system of long-term care and to
focus on care in the community. The infrastructure of AoA\'s aging
services network--one of the largest providers of home and
community-based long-term care services--provides an important
foundation for these efforts.

AoA programs provide services to elders at home and in the community
through a nationwide network of State, Tribal, and area agencies on
aging and through over 29,000 local service providers. These services
complement existing medical and health care systems and support some of
life\'s most basic functions: nutrition, transportation, respite and
counseling for caregivers, and personal care to those who need
assistance with activities of daily living such as bathing and eating.

**OPEN TEXT BOX**

State Flexibility in Using Nutrition Funding

As authorized by the Older Americans Act, States may transfer up to 30
percent of funding between Home-Delivered and/or Congregate Nutrition
Services and Home and Community-Based Supportive Services. States may
also transfer 40 percent of funding between Home-Delivered and
Congregate Nutrition Services. This option allows greater flexibility
for individual States to better meet the needs of their seniors.

**CLOSE TEXT BOX**

Nutrition Programs

Nutrition programs--including Congregate and Home-delivered Meals and
the Nutrition Services Incentive Program--total \$719 million, over half
of AoA\'s funding. Nutrition services help over two million older adults
have access to the nutritious food they need to stay healthy and
decrease their risk of disability. Meals served in a congregate setting
also provide opportunities for social engagement and meaningful
volunteer roles, which contribute to overall health and well-being.
Finally, while meals are the core service, these programs also provide
related services such as nutrition screening, assessment, education, and
counseling.

Funding for nutrition programs is significantly leveraged: 61 and 67
percent of funding for Congregate and Home-Delivered meals,
respectively, comes from sources other than the Older Americans Act.
Priority for the receipt of meals is given to those who are in greatest
economic or social need, with particular attention to older low-income
and minority adults as well as individuals residing in rural
communities.

Home and Community-Based Supportive Services

The FY 2006 request for Home and Community-Based Services is \$354
million. This grant program to States and Territories supports the
implementation of comprehensive and coordinated service systems for
older individuals and their families. The array of services provided by
these grants helps to keep seniors as independent as possible and
enables them to stay in their homes and communities as long as possible,
delaying the need for costly institutional care.

Services provided include transportation assistance; information and
referral services; chore, homemaker and personal care services; and
adult day care. These services are offered through multi-purpose senior
centers which function as community focal points to coordinate and
integrate services for the elderly, or through other community-based
settings. In the last fiscal year for which data is available, AoA
provided nearly 36 million rides to help seniors visit doctors,
pharmacies, grocery stores, meal sites, and senior centers. Information
and referral services helped empower individuals and families to make
informed choices about their service and care needs. Personal care and
homemaker services enabled elders to live with dignity at home through
assistance with activities of daily living.

National Family Caregiver Support Program

The National Family Caregiver Support Program is another critical
element in rebalancing the system of long-term care towards
community-based programs and away from institutional care. Family
caregivers have always been the main source of long-term care services
provided in the United States. AoA is committed to assisting these
caregivers by providing grants to States and Territories for developing
multifaceted systems of support for family caregivers of disabled
elders, as well as for grandparents caring for disabled grandchildren.
The FY 2006 budget includes \$162 million for the National Family
Caregiver Support Program; this includes \$6 million to support Native
American caregivers. Support services for caregivers include
information, training, counseling, respite, and assistance services.
Research indicates that informal caregiving supports can have a
significant impact on the health and well-being of caregivers, delay the
need for institutionalization of the care recipient, and significantly
reduce costs to Medicare, Medicaid and private payers.

**OPEN TEXT BOX**

Caregivers' Economic Value

The number of unpaid informal caregivers (spouses, adult children,
relatives, and friends) or elderly individuals is estimated to be 23
million or more. A study in the journal of *Health Affairs* estimated
that this informal care, if provided by home care aides, would cost
\$257 billion annually.

**CLOSE TEXT BOX**

Program Innovations

AoA continues to identify more cost-effective and efficient ways of
delivering services and to implement positive change in systems of care.
The FY 2006 request of \$24 million for Program Innovations supports
projects for local service programs to improve access, better integrate
services, and increase emphasis on prevention. Projects funded by the
program include:

-   Aging and Disability Resource Centers -- 24 of which have been
    funded to date -- that serve as highly visible and accessible
    resources for elders and their families to gain access to
    information on the full range of public and private long-term care
    options;

-   Integrated Care Management projects that improve the quality of care
    for seniors by identifying and supporting innovations that involve
    partnerships with managed care organizations or capitated financing
    arrangements;

-   Evidence-Based Disease Prevention grants that translate research
    results into community-level prevention programs;

-   Partnerships to help States rebalance their long-term care systems,
    integrate services at the community level, and promote healthy and
    active aging;

-   Outreach to seniors -- particularly the disadvantaged -- on the
    Medicare Modernization Act and the introduction of new prescription
    drug and preventive health benefits.

These and other projects are critical for ensuring the continued
effectiveness of AoA\'s core service delivery programs, by finding ever
more efficient and relevant methods for meeting the needs of America\'s
elderly population. The budget does not continue one-time FY 2005
projects.

Protection, Prevention, and Aging Network Support

The FY 2006 request includes \$54 million for health promotion and
disease prevention programs, including health screenings, physical
fitness, and medication management. These programs promote healthy
lifestyles and help delay or prevent the onset of chronic disease; and
also protect vulnerable elders from abuse and exploitation through
training, outreach, and technical assistance to State and community
elder advocacy programs.

Native American Nutrition and Supportive Services

The budget requests \$26 million for grants for Native Americans. These
grants will enable 243 tribal organizations serving approximately 300
Tribes to continue to provide American Indians, Alaskan Natives, and
Native Hawaiians who are over the age of 60 with nutritional and
supportive services which help them remain healthy and independent.

Alzheimer\'s Disease Demonstration Grants

The FY 2006 budget also includes \$12 million for the Alzheimer\'s
Disease Demonstration Grant program. These grants improve the quality of
services provided to those suffering from Alzheimer\'s Disease by
assisting States to incorporate new research findings, innovative
approaches to care, and cultural competencies into their state-wide
systems of home and community-based services.

Program Administration

A total of \$18 million is requested to maintain staffing levels, and
for related program management and support activities necessary to
effectively administer a wide array of AoA programs. This request also
supports efforts to strengthen management through greater efficiencies
and economies of scale in information technology, financial systems, and
personnel operations.

White House Conference on Aging

The White House Conference on Aging is scheduled for October 23-26,
2005, in Washington, D.C. The last White House Conference occurred in
1995. The purpose of the Conference is to develop recommendations for
the President and Congress on policy and research issues in the field of
aging.

Departmental Management OVerview Table

  ------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------
                                                                                                                                                                                                 **2006**

                                                                                                                      **[2004]{.underline}**   **[2005]{.underline}**   **[2006]{.underline}**   **[+/-
                                                                                                                                                                                                 2005]{.underline}**

  General Departmental Management:                                                                                                                                                               

  Adolescent Family Life\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                  \$31                     \$31                     \$31                     \$0

  Office of Minority Health\...\...\...\...\...\...\...\...\...\...\...\...\.....                                     55                       50                       47                       -3

  Office on Women\'s Health\...\...\...\...\...\...\...\...\...\...\...\...\...                                       29                       29                       29                       0

  Minority HIV/AIDS \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                50                       52                       52                       0

  IT Security and Innovation Fund\...\...\...\...\...\...\...\...\....                                                15                       15                       15                       0

  Afghanistan\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                    5                        6                        6                        0

  Embryo Adoption Awareness Campaign\...\...\...\.....                                                                1                        1                        1                        0

  Other General Departmental Management \...\...\...\...                                                              174                      190                      178                      -12

  Evaluation Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                              41                       40                       40                       0

  Health Care Fraud and Abuse Control \...\...\...\...\...\...                                                        [5]{.underline}          [5]{.underline}          [5]{.underline}          [0]{.underline}

  **Total, GDM Program Level\...\...\...\...\...\...\...\...\...\...\...**                                            **\$406**                **\$419**                **\$404**                **-\$15**

  Health Information Technology Initiative:                                                                                                                                                      

  Health IT \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                \$0                      \$0                      \$75                     +\$75

  Evaluation Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                              [1]{.underline}          [3]{.underline}          [3]{.underline}          [0]{.underline}

  **Total, Health IT Program Level\...\...\...\...\...\...\...\.....**                                                **\$1**                  **\$3**                  **\$78**                 **+\$75**

  Medicare Hearings and Appeals:                                                                                                                                                                 

  Medicare Hearings and Appeals\...\...\...\...\...\...\...\...\.....                                                 \$47                     \$58                     \$80                     +\$22

  **Total, MH&A Program Level\...\...\...\...\...\...\...\...\.....**                                                 **\$47**                 **\$58**                 **\$80**                 **+\$22**

  Public Health and Social Services Emergency Fund:                                                                                                                                              

  PHSSEF\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                [\$2,164]{.underline}    [\$2,339]{.underline}    [\$2,428]{.underline}    [+\$89]{.underline}

  **Total, PHSSEF Program Level\...\...\...\...\...\...\...\...\...**                                                 **\$2,164**              **\$2,339**              **\$2,428**              **+\$89**

  **Total, DM Program Level\...\...\...\...\...\...\...\...\...\...\...\...**                                         **\$2,618**              **\$2,819**              **\$2,990**              **+\$171**

  Less funds from other sources:                                                                                                                                                                 

  Evaluation Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                              \$42                     \$43                     \$43                     \$0

  Health Care Fraud and Abuse Control \...\...\...\...\...\...                                                        5                        5                        5                        0

  **Total, DM Budget Authority\...\...\...\...\...\...\...\...\...\....**                                             **\$2,571**              **\$2,771**              **\$2,942**              **+\$171**

                                                                                                                                                                                                 

  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   1,570                    1,873                    2,053                    +180
  ------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ---------------------

departmental management

The office of Department Management supports the Secretary in his role
as chief policy officer and general manager of the Department.

Departmental Management (DM) includes funding for four appropriation
accounts in the Office of the Secretary: General Departmental Management
(GDM); Health Information Technology; Medicare Hearings and Appeals; and
Public Health and Social Services Emergency Fund (PHSSEF).

The FY 2006 budget request for GDM provides a total program level of
\$404 million, including appropriations of \$359 million, interagency
transfers of \$40 million in evaluation funds (including \$18 million in
evaluation funds from the former Policy Research account), and \$5
million in health care fraud and abuse funds.

The FY 2006 DM request also reflects funding for two new appropriation
accounts: Health Information Technology, including appropriations of
\$75 million and interagency transfers of \$3 million in evaluation
funds; and funding of \$80 million for Medicare Hearings and Appeals.

The FY 2006 DM budget request also includes a total of \$2.4 billion for
the PHSSEF account.

Health Information Technology

The FY 2006 budget request includes a total of \$78 million for Health
Information Technology (IT). The Office of the National Coordinator for
Health Information Technology (ONCHIT) was created in April 2004 by
Presidential Executive Order, to address strategic planning,
coordination, and analysis related to key technical, economic and other
issues surrounding the public and private adoption of Health IT. This
request will support ONCHIT's efforts to coordinate Federal efforts
across many initiatives and activities, including:

-   Implementing electronic prescribing as an option for program
    providers, as mandated by the Medicare Prescription Drug,
    Improvement and Modernization Act of 2003;

-   Developing interoperability standards and prototypes for the secure
    exchange of Electronic Health Records (EHR) and other health data;

-   Working with regional collaborations to assist health care providers
    in the deployment of interoperable applications;

-   Identifying standards and mechanisms for the broad adoption of EHR,
    including the evaluation of physician incentives and other
    strategies; and

-   Realizing the overarching economic and health benefits of Health IT,
    while reducing the risks associated with EHR adoption.

The FY 2006 budget request will enable ONCHIT to provide strategic
direction for a national interoperable health care system, and to
encourage clinicians to connect and collaborate within a national Health
IT network. The Administration also plans to propose expansion of the
Department's Health IT investment in FY 2005. The National Coordinator
will work with the Agency for Healthcare Research and Quality (AHRQ) and
the National Library of Medicine to develop regional collaborations for
the deployment of interoperable applications, and to accelerate the
development of standards and prototypes.

In addition to funds requested within Departmental Management for Health
IT, the FY 2006 request for AHRQ includes \$50 million to advance the
use of Health IT to enhance patient safety.

Medicare Hearings and Appeals

The FY 2006 budget request includes \$80 million in Medicare Trust Funds
to support a new Office of Medicare Hearings and Appeals (OMHA), as
mandated by the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MMA). MMA transferred responsibility for
hearing Medicare appeals at the Administrative Law Judge (ALJ) level --
the third level of Medicare claims appeals -- from the Social Security
Administration to the Office of the Secretary at HHS by no later than
October 1, 2005. The Medicare Benefits Improvement and Protection Act of
2000 (BIPA) also mandated that ALJ appeals be heard within 90 days after
receipt of a request from a Medicare appellant for such a hearing. To be
able to meet this timeframe, OMHA plans to invest heavily in technology
and to utilize video-teleconferencing (rather than face-to-face
hearings) for the majority of cases.

General Departmental Management

The GDM account supports those activities associated with the
Secretary's roles in administering and overseeing the organization,
programs, and activities of the Department. These activities are carried
out through 15 Staff Divisions (STAFFDIVs). The GDM budget request for
FY 2006 totals \$404 million, a decrease of \$15 million or 4 percent
below the comparable FY 2005 level. The GDM request provides funding for
the following activities:

**Office of Population Affairs (OPA)/Adolescent Family Life:** The
Adolescent and Family Life (AFL) request of \$31 million will continue
to provide support for the AFL demonstration and research program
authorized under Title XX of the Public Health Service (PHS) Act.
Through the grants awarded under this program, AFL provides funding in
three areas: care demonstration projects, prevention projects, and
research projects. This request includes \$13 million in abstinence-only
prevention projects, as defined by the Welfare Reform legislation (P.L.
104-193). Further, OPA also administers the Family Planning program
under Title X of the PHS Act, which is funded through the Health
Resources and Services Administration (HRSA).

**Office of Minority Health:** The Office of Minority Health request of
\$47 million, a \$3 million decrease from FY 2005, will provide funding
to continue disease prevention, health promotion, service demonstration,
and educational efforts that focus on health concerns that cause the
high rate of death in racial and ethnic minority communities. The
reduction is attributed to FY 2005 Congressional earmarks which are not
continued in FY 2006.

**Office on Women's Health:** The Office on Women's Health request of
\$29 million, the same as FY 2005, will provide funding to continue the
advancement of women's health programs through the promotion and
coordination of research, service delivery, and education -- both
throughout HHS agencies and offices, with other government
organizations, and with consumer and health professional groups.

**Minority HIV/AIDS:** The FY 2006 request includes \$52 million, the
same level as FY 2005, to support innovative approaches to HIV/AIDS
prevention and treatment in minority communities heavily impacted by
this disease. These funds allow the Department to continue priority
investments and public health strategies targeted to reduce the
disparities and burden of HIV/AIDS in racial and ethnic minority
populations.

**Information Technology Security and Innovation Fund:** The FY 2006
budget request includes \$15 million to continue funding for the IT
Security and Innovation Fund. Projects funded through the IT Security
and Innovation Fund focus on HHS enterprise-wide investments, notably:
enterprise architecture, key E-Government projects, HHS common IT
infrastructure services, and security and infrastructure to enable HHS
common administrative systems.

**Afghanistan:** Included in the FY 2006 request for the Office of
Global Health Affairs is \$6 million to continue support of HHS health
care initiatives in Afghanistan, particularly in the areas of maternal
and child health.

**Embryo Adoption Awareness Campaign:** Included in the President's
Budget request for the first time is \$1 million to continue the Embryo
Adoption pubic awareness campaign grant award program. The purpose of
the campaign is to educate Americans about the existence of frozen
embryos (resulting from in-vitro fertilization) which are available for
adoption.

**Other General Departmental Management:** The FY 2006 budget request
includes \$178 million to fund offices which provide leadership, policy,
legal, and administrative guidance to HHS components.

One of the offices included in Other GDM is the Office on Disability
(OD). Established in 2002 in support of President Bush's New Freedom
Initiative, OD has been charged to: lead the HHS New Freedom Initiative;
oversee, coordinate, develop and implement disability programs and
initiatives within HHS that affect persons with disabilities; ensure
that persons of every age with disabilities have a voice within HHS; and
heighten the interaction of programs within HHS and with Federal, State,
community and private sector partners.

Public Health and Social Services Emergency Fund and Bioterrorism

The FY 2006 request funds HHS bioterrorism and other emergency
preparedness activities in two ways. The Public Health and Social
Services Emergency Fund (PHSSEF) provides \$2.4 billion for pandemic
influenza preparedness and bioterrorism efforts in the Centers for
Disease Control and Prevention, the Health Resources and Services
Administration, the Office of the Secretary, and targeted countermeasure
research at the National Institutes of Health. Direct appropriations are
also provided to NIH and the Food and Drug Administration for their
bioterrorism efforts.

**Bioterrorism:** The HHS FY 2006 request includes \$4.2 billion for
bioterrorism, a net increase of \$154 million above FY 2005. Of the
total, \$2.3 billion is funded through the PHSSEF, and \$1.9 billion
through NIH and FDA accounts. The FY 2006 budget supports thr new
Federal Mass Casualty Initiative, a model emergency response
demonstration, a new chemical countermeasures research initiative, and
expanded procurement funding for the Strategic National Stockpile (SNS).

Mass Casualty Initiative

The FY 2006 President\'s Budget includes \$70 million within HHS for a
new Federal Mass Casualty Initiative. Since FY 2002, HRSA has funded
work to expand state and local hospital capacity to treat mass
casualties. This new initiative reflects the concern that local medical
systems will need added assistance in the case of an attack involving
the use of weapons of mass destruction. The FY 2006 request includes a
three-pronged effort. First, the request for the SNS includes \$50
million in new funding for the purchase, maintenance, and operation of
portable hospital units that can be deployed to increase hospital surge
capacity in the event of a bioterrorist attack. Second, the Medical
Reserve Corps (MRC) budget includes an increase of \$12.5 million for a
total of \$22 million. The MRC is the Citizen Corps component that
organizes local volunteers to assist regular medical response
professionals and facilities during a large-scale local emergency.
Finally, \$7.5 million will finance the development and updating of
systems designed to rapidly access credentialing information on
healthcare providers in an emergency. These systems will be able to
obtain data from federal, state, and non-government sources, including
the State-based Emergency System for Advance Registration of Volunteer
Healthcare Personnel.

Strategic National Stockpile

The FY 2006 President\'s Budget includes \$600 million for the Strategic
National Stockpile (SNS), an increase of \$203 million above FY 2005.
This increase includes \$50 million for the purchase of portable mass
casualty treatment units. In addition to housing these new units, the
SNS finances the procurement of commercially available countermeasures,
such as anthrax antibiotics to cover 60 million people, and the
replacement of pharmaceuticals and supplies that have lost potency. This
appropriation also includes funding for specialized facilities needed to
store SNS and BioShield procured countermeasures, including enough
smallpox vaccine for every American. Finally, funds are necessary to
maintain the capacity to move SNS assets anywhere in the U.S. within 12
hours and to provide technical assistance to State and local governments
participating in the Cities Readiness Initiative; this initiative seeks
to upgrade their ability to provide anthrax antibiotics to all residents
within 48 hours of an anthrax event.

National Institutes of Health

The FY 2006 request for the National Institutes of Health (NIH)
biodefense activities totals \$1.8 billion, a net increase of \$56
million, or 3.2 percent, above FY 2005. Within this amount, research and
development funding will increase \$175 million, partially offset by a
\$119 million reduction in extramural laboratory construction funding.
Of the NIH total, \$97 million is budgeted in the PHSSEF to develop
countermeasures against chemical, nuclear, and radiological threats. NIH
will use \$47 million to continue work initiated in FY 2005 on nuclear
and radiological countermeasures. In FY 2006, the President\'s Budget
includes an additional \$50 million to complement this work with a new
targeted research effort to expand the current range of chemical
countermeasures. Of the funds directly appropriated to NIH, \$1.7
billion will fund basic research addressing both naturally occurring
threats and the risk of biotechnology advances leading to engineered or
modified organisms that could evade current medical countermeasures or
enhance their virulence. These research efforts will focus on the
biology of microbial agents with bioterrorism potential, the properties
of the host\'s response, and applied research and advanced development
of new or improved diagnostics, vaccines, and therapies. A complementary
investment of \$30 million is requested to expand extramural laboratory
capacity to conduct biodefense research. This additional funding raises
the five-year NIH investment total to \$1 billion for the construction
of intramural and extramural biodefense facilities.

Food Defense

The budget for FDA includes \$244 million for bioterrorism activities.
This total includes \$180 million for food defense, an increase of \$30
million above FY 2005. This request includes \$20 million to increase
analytic surge testing capacity for biological, chemical, and
radiological threat agents for the Food Emergency Response Network
(FERN), \$6 million for research, and \$1 million to continue
development of an Emergency Response and Operations Network. Finally,
FDA will use \$3 million, for a total of \$5 million, to coordinate food
surveillance activities within the Biosurveillance Initiative.

HRSA Curriculum Development and Education

The request maintains the FY 2005 level of \$28 million. The
Bioterrorism Training and Curriculum Development program is designed to
provide bioterrorism-related continuing education and training
opportunities for practicing health care providers and support for new
emergency preparedness curricula in health professions schools.

State and Local Preparedness

CDC and HRSA continue to demonstrate a strong commitment to preparing
States and local public health departments and hospitals to prepare
against public health emergencies and acts of bioterrorism. A total of
\$6.7 billion will have been invested between FY 2002 and FY 2006. The
FY 2006 request includes \$1.3 billion for this work, including \$25
million for one or more competitive grants for a model emergency
response demonstration. This net reduction of \$138 million reflects the
targeting of resources to direct Federal efforts, including portable
mass casualty treatment capacity that can assist any State and expanded
countermeasure readiness. HHS will also re-evaluate State and local
preparedness funding formulas in an attempt to assure that allocations
reflect risk and performance.

Upgrading CDC Capacity and Anthrax Research

The FY 2006 request includes \$140 million for upgrading CDC capacity.
With these funds, CDC will continue to improve epidemiological expertise
in the identification and control of diseases caused by terrorism,
including better electronic communication, distance learning programs,
and cooperative training between public health agencies and local
hospitals. This request provides support for upgrading capacity at CDC,
national planning efforts, oversight of inter-laboratory transfers of
dangerous pathogens and toxins, and laboratory safety inspections. No
funding is earmarked for research on older anthrax vaccines, as the
project is nearing completion; funds were redirected into the Strategic
National Stockpile.

Office of the Secretary

The FY 2006 request for the PHSSEF bioterrorism activities includes \$81
million for the Office of the Secretary. This amount includes an
increase of \$20 million over FY 2005 to fund the new Mass Casualty
Initiative discussed above, as well as:

The President\'s Budget includes \$41 million to support the Office for
Public Health and Emergency Preparedness' (OPHEP) ongoing operations,
including the Secretary\'s Emergency Response Team, and the
International Early Warning Surveillance efforts. This appropriation
also allows OPHEP to target advanced research projects and support the
development of an effective risk communication and information strategy
for the public. OPHEP also manages HHS\'s role in Project BioShield
countermeasure needs analysis and is responsible for procuring these
DHS-funded countermeasures for the SNS.

Cybersecurity funding is maintained at \$10 million in FY 2006 for
cybersecurity. These funds continue to protect the Department\'s
information technology infrastructure from cyber-terrorist attacks.
These funds will provide continuous security monitoring for all HHS
systems, assets, and services.

Emergency Preparedness

**Pandemic Influenza:** The budget includes \$120 million, an increase
of \$21 million, to ensure the Nation has the vaccine production
capacity to respond to an influenza pandemic. It is normal for influenza
strains to change slightly from year to year. When major changes occur
to the influenza strain genetic structure, widespread disease and death
can result. Three such global events - called pandemics - occurred in
the 20th century. Such a pandemic could cause an additional 90,000 to
300,000+ deaths in the U.S., especially if adequate vaccines were not
available quickly. Once a pandemic began, time would be critical in
accomplishing necessary research, development, and delivery of vaccines
required to mitigate the pandemic.

The Department issued a draft Pandemic Influenza Response and
Preparedness Plan in August, 2004. This plan lays out action steps in
several areas. This appropriation is focused on expanding the year-round
domestic vaccine surge production capacity that would be needed in a
pandemic. It will finance contracts with vaccine manufacturers to
develop and license influenza vaccines using new production techniques
and establishing a domestic manufacturing capability. Second, HHS will
continue to ensure a year-round supply of specialized eggs needed for
domestic production of currently licensed vaccines. Moreover,
manufacturers will be encouraged to license and implement new processing
and other technologies to improve vaccine yields from both new cell
culture vaccines and existing egg-based vaccines. In addition, HHS will
sponsor development and licensing of antigen-sparing strategies that
would increase the number of individuals who could be vaccinated from a
given amount of bulk vaccine product. Finally, the budget maintains the
flexibility to redirect these funds to initiate pandemic vaccine
production at any time a pandemic appears imminent.

**Bioterrorism Overview Table**

+----------------------------------------------+-----+-----+-----+-----+
| \`                                           | *   | *   | *   | **  |
|                                              | *[2 | *[2 | *[2 | 200 |
|                                              | 004 | 005 | 006 | 6** |
|                                              | ]{. | ]{. | ]{. |     |
|                                              | und | und | und | *   |
|                                              | erl | erl | erl | *[+ |
|                                              | ine | ine | ine | /-2 |
|                                              | }** | }** | }** | 005 |
|                                              |     |     |     | ]{. |
|                                              |     |     |     | und |
|                                              |     |     |     | erl |
|                                              |     |     |     | ine |
|                                              |     |     |     | }** |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| **Bioterrorism, Public Health and Social     |     |     |     |     |
| Services Emergency Fund**                    |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Centers for Disease Control and Prevention:  |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Upgrading State and Local                    | \$  | \$  | \$  | -\$ |
| Capacity\...\...\...\...\...\...\...\...\... | 918 | 927 | 797 | 130 |
| \...\...\...\...\...\...\...\...\...\...\... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Biosurveillance                              | 22  | 79  | 79  | 0   |
| Initiative\...\...\...\...\                  |     |     |     |     |
| ...\...\...\...\...\...\...\...\...\...\...\ |     |     |     |     |
| ...\...\...\...\...\...\...\...\...\...\.... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Upgrading CDC Capacity/Anthrax               | 169 | 157 | 140 | -\  |
| Research\...\...\...\...\...                 |     |     |     | $17 |
| \...\...\...\...\...\...\...\...\...\...\... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Strategic National                           | 398 | 397 | 600 | \$  |
| Stockpile\...\...\                           |     |     |     | 203 |
| ...\...\...\...\...\...\...\...\...\...\...\ |     |     |     |     |
| ...\...\...\...\...\...\...\...\...\...\.... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| *Federal Mass Casualty Initiative            | *[  | *[  | *[5 | *   |
| (non-add)\...\...\...\                       | 0]{ | 0]{ | 0]{ | [+5 |
| ...\...\...\...\...\...\...\...\...\...\...* | .un | .un | .un | 0]{ |
|                                              | der | der | der | .un |
|                                              | lin | lin | lin | der |
|                                              | e}* | e}* | e}* | lin |
|                                              |     |     |     | e}* |
+----------------------------------------------+-----+-----+-----+-----+
| **Subtotal, CDC                              | **  | **  | **  | **+ |
| \...\...\...\...\...\.                       | \$1 | \$1 | \$1 | \$5 |
| ..\...\...\...\...\...\...\...\...\...\...\. | ,50 | ,56 | ,61 | 6** |
| ..\...\...\...\...\...\...\...\...\...\...** | 7** | 0** | 6** |     |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Health Resources and Services                |     |     |     |     |
| Administration:                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Hospital Preparedness and                    | \$  | \$  | \$  | -   |
| Infrastructure\...\...\...\...\...\...\...   | 515 | 491 | 483 | \$8 |
| \...\...\...\...\...\...\...\...\...\...\... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| *Emergency Response Demonstration            | *0* | *0* | *   | *+  |
| (non-add)\...\                               |     |     | 25* | 25* |
| ...\...\...\...\...\...\...\...\...\...\...* |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Education Incentives for Medical             | [   | [   | [   | [0] |
| Curriculum\...\...\...\...\...               | 28] | 28] | 28] | {.u |
| \...\...\...\...\...\...\...\...\...\...\... | {.u | {.u | {.u | nde |
|                                              | nde | nde | nde | rli |
|                                              | rli | rli | rli | ne} |
|                                              | ne} | ne} | ne} |     |
+----------------------------------------------+-----+-----+-----+-----+
| **Subtotal,                                  | **\ | **\ | **\ | **  |
| HRSA\...\...\...\...\..                      | $54 | $51 | $51 | -\$ |
| .\...\...\...\...\...\...\...\...\...\...\.. | 3** | 9** | 1** | 8** |
| .\...\...\...\...\...\...\...\...\...\....** |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Office of the Secretary:                     |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Office of Public Health and Emergency        | \   | \   | \   | 0   |
| Preparedness\.                               | $41 | $41 | $41 |     |
| ..\...\...\...\...\...\...\...\...\...\..... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Cyber                                        | 10  | 10  | 10  | 0   |
| Security\...\...\...\...\...\...\...\...\... |     |     |     |     |
| \...\...\...\...\...\...\...\...\...\...\... |     |     |     |     |
| \...\...\...\...\...\...\...\...\...\...\... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Medical Reserve                              | 10  | 10  | 22  | +12 |
| Corps\...\...\...\...\                       |     |     |     |     |
| ...\...\...\...\...\...\...\...\...\...\...\ |     |     |     |     |
| ...\...\...\...\...\...\...\...\...\...\.... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Healthcare Provider                          | [0] | [0] | [8] | [   |
| Credential                                   | {.u | {.u | {.u | +8] |
| ing\...\...\...\...\...\...\...\...\...\...\ | nde | nde | nde | {.u |
| ...\...\...\...\...\...\...\...\...\...\.... | rli | rli | rli | nde |
|                                              | ne} | ne} | ne} | rli |
|                                              |     |     |     | ne} |
+----------------------------------------------+-----+-----+-----+-----+
| **Subtotal, Office of the                    | **  | **  | **  | **+ |
| Secretary\...\...\...\...\...\...\..         | \$6 | \$6 | \$8 | \$2 |
| .\...\...\...\...\...\...\...\...\...\....** | 1** | 1** | 1** | 0** |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| National Institutes of Health:               |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Nuclear/Radiological Countermeasures         | \$0 | \   | \   | -   |
| (NIH)\...\...\...\...\                       |     | $47 | $47 | \$0 |
| ...\...\...\...\...\...\...\...\...\...\.... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Chemical Countermeasures                     | [0] | [0] | [   | [+  |
| (                                            | {.u | {.u | 50] | 50] |
| NIH)\...\...\...\...\...\...\...\...\...\... | nde | nde | {.u | {.u |
| \...\...\...\...\...\...\...\...\...\...\... | rli | rli | nde | nde |
|                                              | ne} | ne} | rli | rli |
|                                              |     |     | ne} | ne} |
+----------------------------------------------+-----+-----+-----+-----+
| **Subtotal, NIH                              | **[ | *   | *   | **  |
| PHSSEF\..                                    | \$0 | *[\ | *[\ | [+\ |
| .\...\...\...\...\...\...\...\...\...\...\.. | ]{. | $47 | $97 | $50 |
| .\...\...\...\...\...\...\...\...\...\....** | und | ]{. | ]{. | ]{. |
|                                              | erl | und | und | und |
|                                              | ine | erl | erl | erl |
|                                              | }** | ine | ine | ine |
|                                              |     | }** | }** | }** |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| **Subtotal, PHSSEF                           | **  | **  | **  | *   |
| Bioterrorism\...\...\...\...\...\...\.       | \$2 | \$2 | \$2 | *+\ |
| ..\...\...\...\...\...\...\...\...\...\...** | ,11 | ,18 | ,30 | $11 |
|                                              | 1** | 7** | 5** | 8** |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| **Bioterrorism, Agency Budgets**             |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| National Institutes of Health:               |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Research\.                                   | \   | \   | \   | +\$ |
| ..\...\...\...\...\...\...\...\...\...\...\. | $1, | $1, | $1, | 125 |
| ..\...\...\...\...\...\...\...\...\...\...\. | 629 | 539 | 664 |     |
| ..\...\...\...\...\...\...\...\...\...\..... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| *Subtotal, Research including PHSSEF         | *   | *   | *   | *+1 |
| funding\.                                    | 1,6 | 1,5 | 1,7 | 75* |
| ..\...\...\...\...\...\...\...\...\...\....* | 29* | 86* | 61* |     |
+----------------------------------------------+-----+-----+-----+-----+
| Extramural Laboratory                        | [0] | [1  | [   | [-1 |
| Const                                        | {.u | 49] | 30] | 19] |
| ruction\...\...\...\...\...\...\...\...\...\ | nde | {.u | {.u | {.u |
| ...\...\...\...\...\...\...\...\...\...\.... | rli | nde | nde | nde |
|                                              | ne} | rli | rli | rli |
|                                              |     | ne} | ne} | ne} |
+----------------------------------------------+-----+-----+-----+-----+
| Subtotal, Appropriated to NIH                | \   | \   | \   | +   |
| Accounts\...\...\...\...\...\.               | $1, | $1, | $1, | \$6 |
| ..\...\...\...\...\...\...\...\...\...\..... | 629 | 688 | 694 |     |
+----------------------------------------------+-----+-----+-----+-----+
| ***Subtotal, NIH including PHSSEF            | **  | **  | **  | *   |
| funding\...                                  | *1, | *1, | *1, | *+5 |
| \...\...\...\...\...\...\...\...\...\....*** | 629 | 735 | 791 | 6** |
|                                              | *** | *** | *** |     |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Food and Drug Administration:                |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Food                                         | \$  | \$  | \$  | +\  |
| Sa                                           | 116 | 150 | 180 | $30 |
| fety\...\...\...\...\...\...\...\...\...\... |     |     |     |     |
| \...\...\...\...\...\...\...\...\...\...\... |     |     |     |     |
| \...\...\...\...\...\...\...\...\...\...\... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Vaccines/Drugs/Diagnostics\...\...\          | 53  | 57  | 57  | 0   |
| ...\...\...\...\...\...\...\...\...\...\...\ |     |     |     |     |
| ...\...\...\...\...\...\...\...\...\...\.... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Physical                                     | [7] | [7] | [7] | [0] |
| Security\...\...\...\...\...\...\...\...     | {.u | {.u | {.u | {.u |
| \...\...\...\...\...\...\...\...\...\...\... | nde | nde | nde | nde |
| \...\...\...\...\...\...\...\...\...\...\... | rli | rli | rli | rli |
|                                              | ne} | ne} | ne} | ne} |
+----------------------------------------------+-----+-----+-----+-----+
| **Subtotal, Appropriated to FDA              | **  | **  | **  | **  |
| Accounts\...\...\.                           | [\$ | [\$ | [\$ | [+\ |
| ..\...\...\...\...\...\...\...\...\...\...** | 176 | 214 | 244 | $30 |
|                                              | ]{. | ]{. | ]{. | ]{. |
|                                              | und | und | und | und |
|                                              | erl | erl | erl | erl |
|                                              | ine | ine | ine | ine |
|                                              | }** | }** | }** | }** |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| **Total Bioterrorism                         | **  | **  | **  | **\ |
| Funding\...\...\...\..                       | \$3 | \$4 | \$4 | $15 |
| .\...\...\...\...\...\...\...\...\...\...\.. | ,91 | ,08 | ,24 | 4** |
| .\...\...\...\...\...\...\...\...\...\....** | 6** | 9** | 3** |     |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| **Public Health and Social Services          |     |     |     |     |
| Emergency Fund, Non-Bioterrorism**           |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Pandemic                                     | \   | \   | \$  | +\  |
| Influenza\...\...\...\...\...\...\.          | $50 | $99 | 120 | $21 |
| ..\...\...\...\...\...\...\...\...\...\...\. |     |     |     |     |
| ..\...\...\...\...\...\...\...\...\...\..... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Transformation of the Commissioned           | 3   | 3   | 3   | 0   |
| Corps\...\...\...\...\...\                   |     |     |     |     |
| ...\...\...\...\...\...\...\...\...\...\.... |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| Hurricane Relief                             | [0] | [   | [0] | [-  |
| Efforts\...\...\...\...\.                    | {.u | 50] | {.u | 50] |
| ..\...\...\...\...\...\...\...\...\...\...\. | nde | {.u | nde | {.u |
| ..\...\...\...\...\...\...\...\...\...\..... | rli | nde | rli | nde |
|                                              | ne} | rli | ne} | rli |
|                                              |     | ne} |     | ne} |
+----------------------------------------------+-----+-----+-----+-----+
| **Subtotal,                                  | **  | **\ | **\ | **- |
| Non-Bioterr                                  | \$5 | $15 | $12 | \$2 |
| orism\...\...\...\...\...\...\...\...\...\.. | 3** | 2** | 3** | 9** |
| .\...\...\...\...\...\...\...\...\...\....** |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
|                                              |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+
| **Total,                                     | **  | **  | **  | **+ |
| PHSS                                         | \$2 | \$2 | \$2 | \$8 |
| EF\...\...\...\...\...\...\...\...\...\...\. | ,16 | ,33 | ,42 | 9** |
| ..\...\...\...\...\...\...\...\...\...\...\. | 4** | 9** | 8** |     |
| ..\...\...\...\...\...\...\...\...\...\...** |     |     |     |     |
+----------------------------------------------+-----+-----+-----+-----+

office for civil rights

**Overview Table**

This numerical table shows the Program Level dollars in millions and FTE
information for the years 2004 -- 2006 with a column to show the
increase or decrease if applicable:

The Program Level in 2004 was \$34 million, in 2005 \$35 million, in
2006 \$35 million. There is no increase or decrease to demonstrate.

The FTEs follow: in 2004 there were 244; in 2005 there were 268, in 2006
there are 268 which shows no increase or decrease.

**End Table**

The Department of Health and Human Services (HHS), through the Office
for Civil Rights (OCR) promotes and ensures that people have equal
access to and opportunity to participate in and receive services in all
HHS programs without facing unlawful discrimination, and that the
privacy of their health information is protected while ensuring access
to care. Through prevention and elimination of unlawful discrimination
and by protecting the privacy of individually identifiable health
information, OCR helps HHS carry out its overall mission of improving
the health and well-being of all people affected by its many programs.

The FY 2006 budget request for OCR is \$35 million, the same as the FY
2005 level. The budget supports the activities of OCR as the primary
defender of the public\'s right to nondiscriminatory access to and
receipt of Federally funded health and human services - from hospitals
and nursing homes to Head Start and senior centers. In addition, it
supports the significantly expanded compliance responsibilities of OCR
that protect the rights of individuals with respect to their health
information as provided in the Privacy Rule, issued pursuant to the
Health Insurance Portability and Accountability Act (HIPAA).

OCR assesses compliance with nondiscrimination and Privacy Rule
requirements through complaint resolution, pre-grant and preventative
compliance reviews; monitoring corrective action plans; and carrying out
public education, voluntary compliance, training, and technical
assistance activities. The work of OCR protects individual rights and
simultaneously supports HHS goals for strengthening the health and
well-being of individuals, families, and communities by improving access
to HHS programs and activities.

Some key priorities for OCR in FY 2005-FY 2006 are: increasing access by
vulnerable populations to quality health care; promoting
non-discrimination in adoption and foster care and Temporary Assistance
for Needy Families (TANF); enhancing provision of appropriate services
in the most integrated setting for individuals with disabilities; and
ensuring understanding of and compliance with the Privacy Rule.

Through these varied efforts, OCR promotes integrity in the expenditure
of Federal funds by ensuring that these funds support programs which
provide access to services by intended recipients free from
discrimination on the basis of race, national origin, disability, age,
and sex. The efforts of OCR also maintain public trust and confidence
that the health care system will maintain the privacy of protected
health information while ensuring access to care.

New Freedom Initiative and Olmstead

OCR is involved in a variety of efforts to increase the independence and
quality of life of persons with disabilities, including those with
long-term needs. OCR is the HHS agency with authority and responsibility
to protect the rights of persons with disabilities under the Americans
with Disabilities Act (ADA). It plays a leading role in carrying out the
President's New Freedom Initiative (NFI) and Executive Order 13217,
which commits the U.S. to a policy of community integration for
individuals with disabilities, and calls upon the Federal Government to
enforce the ADA through complaint investigation and alternative dispute
resolution and to work with States to swiftly implement the Olmstead v.
L.C. decision.

During FY 2006, the efforts of OCR will continue its NFI leadership
role, improving access to community-based services for people with
disabilities through technical assistance to States and Olmstead
complaint resolution.

Title VI (Race, Color, and National Origin) Access Initiatives

OCR ensures compliance with the non-discrimination requirements of Title
VI of the Civil Rights Act of 1964, requiring recipients of HHS Federal
financial assistance to ensure that their policies and procedures do not
exclude or limit, or have the effect of excluding or limiting, the
participation of beneficiaries on the basis of race, color, or national
origin. These efforts, which reach beneficiaries of all health and human
services programs that HHS funds, seek to achieve voluntary compliance
and corrective efforts when violations are found.

In FY 2004, OCR and the HHS Administration for Children and Families
(ACF) entered into an agreement with the Ohio Department of Job and
Family Services and the Hamilton County Job and Family Services to
resolve civil rights violations identified by OCR and ACF regarding race
discrimination in adoption placements. OCR also recently collaborated
with the Department of Justice (DOJ) and the U.S. Department of
Agriculture to produce a video and informational brochure in multiple
languages to advise service providers and consumers with limited English
proficiency (LEP) about their responsibilities and rights under Title
VI.

In FY 2006, OCR will continue to focus on a broad range of Title VI
access issues including non-discrimination in adoption, foster care, and
TANF, as well as access to quality health services. For example:

-   To support the HHS HIV/AIDs initiative, OCR has initiated a
    disparities outreach partnership with a regional Public Health
    Service Office of Minority Health (OMH) to plan conferences and
    other activities focusing on HIV/AIDs in minority communities in all
    five States in Region VI. OCR and its Federal partners will work
    with providers and consumer groups, including faith-based
    organizations in those States, to inform minorities of their rights
    to non-discriminatory access to prevention education and treatment,
    and to assist OMH efforts to address social, cultural, and other
    potential barriers to access.

HIPAA - Health Information Privacy

OCR is responsible for implementing and enforcing the HIPAA Privacy
Rule. Compliance with the HIPAA Privacy Rule was required for most
covered entities as of April 14, 2003, when the responsibility for OCR
to enforce the Privacy Rule commenced. The Rule protects the privacy of
individually identifiable health information maintained or transmitted
by health plans, health providers, and clearinghouses. This landmark
rule provides individuals, for the first time, with Federal protection
against the inappropriate use and disclosure of personal health
information.

FY 2004 was the first full year during which OCR received and
investigated complaints under the Privacy Rule. Because the Privacy Rule
does not provide a private right of action, OCR is the only government
entity to which aggrieved parties can turn for redress, through civil
monetary penalties. (DOJ is charged with enforcing Privacy Rule criminal
violations). The number of complaints OCR has received since the April
14, 2003 compliance date now exceeds 10,000. OCR resolved more than
4,400 of these complaints in FY 2004. OCR has also reached tens of
thousands of covered entities and consumers through conferences, a
toll-free call line, and an interactive website providing answers to
specific questions about the Rule, which has received more than 2.5
million hits.

In FY 2006, OCR will continue to:

-   Promote compliance with the Privacy Rule by complaint investigation
    and developing and providing outreach and guidance to covered
    entities and the public; and

-   Analyze and provide recommendations with respect to implementation
    of the Privacy Rule to promote its workability; and issue additional
    guidance, as needed, to aid in implementation and to dispel
    misconceptions.

Cross-Cutting Civil Rights Activities

The work of OCR often addresses more than one of its legal authorities.
Certain population groups may face multiple barriers to services that
cross-cut race, national origin, disability, and age non-discrimination
authorities, and that may also raise issues involving privacy of health
information.

In FY 2006, OCR will continue to build upon its successes in working
with other HHS components and Federal agencies to coordinate its
cross-cutting initiatives.

For example:

-   OCR will continue to work with ACF, States, local governments, and
    other service providers to ensure that TANF programs remain free
    from discriminatory barriers that could prevent minorities and
    individuals with disabilities from obtaining the training and jobs
    that can lead to self-sufficiency.

-   OCR will continue to work with DOJ to coordinate compliance
    activities involving the Privacy Rule, disability rights, and access
    to services by LEP persons.

office of inspector general

**Overview Table**

This numerical table shows the Program Level dollars in millions and FTE
information for the years 2004 -- 2006 with a column to show the
increase or decrease if applicable:

The Program Level in 2004 was \$199 million, in 2005 \$225 million, in
2006 \$200 million. There is a decrease of \$25 million.

The FTEs follow: in 2004 there were 1,500; in 2005 there were 1,507, in
2006 there are 1,395 which shows a decrease of 112.

**End Table**

Under the authority of the Inspector General Act, the Office of
Inspector General (OIG) improves HHS programs and operations and
protects them against fraud, waste, and abuse. By conducting independent
and objective audits, evaluations, and investigations, OIG provides
timely, useful, and reliable information and advice to Department
officials, the Administration, the Congress, and the public.

For FY 2006, the Office of Inspector General (OIG) requests a
discretionary appropriation of

\$40 million, the same as the FY 2005 discretionary level. OIG will also
receive between \$150 and \$160 million in FY 2006 from the Health Care
Fraud and Abuse Control (HCFAC) Account for Medicare and Medicaid
related fraud, waste, and abuse activities. In addition to this, in FY
2005 OIG received \$25 million to fight fraud, waste, and abuse
associated with the implementation of the Medicare Prescription Drug,
Improvement, and Modernization Act (MMA). The FY 2006 budget request
proposes to extend the date that OIG can obligate this \$25 million by
one year, from FY 2005 to FY 2006.

Over the FY 2005 - FY 2006 period, OIG will use its discretionary
funding to continue its work across the non-Medicare and non-Medicaid
areas of HHS, which are public health, children and families, aging, and
department-wide activities. The funding level of OIG for FY 2006 allows
OIG to continue its efforts in:

-   Bioterrorism oversight, investigations, audits, and evaluations;

-   Grant oversight and reviews that cover internal controls, accounting
    controls, performance measurements, and program evaluation; and

-   Nation-wide involvement with the 10 Project Save Our Children (PSOC)
    Task Forces that identify, investigate, and prosecute individuals
    who willfully avoid the payment of their child support obligations.

In addition to this, OIG will continue its HCFAC activities to identify
and prosecute health care fraud; prevent future fraud, waste, or abuse;
protect HHS program beneficiaries; and ensure the solvency of the
Medicare Trust Fund; as well as play an active role in implementation of
the MMA.

Bioterrorism

OIG has an important role in furthering the Department\'s bioterrorism
efforts and ensuring the security of HHS programs, staff, facilities,
and equipment. In FY 2006, OIG has a variety of activities planned.\
For example:

-   Bioterrorism Investigations. Since the events of September 11, 2001,
    OIG has received numerous requests for information and
    investigations relating to terrorist and bioterrorist activity. On
    December 13, 2002, HHS issued the interim final rule for Possession,
    Use, and Transfer of Select Agents and Toxins, 42 CFR Part 73. Based
    upon these new regulations, OIG will pursue violations of
    regulations concerning possession, use, and transfer of select
    agents and toxins through civil monetary penalties.

-   Hospital Surge Capacity. OIG will review the surge capacity
    guideline of the Health Resources and Services Administration (HRSA)
    Hospital Bioterrorism Preparedness Program, which calls for States
    to accommodate 500 patients per one million population. OIG will
    conduct onsite evaluations in a small number of States to determine
    the extent to which the guideline is being met and also survey all
    States to gain a broad overview of how this guideline is being met,
    if States are encountering barriers, and their interaction with HRSA
    to facilitate preparedness.

Grants Oversight

OIG plans to review Department grant programs to determine whether they
are appropriately monitored and managed throughout the grant life cycle.
OIG will assess mechanisms in place to ensure that proper procedures are
used to award grants, fund them, account for expenditures, and verify
that they are used only for authorized purposes. The work of OIG will
include review of performance measures used to determine the nature and
value of the product of the grants, as well as the methods used to
evaluate the individual grants and grant programs as a whole. The
reviews of OIG will cover internal controls, accounting controls,
performance measurements, and program evaluation.

OIG anticipates conducting grant oversight activities in FY 2005-FY 2006
that touch almost every Operating Division within HHS and include such
diverse issues as patient safety, the National Electronic Disease
Surveillance System, nursing workforce development, Native American
diabetes prevention / treatment, and community health centers.

Child Support Enforcement Program

OIG will continue its coverage of all 50 States and the District of
Columbia by its multi-agency task forces (PSOC Task Forces) that
identify, investigate, and prosecute individuals who willfully avoid
payment of their child support obligations under the Child Support
Recovery Act. These task forces bring together State and local law
enforcement and prosecutors, United States Attorneys\' Offices, the OIG,
United States Marshals Service personnel, the Federal Bureau of
Investigation, State and county child support personnel, and all other
interested parties.

As of September 30, 2004, the task force units have received over 8,200
cases from the States. As a result of the work of the task forces, 494
Federal arrests have been executed and 458 individuals sentenced. The
total ordered amount of restitution related to Federal investigations is
over \$22.8 million. There have been 352 arrests at the State level and
310 convictions or civil adjudications to date, resulting in over \$17.3
million in restitution being ordered.

Health Care Fraud and Abuse

Through the Health Insurance Portability and Accountability Act (HIPAA),
OIG receives mandatory funding for its activities that focus on fraud,
waste, abuse, and efficiency improvements in the Medicare and Medicaid
programs. The Act provides for minimum and maximum amounts of funding
that are decided each year by the Secretary of HHS and the Attorney
General. Starting in FY 2003, and each year thereafter, the maximum
amount available to OIG for its HCFAC Program is capped at \$160
million.

OIG works with the Centers for Medicare & Medicaid Services (CMS), other
HHS agencies, and the Department of Justice to ensure that funds due to
the Medicare Trust Fund or CMS are recovered through audits and
investigations, and provides recommendations for statutory, regulatory,
and program changes that could strengthen program integrity.

Medicare Prescription Drug, Improvement, and Modernization Act

In FY 2005 OIG received \$25 million to fight fraud, waste, and abuse
associated with the implementation of the MMA. The FY 2006 budget
request proposes to extend the date that OIG can spend this \$25 million
by one year, from FY 2005 to FY 2006. Under the MMA, OIG is tasked with
several mandatory requirements, as well as general oversight activities.

Initially, OIG will focus on audits of drug manufacturers and surveys to
monitor the market prices of Medicare Part B drugs; statutory
requirements relating to safe harbors for electronic transmission of
drug prescriptions and collaborative efforts of Federally Qualified
Health Clinics; effects of Medicare payment rates on the availability of
hematology and oncology drugs; prices of drugs included in the End-Stage
Renal Disease composite rate; payment methods for training residents in
non-hospital settings; and notices to beneficiaries relating to hospital
lifetime reserve days. Even without specific mandates, OIG is expected
to conduct investigations, audits, and evaluations and provide advice
and technical assistance on all aspects of the Medicare program.
Examples of planned work include:

-   Graduate Medical Education (GME) Voluntary Supervision in
    Nonhospital Settings. The MMA requires that OIG study the
    appropriateness of alternative payment methodologies for GME
    involving the costs of training residents in nonhospital settings.

-   Beneficiary Understanding of Drug Discount Card Program. OIG will
    assess beneficiary understanding of the Medicare Prescription Drug
    Discount Card program and materials CMS provides to beneficiaries,
    as well as determine if beneficiary materials comply with MMA
    requirements and if beneficiaries understand the program.

-   Administrative Costs. Using the Federal Employees Health Benefit
    guidelines, OIG will examine the administrative amounts currently
    claimed by managed care organizations (MCOs). Congress has expressed
    interest in how MCOs determine funding amounts to meet
    administrative costs, which must be allocable, allowable,
    reasonable, and limited under the program.

program support center

**Overview Table**

This numerical table shows expense dollars in millions and FTE
information for the years 2004 -- 2006 with a column to show the
increase or decrease from 2005 to 2006 if applicable:

The expenses for 2004 were \$507 million, in 2005 \$536 million, in 2006
\$542 million. There is an increase of \$6 million.

The FTEs follow: in 2004 there were 1,119; in 2005 there were 1,379, in
2006 there are 1,379 which shows no increase or decrease.

**End Table**

The Program Support Center provides customer-focused administrative
services and products for the Department of Health and Human Services.

The PSC was created to streamline and minimize duplication of
traditional administrative services. The PSC provides services on a
competitive, fee-for-service basis to customers throughout HHS, as well
as to 14 other Executive departments and 20 independent Federal
agencies. The activities and services of the PSC are supported through
the HHS Service and Supply Fund, a revolving fund. The Fund does not
receive appropriated resources, but is funded entirely through charging
its customers for their use of services and products. Services are
provided in six broad areas: human resources, financial management,
administrative operations, strategic acquisitions service, Federal
occupational health, and HR centers. The customers of the PSC include
HHS agencies and other Federal agencies and organizations, such as
components of the Departments of Agriculture, Commerce, Defense,
Education, Energy, Homeland Security, Housing and Urban Development,
Interior, Justice, Labor, State, Transportation, Treasury, Veterans
Affairs, and the U.S. Postal Service.

Human Resources Service

The FY 2006 estimated expenses for the Human Resources Service (HRS) are
\$61 million, the same as the revised FY 2005. HRS provides an extensive
array of personnel systems, administration and management, training, and
payroll services. These include automated personnel and payroll systems
support, equal employment opportunity, and workforce development.

Financial Management Service

The FY 2006 estimated expenses for the Financial Management Service
(FMS) are \$57 million, the same as the revised FY 2005. FMS supports
the financial operations through the provision of grant payment services
for Departmental and other Federal grant and program activities;
accounting and fiscal services; debt and travel management services; and
rate review, negotiation, and approvals for departmental and other
Federal grant and program activities to HHS and other Federal agencies.

Administrative Operations Service

The FY 2006 estimated expenses for the Administrative Operations Service
(AOS) are \$88 million, the same as the revised FY 2005. AOS provides a
wide range of administrative and technical services within the
Department, both in headquarters and in the regions, and to customers
throughout the Federal Government. The major areas of service are real
and personal property management, technical support and communications
management, and management of regional contracts for administrative
support.

Federal Occupational Health Service

The FY 2006 estimated expenses for the Federal Occupational Health
Service (FOHS) are \$175 million, an increase of \$5 million above the
revised FY 2005 level. The increase of \$5 million represents
anticipated increased reimbursements from other Federal agencies. The
FOH provides occupational health services, including health, wellness,
employee assistance, work/life, safety, and environmental and industrial
hygiene-related services to more than 174 Federal components across the
country.

Strategic Acquisition Service

The FY 2006 estimated expenses for the Strategic Acquisition Service
(SAS) are \$117 million, an increase of \$1 million above the revised FY
2005 level. The increase reflects anticipated increased reimbursements.
The SAS is responsible for providing leadership, policy, guidance, and
supervision to the procurement operations of the PSC and for improving
procurement operations within HHS. The SAS provides strategic sourcing
services; acquisition management; and provides pharmaceutical, medical,
and dental supplies to HHS and other Federal agencies. The SAS will
streamline procurement operations in HHS through activities such as the
reduction of duplicate contracts, the use of consolidated contracts, and
implementation of new procurement practices designed to provide higher
quality procurement services.

Human Resources Centers

The FY 2005 estimated expenses for the Human Resources Center (HRC) are
\$44 million, the same as the revised FY 2005. The HR Centers represent
a consolidation of human resources services within the Department, with
sites located in Rockville, Baltimore, and Atlanta. In cooperation with
their customers, the Centers have implemented human capital strategies
that identify, recruit, hire, and retain employees with the skills to
accomplish the mission of HHS.

retirement pay & medical benefits for commissioned officers

**Overview Table**

This numerical table shows the Retirement payments (dollars in
millions), the Survivor Benefits (dollars in millions), Medical Care for
Retirees and Survivors (dollars in millions) and Accrued Medical
Benefits for over-65 (dollars in millions.) The information is provided
for the years 2004 -- 2006 with a column to show the increase or
decrease if applicable:

The Retirement payments in 2004 were \$227 million, in 2005 \$242
million, in 2006 \$256 million. There is an increase of \$14 million
from 2005 to 2006.

The Survivor Benefits in 2004 were \$14 million, in 2005 \$14 million,
in 2006 \$16 million. There is an increase of \$2 million from 2005 to
2006.

The Medical Care for Retirees and Survivors in 2004 were \$53 million,
in 2005 \$55 million, in 2006 \$57 million. There is an increase of \$2
million from 2005 to 2006.

The Accrued Medical Benefits for over-65 in 2004 were \$27 million, in
2005 \$33 million, in 2006 \$34 million. There is an increase of \$1
million from 2005 to 2006.

**End Table**

This appropriation provides for annuities of retired Public Health
Service (PHS) Commissioned Officers; payment to survivors of deceased
retired officers; and medical care to active duty PHS commissioned
officers, retirees, and dependents of members and accrued medical
benefit payments for PHS Commissioned Corps officers and beneficiaries
over age 65.

The FY 2006 request of \$363 million is a net increase of \$19 million
over the FY 2005 level. This amount reflects increased retirement
payments of \$14 million, increased survivor benefits of \$2 million,
increased medical care benefits costs of \$2 million, and increased
accrual medical benefit payments for officers and beneficiaries over age
65 of \$1 million.