Department of Health and Human Services

FY 2005 Budget in Brief

LETTER FROM THE SECRETARY

[The President\'s FY 2005 Budget for the Department of Health and Human
Services reflects the Administration\'s ongoing commitment to enhance
the health, well-being, and safety of our Nation\'s citizens. The \$580
billion proposed by the President will enable the Department to continue
working with our partners in State and local governments, and in the
private and volunteer sectors to improve health benefits, strengthen our
defense against bioterrorism, expand access to health care, and serve
populations in need. ]{.underline}

[The Department of Health and Human Services was given a number of
challenges by the Administration, many of which have been accomplished.
We increased access to health care, completed the doubling of the
National Institutes of Health budget, and launched the Global AIDS
Initiative. We have also made great strides in building the capacity of
grass-roots organizations to meet the needs of our citizens, and in
expanding the network of care for the treatment of substance
abuse.]{.underline}

[Our Nation continues to build its capability to prepare for and respond
to the threat of bioterrorism. The Department plays a crucial role in
this response, and our FY 2005 budget will enhance the necessary
services that contribute to the war on terrorism and protect us against
biologic and other threats. We will focus on preparedness at both the
domestic and global levels, expand our programs that enable us to
rapidly detect and respond to disease, improve the capacity of our
laboratories, and ensure the safety of food products. ]{.underline}

[In the FY 2005 budget, the Department of Health and Human Services will
use its resources to effectively impact the Nation\'s public health
infrastructure, focusing on safety and improved health outcomes. We will
continue to work towards fulfilling the promise of a safe and healthy
Nation, while strengthening support for populations in need. Lastly, the
Department will continue its work to improve the management and
performance of its programs. ]{.underline}

[ Sincerely, ]{.underline}

[ Tommy G. Thompson]{.underline}

[ Sincerely, ]{.underline}

[ Tommy G. ThompsonTABLE OF CONTENTS]{.underline}

[Overview 1]{.underline}

[Food and Drug Administration 7]{.underline}

[Health Resources and Services Administration 12]{.underline}

[Indian Health Service 18]{.underline}

[Centers for Disease Control and Prevention 22]{.underline}

[National Institutes of Health 31]{.underline}

[Substance Abuse and Mental Health Services Administration
38]{.underline}

[Agency for Healthcare Research and Quality 42]{.underline}

[Centers for Medicare & Medicaid Services 46]{.underline}

[Administration for Children and Families 84]{.underline}

[Administration on Aging 101]{.underline}

[Departmental Management 106]{.underline}

[Office for Civil Rights 115]{.underline}

[Office of Inspector General 118]{.underline}

[Program Support Center 120]{.underline}

[Retirement Pay and Medical Benefits for Commissioned Officers
122]{.underline}

**[ACHIEVING A SAFE AND HEALTHY NATION]{.underline}**

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[HHS Budget by Composition]{.underline}

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| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| **[S     |          | **[      | **[      | **[      | **[+     |
| ubtotal, |          | \$412,43 | \$443,55 | \$475,85 | \$32,301 |
| M        |          | 1]{.unde | 2]{.unde | 3]{.unde | ]{.unde  |
| andatory |          | rline}** | rline}** | rline}** | rline}** |
| (Outlay  |          |          |          |          |          |
| s)\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.unde  |          |          |          |          |          |
| rline}** |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Discr   |          |          |          |          |          |
| etionary |          |          |          |          |          |
| Programs |          |          |          |          |          |
| (B       |          |          |          |          |          |
| A):]{.un |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Food &  |          | [\$1,    | [\$1,    | [\$1,    | [+\$22   |
| Drug     |          | 368]{.un | 384]{.un | 406]{.un | ]{.un    |
| Administ |          | derline} | derline} | derline} | derline} |
| ration\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Health  |          | [6,      | [5,      | [5,      | [+316    |
| R        |          | 072]{.un | 356]{.un | 672]{.un | ]{.un    |
| esources |          | derline} | derline} | derline} | derline} |
| &        |          |          |          |          |          |
| Services |          |          |          |          |          |
| Administ |          |          |          |          |          |
| ration\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Indian  |          | [2,      | [2,      | [2,      | [+74     |
| Health   |          | 758]{.un | 816]{.un | 890]{.un | ]{.un    |
| Service\ |          | derline} | derline} | derline} | derline} |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Centers |          | [4,      | [4,      | [4,      | [-33     |
| for      |          | 450]{.un | 264]{.un | 231]{.un | ]{.un    |
| Disease  |          | derline} | derline} | derline} | derline} |
| Control  |          |          |          |          |          |
| and      |          |          |          |          |          |
| Prevent  |          |          |          |          |          |
| ion\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [        |          | [23,     | [27,     | [27,     | [+500    |
| National |          | 454]{.un | 243]{.un | 743]{.un | ]{.un    |
| In       |          | derline} | derline} | derline} | derline} |
| stitutes |          |          |          |          |          |
| of       |          |          |          |          |          |
| He       |          |          |          |          |          |
| alth\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [S       |          | [3,      | [3,      | [3,      | [+198    |
| ubstance |          | 136]{.un | 195]{.un | 393]{.un | ]{.un    |
| Abuse &  |          | derline} | derline} | derline} | derline} |
| Mental   |          |          |          |          |          |
| Health   |          |          |          |          |          |
| Serv     |          |          |          |          |          |
| ices\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Agency  |          | [3]{.un  | [0]{.un  | [0]{.un  | [ 0      |
| for      |          | derline} | derline} | derline} | ]{.un    |
| He       |          |          |          |          | derline} |
| althcare |          |          |          |          |          |
| Research |          |          |          |          |          |
| &        |          |          |          |          |          |
| Qual     |          |          |          |          |          |
| ity\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| *[AHRQ   |          | *[2      | *[2      | *[2      | *[+29    |
| Program  |          | 99]{.und | 50]{.und | 79]{.und | ]{.und   |
| Level    |          | erline}* | erline}* | erline}* | erline}* |
| (No      |          |          |          |          |          |
| n-Add)\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.und   |          |          |          |          |          |
| erline}* |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Centers |          | [2,      | [2,      | [2,      | [+76     |
| for      |          | 506]{.un | 457]{.un | 533]{.un | ]{.un    |
| Medicare |          | derline} | derline} | derline} | derline} |
| &        |          |          |          |          |          |
| Medicaid |          |          |          |          |          |
| Servic   |          |          |          |          |          |
| es\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Admini  |          | [13,     | [13,     | [13,     | [+369    |
| stration |          | 057]{.un | 080]{.un | 449]{.un | ]{.un    |
| for      |          | derline} | derline} | derline} | derline} |
| Children |          |          |          |          |          |
| &        |          |          |          |          |          |
| Families |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Admini  |          | [1,      | [1,      | [1,      | [+3      |
| stration |          | 349]{.un | 341]{.un | 344]{.un | ]{.un    |
| on       |          | derline} | derline} | derline} | derline} |
| A        |          |          |          |          |          |
| ging\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Office  |          | [        | [        | [        | [+12     |
| of the   |          | 411]{.un | 418]{.un | 430]{.un | ]{.un    |
| Secret   |          | derline} | derline} | derline} | derline} |
| ary\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [PHSS    |          | [1,      | [1,      | [1,      | [+90     |
| EF\...\. |          | 487]{.un | 806]{.un | 896]{.un | ]{.un    |
| ..\...\. |          | derline} | derline} | derline} | derline} |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Program |          | [0]{.un  | [0]{.un  | [13]{.un | [+13     |
| Support  |          | derline} | derline} | derline} | ]{.un    |
| Cen      |          |          |          |          | derline} |
| ter/Comm |          |          |          |          |          |
| issioned |          |          |          |          |          |
| Co       |          |          |          |          |          |
| rps\.... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| **[S     |          | **       | **       | **       | **[      |
| ubtotal, |          | [\$60,05 | [\$63,36 | [\$65,00 | +\$1,640 |
| Discr    |          | 1]{.unde | 0]{.unde | 0]{.unde | ]{.unde  |
| etionary |          | rline}** | rline}** | rline}** | rline}** |
| (BA)\.   |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.unde  |          |          |          |          |          |
| rline}** |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| **[S     |          | **       | **       | **       | **[      |
| ubtotal, |          | [\$53,61 | [\$58,60 | [\$63,15 | +\$4,552 |
| Discr    |          | 9]{.unde | 4]{.unde | 6]{.unde | ]{.unde  |
| etionary |          | rline}** | rline}** | rline}** | rline}** |
| (O       |          |          |          |          |          |
| utlays)\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
| ]{.unde  |          |          |          |          |          |
| rline}** |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| *        |          | **[      | **[      | **[      | **[+     |
| *[Total, |          | \$466,05 | \$502,15 | \$539,00 | \$36,853 |
| HHS      |          | 0]{.unde | 6]{.unde | 9]{.unde | ]{.unde  |
| Outl     |          | rline}** | rline}** | rline}** | rline}** |
| ays\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
| ]{.unde  |          |          |          |          |          |
| rline}** |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          | **[200   | **[200   | **[200   | **[200   |          |
|          | 2]{.unde | 3]{.unde | 4]{.unde | 4]{.unde |          |
|          | rline}** | rline}** | rline}** | rline}** |          |
|          |          |          |          |          |          |
|          |          |          |          | **[+/-   |          |
|          |          |          |          | 200      |          |
|          |          |          |          | 3]{.unde |          |
|          |          |          |          | rline}** |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Food &  |          |          |          |          |          |
| Drug     |          |          |          |          |          |
| Admi     |          |          |          |          |          |
| nistrati |          |          |          |          |          |
| on:]{.un |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Program | [\$1,    | [\$1,    | [\$1,    | [+\$58   |          |
| L        | 551]{.un | 655]{.un | 713]{.un | ]{.un    |          |
| evel\... | derline} | derline} | derline} | derline} |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Budget  | [1,      | [1,      | [1,      | [+22     |          |
| A        | 368]{.un | 384]{.un | 406]{.un | ]{.un    |          |
| uthority | derline} | derline} | derline} | derline} |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [O       | [1,      | [1,      | [1,      | [+27     |          |
| utlays\. | 126]{.un | 373]{.un | 400]{.un | ]{.un    |          |
| ..\...\. | derline} | derline} | derline} | derline} |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Health  |          |          |          |          |          |
| R        |          |          |          |          |          |
| esources |          |          |          |          |          |
| &        |          |          |          |          |          |
| Services |          |          |          |          |          |
| Admi     |          |          |          |          |          |
| nistrati |          |          |          |          |          |
| on:]{.un |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Budget  | [6,      | [5,      | [5,      | [+312    |          |
| A        | 209]{.un | 498]{.un | 810]{.un | ]{.un    |          |
| uthority | derline} | derline} | derline} | derline} |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [O       | [5,      | [5,      | [5,      | [+73     |          |
| utlays\. | 705]{.un | 848]{.un | 921]{.un | ]{.un    |          |
| ..\...\. | derline} | derline} | derline} | derline} |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Indian  |          |          |          |          |          |
| Health   |          |          |          |          |          |
| Servi    |          |          |          |          |          |
| ce:]{.un |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Budget  | [2,      | [2,      | [3,      | [+124    |          |
| A        | 858]{.un | 916]{.un | 040]{.un | ]{.un    |          |
| uthority | derline} | derline} | derline} | derline} |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [O       | [2,      | [2,      | [3,      | [+177    |          |
| utlays\. | 811]{.un | 846]{.un | 023]{.un | ]{.un    |          |
| ..\...\. | derline} | derline} | derline} | derline} |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Centers |          |          |          |          |          |
| for      |          |          |          |          |          |
| Disease  |          |          |          |          |          |
| Control  |          |          |          |          |          |
| &        |          |          |          |          |          |
| Preventi |          |          |          |          |          |
| on:]{.un |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Budget  | [4,      | [4,      | [4,      | [-33     |          |
| A        | 450]{.un | 264]{.un | 231]{.un | ]{.un    |          |
| uthority | derline} | derline} | derline} | derline} |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [O       | [3,      | [4,      | [4,      | [-4      |          |
| utlays\. | 672]{.un | 214]{.un | 210]{.un | ]{.un    |          |
| ..\...\. | derline} | derline} | derline} | derline} |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [        |          |          |          |          |          |
| National |          |          |          |          |          |
| In       |          |          |          |          |          |
| stitutes |          |          |          |          |          |
| of       |          |          |          |          |          |
| Heal     |          |          |          |          |          |
| th:]{.un |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Budget  | [23,     | [27,     | [27,     | [+550    |          |
| A        | 554]{.un | 343]{.un | 893]{.un | ]{.un    |          |
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[The HHS fiscal year (FY) 2005 budget furthers the goals of President
Bush\'s initiatives to ensure the health, well-being and safety of our
Nation. The FY 2005 budget totals \$580 billion in outlays, an increase
of \$32 billion, or 5.8 percent, over the comparable FY 2004 budget. The
discretionary portion of the HHS budget totals \$67 billion in budget
authority, an increase of 1.2 percent over the FY 2004 level.
]{.underline}

[Through the programs and services presented in the budget plan of HHS,
Americans will:]{.underline}

-   [receive new health benefits and services;]{.underline}

-   [be protected from the threat of bioterrorism;]{.underline}

-   [benefit from enhanced disease detection and prevention;
    ]{.underline}

-   [have greater access to health care; and]{.underline}

-   [receive greater support in working through the transition from
    welfare to self-sufficiency.]{.underline}

[In addition, the budget plan will continue to support programs for
populations in need, including children, families, and the elderly. All
HHS programs and services are strengthened through effective
partnerships with other Federal departments, State and local
governments, and community and faith-based organizations. The budget
plan continues efforts to improve the quality of health care, modernize
Medicare, and improve the management of the Department and its
programs.]{.underline}

[HHS has accomplished a number of the Administration's goals to improve
the health and well-being of our Nation's citizens. The Department
has:]{.underline}

-   [Increased access to health care for an additional 3 million people
    through 614 new and expanded health center sites; ]{.underline}

-   [Completed the doubling of the budget of the National Institutes of
    Health (NIH); ]{.underline}

-   [Established a new Access to Recovery State Voucher program,
    providing 50,000 individuals with needed treatment and recovery
    services from qualified community providers, including those that
    are faith-based;]{.underline}

-   [Provided, through the Compassion Capital Fund, 21 grants to
    intermediary organizations for capacity-building training and
    technical assistance to local grassroots organizations in order to
    reduce homelessness and hunger, and promote positive youth
    development and; ]{.underline}

-   [Provided support for one-to-one mentoring through the Mentoring
    Children of Prisoners program to help over 30,000 children each year
    through the time a parent is incarcerated.]{.underline}

[Medicare Modernization]{.underline}

[HHS fully supports comprehensive Medicare modernization. In response to
the need for a subsidized prescription drug benefit and better insurance
protection, the Administration and Congress worked together to enact the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA). The MMA phases in a prescription drug discount card in FY 2004.
The full benefit begins in FY 2006.]{.underline}

[Prescription Drug Discount Card: The MMA establishes a new Medicare
approved prescription drug discount card program that will immediately
help Medicare beneficiaries reduce their out-of-pocket spending on
drugs. Seniors and individuals with disabilities could save, on average,
10 to 15 percent on their total drug costs, with savings up to 25
percent or more off retail prices on individual prescriptions. Card
enrollment begins as early as May 2004, and discounts begin in June
2004. Low-income beneficiaries will receive a \$600 per year credit on
their cards to use towards their drug expenditures. ]{.underline}

[New Prescription Drug Benefit: MMA establishes a new voluntary
prescription drug benefit that will begin in January 2006. Medicare
beneficiaries with the lowest incomes and the highest levels of spending
on drugs will get the most financial assistance. Under the full drug
benefit begins, seniors and those with disabilities who pay full retail
drug prices today are expected to save approximately 20 percent off the
retail cost of their prescription drugs. Beneficiaries who spend
significant amounts for prescription drugs may pay 50 percent less
out-of-pocket, in exchange for a modest monthly premium of about \$35.
]{.underline}

[When Congress considered the MMA, the Congressional Budget Office
estimated the cost of the bill at \$395 billion from 2004 to 2013. The
Medicare actuaries have recently estimated the cost of the law as \$534
billion from 2004 to 2013. Because the Medicare legislation makes
far-reaching changes to a complex entitlement program with many new
private-sector elements, there is even greater uncertainty in these
estimates than usual. It is not uncommon for different assumptions
underlying the respective estimates to produce differences in cost
projections. This difference of \$139 billion is approximately 2.1
percent of the projected \$6.5 trillion in total Medicare and Medicaid
spending over the same time period.]{.underline}

[Medicaid Modernization]{.underline}

[HHS plans to work diligently with Congress to reform Medicaid and give
States the flexibility they need to innovate and stabilize the program.
States would be allowed to take Medicaid and SCHIP funds in a flexible
allotment to provide coverage in a way that best fits their needs.
States would be required to continue coverage for mandatory Medicaid
beneficiaries.]{.underline}

[Disease Detection and Bioterrorism Preparedness]{.underline}

[The FY 2005 budget includes a multi-prong effort, with targeted
investments of \$373 million, to improve the security of our Nation by
accelerating the detection of and response to potential disease
outbreaks of any kind -- regardless of whether the pathogen is naturally
occurring or intentionally released. The importance of this work is
underscored by both the threat of bioterrorism, and the recent series of
emerging infectious diseases -- SARS, Avian Influenza in eastern Asia,
and the Fujian influenza strain circulating in the U.S. this
winter.]{.underline}

[Global Disease Detection and Quarantine: The Centers for Disease
Control and Prevention\'s (CDC) Global Disease Detection initiative will
help the U.S. learn more rapidly about new disease threats that emerge
in other nations. CDC will help those nations identify and stop those
diseases before they can arrive in the U.S. To help ensure those
diseases do not enter the U.S., CDC will also expand quarantine
capacities at ports-of-entry for international travelers.]{.underline}

[Defending the Nation\'s Food Supply: The Food and Drug Administration
(FDA) has already dramatically expanded its work to prevent
intentionally contaminated foods from entering the U.S. The FY 2005
budget takes the next step, making the investments needed to accelerate
Federal and State ability to detect contamination. FDA will
substantially expand the laboratory capacity of its State partners, and
will work to find faster and better tests to detect contamination,
including ones that could be used on-site at ports, processing plants,
and other food facilities.]{.underline}

[Biosurveillance: Under traditional public health reporting mechanisms,
disease outbreaks can take several days to a few weeks to detect. The
new BioSense surveillance initiative at CDC seeks to shorten this time
dramatically. HHS, in coordination with the Department of Homeland
Security, the Environmental Protection Agency, the Department of
Agriculture, and others, is developing new tools and procedures to
identify potential disease outbreaks or environmental releases far more
rapidly. This work will be supplemented by targeted CDC investments to
more fully integrate public health and commercial medical laboratories
into the Laboratory Response Network.]{.underline}

[Extramural Biosafety Laboratory Construction: New investments in the
National Institutes of Health will both provide the research laboratory
space our universities need to help develop medical protection from
bioterrorism, and back up State and Federal public health laboratories
if there is an actual or suspected bioterrorism attack. The \$150
million for extramural laboratories will fund an additional 20 Level 3
laboratories across the U.S.]{.underline}

[Strategic National Stockpile: Under the Homeland Security Act of 2002,
HHS continued to manage the Stockpile on a day-to-day basis. The
Department of Homeland Security was responsible for authorizing HHS
deployment of the Stockpile, and financing its costs. The FY 2005 budget
returns financing of the Stockpile to HHS, requesting \$400 million,
with either Department authorized to order deployment in an emergency.
The budget also seeks the ability to respond to revised threat
assessments as they evolve, proposing permissive authority to transfer
additional funds from other bioterrorism programs.]{.underline}

[Bioterrorism Preparedness Assistance to State and Local Governments:
The FY 2005 request reflects a cumulative investment of over \$5 billion
in State, local and hospital preparedness since FY 2001 through the CDC
and HRSA cooperative agreements to improve capacity to respond to
bioterrorism and public health emergencies. Building on this solid
investment, this year\'s request reflects an effort to accelerate
targeted progress in preparedness. In addition to providing support to
States for preparedness and training, CDC is redirecting some funds to
develop surveillance data that will assist States with earlier threat
detection. State food laboratory investments will be expanded to protect
the Nation from threats against the food supply, and these food defense
activities will be coordinated with surveillance efforts across
government. Continued investments in hospital preparedness will ensure
that 100 percent of States have viable surge capacity
plans.]{.underline}

[Marriage and Healthy Family Development]{.underline}

[The budget includes an initiative to build on the research that there
are life-long benefits of growing up in married-parent families. This
initiative comprised of new and existing programs, has four elements: 1)
supporting marriage and families; 2) providing tools to parents; 3)
teaching values to children; and 4) encouraging community and
faith-based organizations to support families.]{.underline}

[Supporting Healthy Marriages: This initiative builds further upon the
Administration\'s Temporary Assistance to Needy Families (TANF)
Reauthorization proposal, which includes \$1 billion (Federal funds)
over five years to promote healthy marriage and family formation. The FY
2005 budget proposes to increase Federal funds available for this
purpose to \$1.2 billion over five years -- a \$160 million increase
over the original TANF proposal. With State matching funds, a total of
\$1.8 billion will help advance this central goal of the TANF
program.]{.underline}

[Responsible Choices: This initiative will educate teens and parents
about the risks associated with early sexual activity and provide the
tools needed to help teens make responsible choices. To accomplish this
goal, the budget doubles total funding for abstinence education
activities, providing \$273 million. HHS will develop, implement and
evaluate abstinence education programs for 12 to 18 year olds that
promote abstinence and encourage healthy decisions. HHS will provide
grants for up to 500 communities and 59 States and Territories. These
grants will be administered by the Administration for Children and
Families (ACF) and the Office of Population Affairs. The Community-Based
and State grant programs currently being transferred to ACF will have
increased linkages to other comprehensive youth development efforts.
Funds are also included for a new public awareness campaign to help
parents communicate with their children about the health risks
associated with early sexual activity.]{.underline}

[Responsible Fatherhood and Marriage: The budget includes \$50 million
to support a new program to assist non-custodial fathers in becoming
more involved in their children\'s lives. Over 25 million children
currently live in homes without fathers.]{.underline}

[Preventing and Treating Child Abuse: This initiative also increases two
State child abuse grant programs that will increase the ability of
States to provide prevention services to an additional 55,000 at-risk
children and families and reduce the average time to services provision
for State child protective services systems by nearly 38
percent.]{.underline}

[Supporting Children, Families, and the Elderly]{.underline}

[Advancing Welfare Reform: The budget again proposes to reauthorize
Temporary Assistance for Needy Families (TANF). The proposal builds off
the successes of TANF by strengthening work requirements and supporting
healthy marriage and families. The budget includes current level funding
for State assistance grants and other key components as well as
establishing a new grant and demonstration program to promote healthy
marriage.]{.underline}

[Child Support Enforcement: FY 2005 budget includes two new proposals
aimed at increasing medical child support and ensure that children have
the health coverage they need. This budget includes proposals from FY
2003 and FY 2004 that enhance automation and significantly increase
collections to all families. Two of these proposals help families on
TANF and those formerly on welfare by giving States the option to pass
additional collections on to these families. Overall, these proposals
should result in \$3 billion over five years in increased collections to
families for a Federal investment of \$105 million over five
years.]{.underline}

[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 \$37 million in FY 2005 and it is
budget neutral over five years.]{.underline}

[Faith-Based and Community Initiative: The budget maintains a strong
commitment to strengthening and expanding the role of faith-based and
community organizations in reducing the Nation\'s social problems. The
budget provides \$161 million, in total, for the Compassion Capital
Fund, Mentoring Children of Prisoners, and Maternity Group Homes to
support at-risk youth, ex-offenders, the homeless, and the
hungry.]{.underline}

[Head Start: The budget includes \$6.9 billion for Head Start services
to 919,000 children. Within the \$169 million increase, \$45 million is
provided to support nine new State pilot projects to coordinate State
preschool programs, Federal child care grants, and Head Start into a
comprehensive system of early childhood programs.]{.underline}

[Enhancing Public Health and Disease Prevention]{.underline}

[Steps to a Healthier US: "Steps" provides funds to local communities to
keep citizens from becoming obese and developing diabetes, and to
prevent hospitalizations from asthma. The budget proposes an increase of
\$81 million, for a total of \$125 million, to accelerate implementation
in existing sites and to expand this new grant program to additional
communities. These funds will also support the Diabetes Detection
Initiative, which is targeted at the estimated 5 million undiagnosed
diabetics.]{.underline}

[Health Centers: The FY 2005 budget includes \$1.8 billion for Health
Centers to provide health care services to 15 million individuals -- 4.5
million more patients than in FY 2001, of whom approximately 40 percent
have no insurance coverage. This is the fourth year of the President\'s
initiative to increase access to health care through the Health Center
program. The budget also proposes an increase for the National Health
Service Corps, initiating a new effort to recruit nurses and physicians
who will also have a long term Reserve Corps commitment to the Public
Health Service Commissioned Officer Corps.]{.underline}

[Access to Recovery: The FY 2005 request proposes to double the Access
to Recovery State Voucher program, for a total of \$200 million. Access
to Recovery provides individuals seeking substance abuse treatment
services with vouchers to pay for the care they need from effective
community providers, including those that are faith-based. Approximately
100,000 individuals will be served at the FY 2005 funding
level.]{.underline}

[Childhood Immunization: The budget includes three essential
improvements in childhood immunizations. First, legislation is proposed
in the Vaccines for Children (VFC) program to improve access to these
vaccines for underinsured children who are already entitled to receive
them, and restore tetanus and diphtheria toxoid vaccines to the VFC
program; these changes will expand vaccine purchases by \$55 million.
Second, FY 2005 will be the third year of the HHS effort to build a six
month stockpile of all regularly recommended vaccines; the FY 2005
investment will be \$184 million. Finally, HHS will ensure that children
have access to influenza vaccines next winter, investing \$40 million of
FY 2004 funds in a stockpile of next winter\'s vaccine.]{.underline}

[Prevention of \"Mad Cow Disease\": The FY 2005 budget provides the Food
and Drug Administration (FDA) \$30 million, an \$8 million increase, to
expand efforts to prevent Bovine Spongiform Encephalopathy (BSE) or
\"Mad Cow Disease.\" FDA will intensify its efforts to keep forbidden
animal proteins out of cattle feed, the only known mode of
transmission.]{.underline}

[Medical Devices: The budget seeks a \$26 million increase in budget
authority for FDA\'s Medical Devices program to ensure medical
technologies are safe and available to Americans as quickly as possible.
This funding will ensure accomplishment of the aggressive pre-market
review goals agreed upon in the Medical Devices User Fee and
Modernization Act.]{.underline}

[Medical Research: Building on the accomplishment of the five-year
doubling of the NIH budget, the FY 2005 budget will total \$28.8 billion
for NIH. This is an increase of \$764 million over FY 2004 and will
support nearly 40,000 research project grants, a record total for NIH.
Included in this budget are funds for the NIH Roadmap, an initiative
that will target gaps and major opportunities in biomedical research in
order to rapidly transform new scientific knowledge into tangible health
benefits for the American public. This request will maintain the
long-term stability of the biomedical research enterprise and ensure
continued productivity in all areas of research at NIH. ]{.underline}

[Breast and Cervical Cancer: The FY 2005 budget provides an increase of
\$10 million for the breast and cervical cancer program. The CDC\'s
breast and cervical cancer program supports screening services for
low-income, underinsured, or uninsured women.]{.underline}

[Preventive Benefits: Beginning in January 2005, all newly enrolled
Medicare beneficiaries will be covered for an initial physical
examination. All beneficiaries will be covered for cardiovascular
screening blood tests, and those at risk will be covered for a diabetes
screening test.]{.underline}

[Indian Health Service: The Indian Health Service (IHS) will receive
\$3.7 billion to provide medical care and prevention and wellness
activities to 1.6 million American Indians and Alaska Natives (AI/AN).
IHS will staff five new facilities -- doubling the number of primary
care provider visits -- and support an 11 percent increase in sanitation
construction to provide safe water and waste disposal to AI/AN
homes.]{.underline}

[Mental Health: The budget responds to the recommendations of the
President\'s Commission on Mental Health by proposing a new \$44 million
State grant program to support State planning efforts to reduce system
fragmentation and increase services to persons living with mental
illness. The request also maintains a strong commitment to increasing
services for the homeless, many of whom suffer from mental illness. The
budget includes \$10 million to support the Samaritan Initiative -- an
Administration-wide initiative to reduce chronic
homelessness.]{.underline}

[Health Care Information Technology]{.underline}

[The Administration will work with those involved in heath care
information technology (IT) to advance the efforts to translate IT
opportunities into higher quality, safer, and more efficient health care
for all Americans. In support of this effort, the budget proposes \$50
million in new funding to support State or regional demonstration grants
to test the feasibility of information exchange among health care
settings, and to fund other innovative IT projects that will improve
health care quality. ]{.underline}

[In addition, the budget continues the President\'s commitment to
improve quality of care and patient safety in all health care settings
by proposing \$84 million in the Agency for Healthcare Research and
Quality (AHRQ). Within this total, \$50 million will fund grants to
continue efforts to promote, accelerate, and demonstrate the development
and adoption of IT, including in small and rural communities where
health IT penetration has been low.]{.underline}

[HHS is also leading the Consolidated Health Informatics (CHI)
initiative which promotes the adoption of interoperability standards for
clinical data used within the Federal government. It is anticipated that
this effort will provide an incentive for non-Federal organizations to
adopt these standards as well. The CHI effort is expected to lead to
creation of an information infrastructure that will ensure wider
availability and interoperability of clinical data. The use of common
standards will mean that clinical data will be more widely available for
use in patient care which will lead to overall improvements in health
care quality.]{.underline}

[The New Freedom Initiative]{.underline}

[This initiative builds upon the progress made by the Americans with
Disabilities Act of 1990 (ADA) in protecting the civil rights of people
with disabilities. The initiative promotes the full integration of
people with disabilities into all aspects of American life. For health
services, the goal is to place more of an emphasis on home and
community-based care. The FY 2005 budget includes proposals in support
of the New Freedom Initiative for a total of \$73 million.]{.underline}

[Medicaid Program Integrity]{.underline}

[Ensuring the fiscal integrity of Medicaid continues to be a high
priority of HHS. To ensure that Federal taxpayer dollars are being used
appropriately to serve Medicaid recipients, HHS proposes two provisions
to limit excessive payments to providers. The first limits Federal
reimbursement to the States to no more than cost of Medicaid services
provided. The second restricts the use of certain intergovernmental
transfers. These measures would stop excessive payments while preserving
the ability of States to pay reasonable rates to Medicaid
providers.]{.underline}

[Management Improvements]{.underline}

[President\'s Management Agenda: In August 2001, President Bush
challenged HHS and other departments to \"address the most apparent
deficiencies where the opportunity to improve performance is the
greatest.\" Based on this challenge, The President\'s Management
Council, the Office of Management and Budget and the Office of Personnel
Management developed standards for success in each of five
Government-wide initiatives:]{.underline}

-   [Strategic Management of Human Capital]{.underline}

-   [Competitive Sourcing]{.underline}

-   [Improved Financial Performance]{.underline}

-   [Expanded Electronic Government (E-Gov)]{.underline}

[Budget & Performance Integration ]{.underline}

[The FY 2005 request supports improvements in all five
initiatives:]{.underline}

-   [As part of the One HHS initiative, the Department has consolidated
    management of its human resources function, to better focus on the
    recruitment, retention, and development of a workforce with the
    skills necessary to carry out our mission now and in the future. The
    hiring process has been simplified and automated, and leadership
    succession programs are in place. Top executives, managers, and
    employees alike are held accountable for contributing to the
    Department\'s mission through performance contracts that link
    directly to HHS\' strategic priorities.]{.underline}

-   [HHS is developing a long-range competition plan that will detail
    how the Department plans to implement competitive sourcing as a
    carefully and regularly considered option for improving the
    cost-effectiveness and quality of its commercial
    operations.]{.underline}

-   [Two years into the effort, steady progress continues to be made in
    developing the Unified Financial Management System (UFMS). NIH
    successfully deployed the general ledger and travel systems this
    year; CMS is piloting the Healthcare Integrated General Ledger
    Accounting System (HIGLAS) at two major Medicare contractors; the
    system is scheduled for implementation by CDC in October 2004, and
    by FDA in October 2004.]{.underline}

-   [HHS achieved its fifth consecutive clean audit opinion, a full 75
    days earlier than last year\'s annual report, thus meeting the
    President\'s Management Agenda objective to accelerate financial
    reporting. This year\'s report shows that we continue to make
    progress toward more integrated and productive management of the
    more than 300 HHS programs, projects, and activities that serve
    Americans, and toward increased financial discipline and
    accountability. HHS is dedicated to improving timely financial
    reporting, and its recent success is a step toward our continued
    commitment of improving financial reporting including the
    accelerated publication of quarterly financial statements. The more
    timely arrival of financial data is crucial to the goal of improving
    financial management since current data is necessary for management
    and decision-makers. ]{.underline}

-   [In E-Government, HHS has provided leadership under the Consolidated
    Health Informatics (CHI) Initiative. This effort will result in the
    Federal Government\'s adopting interoperability standards as the
    basis for electronic health data transfer in all activities and
    projects.]{.underline}

-   [Grants.gov, another E-Government initiative, will streamline and
    simplify grants processes, standardize grants data elements, and
    create an electronic storefront to route grants transactions.
    ]{.underline}

-   [In accordance with the standards for success, formulation of the FY
    2005 budget benefitted from the use of performance information in
    Department decision making. FY 2005 performance plans align the full
    budgeted cost of programs with mission accounts and activities.
    Eighteen Performance Assessment and Rating Tool (PART) reviews were
    completed as part of the FY 2005 budget process. PART was also used
    to inform budget decisions throughout the HHS budget
    process.]{.underline}

[Conclusion]{.underline}

[The HHS FY 2005 President\'s Budget builds on past accomplishments in
protecting the health and safety of our Nation while continuing to move
toward future goals. It reflects the ongoing work in enhancing the
benefits of Medicare and modernizing Medicaid. It increases support of
our Nation\'s families, children, and elderly, with emphasis on at risk
populations. It supports the President\'s health and social service
initiatives, and keeps the promise of a safe and healthy Nation. The
budget also maintains the Department\'s goal of improving the management
and performance of its programs, and strives to better serve the
American public.]{.underline}**[Food and Drug
Administration]{.underline}**

  ------------------------------------------------------------------------------------------------------------------------------------------------ ---------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                                                                                                                                                                          **[2005]{.underline}**
                                                                                                                                                                                                                                          
                                                                                                                                                   **[2003]{.underline}**       **[2004]{.underline}**       **[2005]{.underline}**       **[+/- 2004]{.underline}**
                                                                                                                                                                                                                                          
  **[Salaries and Expenses:]{.underline}**                                                                                                                                                                                                
                                                                                                                                                                                                                                          
  [Foods\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                 [\$408 ]{.underline}         [\$410 ]{.underline}         [\$470 ]{.underline}         [+\$60 ]{.underline}
  [Animal Drugs and Feeds\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                           [88 ]{.underline}            [88 ]{.underline}            [99 ]{.underline}            [+11 ]{.underline}
  [Medical Devices\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                               [223 ]{.underline}           [224 ]{.underline}           [252 ]{.underline}           [+28 ]{.underline}
  [Drugs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                [457 ]{.underline}           [476 ]{.underline}           [499 ]{.underline}           [+23 ]{.underline}
  [Biologics\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                    [165 ]{.underline}           [169 ]{.underline}           [173 ]{.underline}           [+4 ]{.underline}
  [National Center for Toxicological Research\...\...\...\...\..... ]{.underline}                                                                  [40 ]{.underline}            [41 ]{.underline}            [41 ]{.underline}            [ 0 ]{.underline}
  [Other Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                             [112 ]{.underline}           [116 ]{.underline}           [118 ]{.underline}           [+2 ]{.underline}
  [GSA Rental Payments\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                       [108 ]{.underline}           [119 ]{.underline}           [123 ]{.underline}           [+4 ]{.underline}
  [Non-GSA Rent & Rent Related Activities\...\...\...\...\...\..... ]{.underline}                                                                  [37 ]{.underline}            [39 ]{.underline}            [63 ]{.underline}            [+24 ]{.underline}
                                                                                                                                                                                                                                          
  **[Subtotal, S&E\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}**                             **[\$1,637 ]{.underline}**   **[\$1,682 ]{.underline}**   **[\$1,838 ]{.underline}**   **[+\$156 ]{.underline}**
  [Buildings and Facilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                            [8 ]{.underline}             [7 ]{.underline}             [ 0 ]{.underline}            [-7 ]{.underline}
  [Export/Certification Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                               [6 ]{.underline}             [7 ]{.underline}             [7 ]{.underline}             [ 0 ]{.underline}
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
  **[Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**                                             **[\$1,652 ]{.underline}**   **[\$1,696 ]{.underline}**   **[\$1,845 ]{.underline}**   **[+\$149 ]{.underline}**
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
  **[Less User Fees]{.underline}[:]{.underline}**                                                                                                                                                                                         
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
  [Prescription Drug User Fee Act (PDUFA)\...\...\...\...\...\.... ]{.underline}                                                                   [\$223 ]{.underline}         [\$250 ]{.underline}         [\$284 ]{.underline}         [+\$34 ]{.underline}
  [Medical Device User Fees (MDUFMA)\...\...\...\...\...\...\..... ]{.underline}                                                                   [25 ]{.underline}            [32 ]{.underline}            [34 ]{.underline}            [+2 ]{.underline}
  [Proposed Law, Animal Drugs User Fee Act (ADUFA) ]{.underline}                                                                                   [ 0 ]{.underline}            [5 ]{.underline}             [8 ]{.underline}             [+3 ]{.underline}
  [Mammography Quality Standards Act (MQSA)\...\...\... ]{.underline}                                                                              [16 ]{.underline}            [16 ]{.underline}            [17 ]{.underline}            [+1 ]{.underline}
                                                                                                                                                                                                                                          
  [Export/Certification Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                         [6 ]{.underline}             [7 ]{.underline}             [7 ]{.underline}             [ 0 ]{.underline}
                                                                                                                                                                                                                                          
  **[Subtotal, User Fees\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}**                                   **[\$271 ]{.underline}**     **[\$310 ]{.underline}**     **[\$350 ]{.underline}**     **[+\$40 ]{.underline}**
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
  **[Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**                                                     **[\$1,381 ]{.underline}**   **[\$1,386 ]{.underline}**   **[\$1,495 ]{.underline}**   **[+\$109 ]{.underline}**
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
  **[Biodefense (non-add):]{.underline}**                                                                                                                                                                                                 
                                                                                                                                                                                                                                          
  *[Food Defense\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}*                           *[\$97 ]{.underline}*        *[\$116 ]{.underline}*       *[\$181 ]{.underline}*       *[+\$65 ]{.underline}*
                                                                                                                                                                                                                                          
  *[ Medical Product Countermeasures\...\...\...\...\...\...\...\...\...\... ]{.underline}*                                                        *[53 ]{.underline}*          *[53 ]{.underline}*          *[58 ]{.underline}*          *[+5 ]{.underline}*
  *[ Security\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}*               *[7 ]{.underline}*           *[7 ]{.underline}*           *[7 ]{.underline}*           *[ 0 ]{.underline}*
                                                                                                                                                                                                                                          
  *[Subtotal, Biodefense (non-add)\...\...\...\...\...\...\...\...\...\... ]{.underline}*                                                          *[\$157 ]{.underline}*       *[\$176 ]{.underline}*       *[\$246 ]{.underline}*       *[+\$70 ]{.underline}*
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                          
  [FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}   [ 10,214 ]{.underline}       [ 10,691 ]{.underline}       [ 10,844 ]{.underline}       [+153 ]{.underline}
                                                                                                                                                                                                                                          
  ------------------------------------------------------------------------------------------------------------------------------------------------ ---------------------------- ---------------------------- ---------------------------- ----------------------------

[The FY 2005 budget request for FDA is \$1.8 billion, a net program
level increase of \$149 million. Within this total, there are program
increases of \$179 million, partially offset by \$30 million in
management and other savings. Of the funds requested, \$350 million will
be derived from industry-specific user fees. Significant increases are
included to ensure the safety and protection of our food supply; and
accelerate the availability of new, safe and effective drugs and medical
technologies, including biodefense medical countermeasures. The budget
also supports FDA\'s administrative consolidation efforts -- including
moving 1700 staff into their consolidated headquarters currently under
construction at White Oak in Maryland.]{.underline}

[Protecting the Food Supply]{.underline}

[FDA is responsible for protecting the food supply directly through its
oversight of approximately 80 percent of the U.S. food supply, and
indirectly through it\'s efforts to improve the health of food animals
regulated by the U.S. Department of Agriculture (USDA). In FY 2005,
through its Foods program, FDA will ensure consumers are protected
against intentional and accidental risks against the safety of our food
supply and also ensure the safety of dietary supplements and cosmentics.
For this work, the budget includes \$470 million, a net increase of \$60
million. 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\" prevention efforts. For this work,
the budget includes \$99 million in the Animal Drugs and Feeds program,
a net increase of \$11 million. Of this total, \$7 million is derived
from industry-specific animal drug premarket review fees.]{.underline}

[Food Defense: Over the past three years, FDA has bolstered the
nation\'s food defense through increases in port security, food import
inspections and additional food security personnel. Specifically, the
Agency hired more than 655 additional food security personnel, and, as a
result, achieved a five-fold increase in field import examinations
between FY 2001 and FY 2003. This feat was accomplished in part as a
result of the heightened alert during Operation Liberty Shield when FDA
ramped up domestic and import inspection coverage -- increasing import
inspections to 80,000 by staffing 50 more ports of entry for a total of
90. FDA will soon finalize and implement provisions of the Public Health
Security and Bioterrorism Preparedness and Response Act of 2002. These
new safeguards will require registration of food facilities, advance
notice of food imports, improved record-keeping for imported foods, and
will provide authority to detain food when there is credible evidence
that it poses a threat of serious adverse health consequences or death.
]{.underline}

[The budget requests a \$65 million major expansion for a total of \$181
million dedicated to FDA\'s efforts to protect Americans from risks of
deliberate food contamination. This government-wide strategy will be in
coordination with the Department of Homeland Security and the U.S.
Department of Agriculture\'s Food Safety and Inspection Service with the
common aim of increasing the ability to detect threats to our nation\'s
food supply. Within the increase, \$35 million will be directed to
efforts to increase analytic surge testing capacity for biological,
chemical and radiological threat agents by enhancing the Food Emergency
Response Network (FERN). When completed, FERN will encompass a
nationwide network of Federal and State laboratories, greatly promoting
the country\'s ability to respond immediately to terrorist attacks. \$15
million of the increase will fund research on technologies capable of
detecting and preventing threats to the food supply. Development of
these protection strategies will shield the food supply from potential
attacks and enable rapid response if needed. To reduce the risk of
contaminated food products entering domestic commerce, \$7 million will
be devoted to increasing import inspectional activities and domestic
food establishment inspections. In FY 2005, FDA will conduct 97,000
import field inspections, a more than 60 percent increase over FY 2004
and seven times the amount in FY 2001. FDA will also conduct over 25,500
domestic exams, nearly eleven times the amount in FY 2001. In addition,
\$3 million will be used outside Foods to support crisis response
operations. ]{.underline}

[FDA will also direct an added \$5 million to finance its role in the
government-wide biosurveillance effort designed to provide the earliest
possible detection of the international 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.]{.underline}

[Bovine Spongiform Enciphalopathy (BSE) \"Mad Cow Disease\": In FY 2005,
the budget seeks an additional \$8 million in Animal Drugs and Feeds to
expand BSE or \"Mad Cow Disease\" prevention efforts for an agency-wide
total of \$30 million. Since contaminated feed is the only known way for
BSE to spread among cattle, efforts will be expanded to ensure their
food supply is safe and free of potentially contaminated products. The
contamination of cattle feed occurs when byproducts, derived from a
contaminated animal, are included in animal foods. All firms handling
potentially contaminated products are inspected annually to ensure they
are not distributed to animal feed mixers, providing assurance of their
exclusion from the animal food supply. In response to the recent case in
the State of Washington, FDA halted the distribution of byproducts
derived from the contaminated cow, preventing their entrance into
commerce. In other program areas, \$6 million of the agency-wide total
will ensure substances used in the production of drugs and dietary
supplements are free of contamination, and donated blood and tissue
products are safe.]{.underline}

[Animal Drugs Premarket Review: In FY 2004, Congress enacted the Animal
Drug User Fee Act (ADUFA). The budget includes \$8 million derived from
industry-specific fees, bringing the total spending on animal drug
premarket review to \$36 million. These funds will allow FDA to improve
review times on 90 percent of original new animal drug applications by
35 days. ]{.underline}

[Medical Devices]{.underline}

[The FY 2005 budget includes \$217 million, a \$26 million increase in
budget authority to ensure medical technologies are safe, effective and
available to Americans as quickly as possible. This level of funding is
consistent with the intent of the Medical Device User Fee and
Modernization Act of 2002 (MDUFMA). Including \$35 million derived from
industry-specific user fees, the budget includes a total of \$252
million for the Medical Devices program. ]{.underline}

[The Medical Devices increase will support the necessary investments,
including hiring 50 additional staff, to accomplish review goals that
become increasingly aggressive through FY 2007. In FY 2005, FDA expects
to meet goals related to the review of applications for improvements to
existing devices and certain new devices that manufacturers claim are as
safe and effective as ones currently in the marketplace. FDA will review
75 percent of applications for each of these application types within
180 and 90 days respectively. This percentage of applications reviewed
will become more challenging each year through FY 2007. For breakthrough
technologies and other new, innovative devices, ambitious review goals
take effect in FY 2006, and in FY 2007 when decisions will be made on 90
percent of applications within 320 days. ]{.underline}

[Human Drugs and Biologics ]{.underline}

[In FY 2005, the budget includes \$499 million, an increase of \$23
million for the Human Drugs program and \$173 million, an increase of
\$4 million in Biologics. Of the total spending on these activities,
\$253 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 2003, FDA approved 466 new and generic drugs and
biological products, many of which represent significant therapeutic
advances.]{.underline}

[Biodefense Countermeasures: An increase of \$5 million will be used to
accelerate the availability of safe and effective biodefense
countermeasures. The first request for proposals for procurement of a
new generation anthrax vaccine through Project BioShield will be
initiated shortly. FDA has been working closely with NIH and industry
researchers, and must expand its work on this and other needed
countermeasures. In FY 2005, FDA anticipates dedicating a total of 119
staff years in the Biologics program and 81 in the Drugs program to
these critically important activities. ]{.underline}

[Patient Safety: The budget includes \$77 million to finance efforts
targeted at reducing preventable adverse events. Improving the reporting
of adverse events that were potentially related to the proper or
improper use of regulated products is a major function of the Agency.
Efforts are now underway to take that a step further, helping medical
providers avoid medical errors. It is estimated that 45 percent of
drug-related medical errors occurred when the wrong drug was dispensed.
New requirements for bar code labels on prescription drugs will enable
hospitals and pharmacies to avoid many of these errors by implementing
new bar code controls.]{.underline}

[Increased attention will be directed towards ensuring that new drugs
and biologics are not only safe and effective for use in adults, but
also in the pediatric population. In FY 2003, manufacturer-requested
pediatric studies were used to change the labels of 21 medications,
making them available for use by children. In FY 2005, efforts to
implement the Pediatric Research Equity Act will result in
pharmaceutical companies conducting pediatric studies on new drugs and
biologics, as well as provide information on the appropriate pediatric
dosage and administration.]{.underline}

[Generic Drugs: In FY 2005, \$53 million is included within the Drugs
program to accelerate the availability of safe and effective generic
drugs. Generic drugs that are approved are just as safe and effective as
their brand-name counterparts, and they often cost 70 percent less. New
regulations have been implemented to prevent inappropriate delays
related to patent filings -- speeding the availability of generic drugs
to American consumers and saving them an estimated \$35 billion over the
next ten years. In FY 2005, it is expected that 399 generic drug
applications will be approved, with an 18-month average review time.
This is a 50 percent increase in approvals and 14 percent acceleration
in review time since FY 2002.]{.underline}

[Prescription Drug User Fee Act (PDUFA): The budget includes \$284
million from the Prescription Drug User Fee Act (PDUFA) fees, of which
\$245 million is available for the Human Drugs and Biologics programs
and the remaining \$39 million for rent and other costs related to the
management and operations of the program. The PDUFA program has been
highly successful in reducing the time needed to review applications for
new drugs and biologics, while maintaining the safety standards
essential to the public\'s health. These fees have also enabled the
provision of substantially more technical assistance, advice, and rapid
responses to special inquiries during the drug development and testing
period. As a result, industry has been able to significantly shorten the
time needed for drug development and testing. ]{.underline}

[Facilities]{.underline}

[The FY 2005 budget includes \$186 million for rent and facilities for
staff, a net increase of \$28 million. This includes \$123 million for
rental payments to the General Services Administration, and \$63 million
for costs related to rent and construction. No new appropriations are
requested in FY 2005 for facility repair needs, utilizing funds
available from prior years instead. ]{.underline}

[New Headquarters Facility: The FY 2005 budget includes \$33 million for
the consolidation of FDA\'s headquarter facilities into their new campus
the General Services Administration (GSA) is constructing at White Oak
in suburban Maryland. These funds will support telecommunications
cabling and equipment, records management consolidation and office
hardware and equipment. In December of FY 2004, the Agency completed the
move of 125 scientists and laboratory equipment related to drug review
into their new Life Sciences laboratory. In FY 2005, 1,700 of Center for
Drug Evaluation and Research (CDER) administrative personnel will be
relocated to the new CDER Office building that is 50 percent complete
and will be ready for occupancy next April. The FY 2005 GSA budget
includes \$88 million for White Oak -- directed primarily at building a
medical device and radiological products laboratory to be occupied in FY
2006. ]{.underline}

[Management Improvements]{.underline}

[Consistent with the President\'s Management Agenda (PMA), the FY 2005
budget request also includes cost savings from FDA completing
implementation of its new shared services approach for internal
administrative support functions -- i.e., facilities management and
operations, telecommunications, procurement, travel, information
technology support and project management. This will include customer
advocated, service level agreements, governance boards, etc., to ensure
the quality as well as the cost-effectiveness of these services. These
efforts will achieve \$23 million in savings throughout the Agency.
FDA\'s budget also includes a \$14 million increase in pay.]{.underline}

**[Health Resources and Services Administration]{.underline}**

  ------------------------------------------------------------------------------------------------------------------------------------------------------------------ ----------------------------- ----------------------------- ----------------------------- ----------------------------
  [Telehealth\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}          [ 27 ]{.underline}            [ 4 ]{.underline}             [ 4 ]{.underline}             [ 0 ]{.underline}
                                                                                                                                                                                                                                                               
  [Black Lung/Radiation Exposure Compensation\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                [ 8 ]{.underline}             [ 7 ]{.underline}             [ 7 ]{.underline}             [ 0 ]{.underline}
  [Hansen\'s Disease Services Programs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                [ 20 ]{.underline}            [ 19 ]{.underline}            [ 19 ]{.underline}            [ 0 ]{.underline}
  [Health Care Facilities/Other Improvement Projects\...\...\...\...\...\...\...\..... ]{.underline}                                                                 [ 295 ]{.underline}           [ 372 ]{.underline}           [ 0 ]{.underline}             [ -372 ]{.underline}
  [State Planning Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                          [ 15 ]{.underline}            [ 15 ]{.underline}            [ 0 ]{.underline}             [ -15 ]{.underline}
  [Universal Newborn Hearing Screening/Trauma\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                [ 13 ]{.underline}            [ 13 ]{.underline}            [ 0 ]{.underline}             [ -13 ]{.underline}
  [Program Management\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                              [ 164 ]{.underline}           [ 155 ]{.underline}           [ 158 ]{.underline}           [ +3 ]{.underline}
                                                                                                                                                                                                                                                               
  [National Practitioner Data Bank (User Fees)\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                        [ 20 ]{.underline}            [ 16 ]{.underline}            [ 16 ]{.underline}            [ 0 ]{.underline}
                                                                                                                                                                                                                                                               
  [Health Integrity & Protection Data Banks (User Fees)\...\...\...\...\...\..... ]{.underline}                                                                      [6 ]{.underline}              [4 ]{.underline}              [4 ]{.underline}              [0 ]{.underline}
                                                                                                                                                                                                                                                               
  **[Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**                       **[ \$7,017 ]{.underline}**   **[ \$7,188 ]{.underline}**   **[ \$6,578 ]{.underline}**   **[ -\$610 ]{.underline}**
                                                                                                                                                                                                                                                               
  [Less Funds Allocated From Other Sources:]{.underline}                                                                                                                                                                                                       
                                                                                                                                                                                                                                                               
  [User Fees\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}               [ -25]{.underline}            [ -20]{.underline}            [ -20]{.underline}            [ 0 ]{.underline}
                                                                                                                                                                                                                                                               
  [PHS Evaluation Funds (Ryan White)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                       [ -25]{.underline}            [ -25]{.underline}            [ -25]{.underline}            [ 0 ]{.underline}
                                                                                                                                                                                                                                                               
  [Public Health and Social Service Emergency Fund\...\...\...\...\...\...\.... ]{.underline}                                                                        [-584]{.underline}            [-543]{.underline}            [-504]{.underline}            [+39 ]{.underline}
                                                                                                                                                                                                                                                               
  [Subtotal, Funds from Other Sources\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                         [ -\$634]{.underline}         [ -\$588]{.underline}         [ -\$549]{.underline}         [ +\$39 ]{.underline}
                                                                                                                                                                                                                                                               
  **[Total, Discretionary Budget Authority\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**                                                          **[ \$6,383]{.underline}**    **[ \$6,600]{.underline}**    **[ \$6,029]{.underline}**    **[ -\$571 ]{.underline}**
                                                                                                                                                                                                                                                               
  [FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}   [1,802]{.underline}           [1,858]{.underline}           [1,822]{.underline}           [ -36 ]{.underline}
                                                                                                                                                                                                                                                               
  ------------------------------------------------------------------------------------------------------------------------------------------------------------------ ----------------------------- ----------------------------- ----------------------------- ----------------------------

[The FY 2005 budget requests \$6.6 billion for HRSA, a net decrease of
\$610 million from the FY 2004 level. FY 2005 represents the fourth year
of support for the President\'s multi-year initiative to increase access
to health care for the uninsured and underserved by enhancing and
strengthening the Health Center program. In order to alleviate the
national nursing shortage, HRSA will direct more resources towards basic
nurse education, loan repayments, and scholarships. The Agency will
increase resources available to respond to national emergencies through
the National Health Service Corps. HRSA will also maintain a significant
investment in preparing our nation\'s hospitals and health professions
workforce for a bioterrorism event. The Agency will expand support for
medications for people living with HIV/AIDS. The budget also supports
rural health policy development and State-level infrastructure, to help
meet the unique challenges facing rural America, maternal and child
health programs, and important transplantation programs.]{.underline}

[Expanding Access to Health Care For Medically Underserved
Americans]{.underline}

[In 2002, the President launched an initiative to expand access to
health care by creating 1,200 new or expanded health center sites and
serving an additional 6.1 million people by 2006. Since FY 2001, the
Health Center program has significantly impacted over 600 communities,
serving over 13 million patients -- 3 million more than in FY 2001 -- 40
percent of whom have no insurance coverage, and many others who have
inadequate coverage.]{.underline}

[In FY 2005, the budget includes \$1.8 billion, an increase of \$219
million from FY 2004, resulting in services for an additional 1.6
million individuals in approximately 330 new and expanded sites. At this
level, a total of 15 million uninsured and underserved individuals will
receive comprehensive preventive and primary care services at over 3,800
health center sites across the country -- nearly 7 million in rural
areas.]{.underline}

[Health centers employ approximately 5,400 physicians and dentists, and
17,000 other health care clinicians -- 13 percent more physicians and
dentists than in FY 2001, and 20 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. The budget also
provides \$5 million in no year funding to maintain support for medical
malpractice coverage for volunteer providers in free
clinics.]{.underline}

[In addition, the FY 2005 budget proposes to reshape the Healthy
Communities Access Program (HCAP) to support efficient Health Center
networks and successful chronic disease management activities. The
reshaped HCAP program, funded at \$10 million, will support networks of
health centers that increase centers\' ability to maximize efficiency,
resources, and quality while minimizing costs and duplication of effort.
By placing the focus on health centers, resources will better serve
patients living with chronic diseases through interdisciplinary teams
implementing patient-centered practice models.]{.underline}

[Developing A Health Professions Workforce for the 21st
Century]{.underline}

[Expanding access to health care requires ensuring an adequate supply of
nurses. The Nation currently faces a nursing shortage of approximately
168,000 nurses. As the population continues to grow and age, and medical
services advance, the need for nurses will continue to increase. The
budget requests \$147 million for nursing education programs, an overall
increase of \$5 million. Since FY 2001, funding for nursing education
programs has increased by 75 percent.]{.underline}

[In FY 2005, the budget increases support for basic nurse education and
retention by \$10 million, for a total of \$42 million. An additional
\$32 million, a \$5 million increase, is requested to support over 1,000
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 diversity, \$44 million for
advanced nursing education, and maintains an \$8 million investment in
loans for nurse faculty and support for comprehensive geriatric
education. These programs will support the recruitment, education, and
retention of 24,000 nurses and nursing students.]{.underline}

[Geographic maldistribution of health professionals also remains a major
problem for many inner city and isolated rural communities. Over the
National Health Service Corps\' (NHSC) 30 year history, more than 24,500
health professionals have committed to service in underserved areas
across the country. Through a targeted management reform initiative,
which began in FY 2002, the NHSC is now better able to assist the
neediest communities. The ratio of loan repayments compared to
scholarships has increased by over 30 percent, enabling the NHSC to
immediately place more health professionals into service in needy
communities -- increasing the current field strength to more than 4,200
clinicians. The NHSC will continue to work with the Health Center
program to help meet its provider needs. Currently, half of NHSC
clinicians serve in health centers. The FY 2005 budget continues the
expansion of the NHSC with an increase of \$35 million, for a total of
\$205 million. Within this increased funding, \$25 million will be
directed to a specific new effort to recruit nurses and physicians to
serve in health professional shortage areas. As a condition of receiving
this assistance, these individuals will incur a service obligation in
underserved areas similar to other NHSC scholarship and loan repayment
recipients, and will be employees of community facilities. These health
care providers will also have a long term reserve commitment to the
Public Health Service Commissioned Corps. ]{.underline}

[To ensure a continuing source of scholarships focused on increasing
diversity in the health professions workforce, the FY 2005 budget
proposes a \$10 million investment in the Scholarships for Disadvantaged
Students program. The budget continues the policy of not funding more
general training efforts -- primary care, interdisciplinary community
projects, training for diversity, and public health. ]{.underline}

[The budget maintains a \$303 million investment in health professions
training in free-standing children\'s hospitals, the same as FY 2004.
The Program Assessment Rating Tool (PART) assessment found the
Children\'s Hospitals Graduate Medical Education program has a clear
purpose and since the program was initiated the percentage of
children\'s hospitals with negative margins has declined.]{.underline}

[Preparing America\'s Health Care System and Providers for
Bioterrorism]{.underline}

[The mission of the Hospital Preparedness program is to ready hospitals
and supporting health care systems -- primary care facilities, EMS
systems, poison control centers -- to deliver coordinated and effective
care to victims of terrorism and other public health emergencies. A
recent PART review found that this program has a clear and important
purpose and that it is well coordinated with other Federal preparedness
efforts.]{.underline}

[Between FY 2002 and FY 2004, a total of \$1.2 billion has been made
available for these efforts in States, Territories, and certain
municipalities. By the end of FY 2003, every awardee had staffed a
hospital preparedness office and advisory committee, completed a needs
assessment, and developed a plan of action in response to the identified
needs. Approximately 60 percent of awardees had developed regional
hospital plans to address surge capacity and manage a potential epidemic
involving at least 500 patients. Awardees are also using funds to
conduct disaster drills; enhance communication systems; make
infrastructure improvements and expansions so that hospitals have
adequate laboratory capacity and improve capabilities to control
infection.]{.underline}

[The FY 2005 budget requests \$476 million to continue progress towards
the goal of 100 percent of States having surge capacity plans. Specific
areas of emphasis will include surge bed capacity, clinical personnel
augmentation, isolation capacity, and hospital-based pharmaceutical
caches. HHS is developing a plan to review the funding allocation and
will consider whether the current formula could be improved by including
indicators such as level of risk, level of preparedness, or measures
related to performance.]{.underline}

[Our health professions workforce must be prepared to recognize
indications of a terrorist event in their patients. The Bioterrorism
Training and Curriculum Development program, first initiated in FY 2003,
supports 19 cooperative agreements to deliver continuing education to a
diverse health care workforce and 12 cooperative agreements to
facilitate the training and preparation of current medical, nursing,
allied health, and other health professions students. The FY 2005 budget
includes \$28 million for this activity.]{.underline}

[Ensuring Access to Services for People Living with
HIV/AIDS]{.underline}

[The FY 2005 budget requests \$2.1 billion for the Ryan White HIV/AIDS
program, a net increase of \$35 million over FY 2004. The Ryan White
Care Act program provides services to approximately 530,000 individuals
each year with little or no insurance. These services include medical
care, access to lifesaving pharmaceuticals, dental care, outpatient
mental health services, outpatient substance abuse treatment, and home
health care. ]{.underline}

[Within the total FY 2005 request, the budget provides \$784 million, an
increase of \$35 million, for the AIDS Drug Assistance Program to
support the purchase of medications for persons living with HIV/AIDS. At
this level, monthly utilization of ADAP will increase from approximately
93,800 clients in FY 2004 to approximately 100,000 clients in FY 2005.
]{.underline}

[HHS continues its commitment to enhance and improve the delivery of
health care by Ryan White CARE Act programs to persons living with
HIV/AIDS. HRSA is working closely with grantees to fully implement
management and improvement programs to enhance the quality of care and
services provided to persons living with HIV/AIDS. ]{.underline}

[HRSA assists international AIDS efforts in the areas of human capacity
and antiretroviral program development in foreign countries
significantly impacted by the virus. In FY 2005, HRSA, through a
partnership with CDC and USAID, will continue to support the
International Mother and Child HIV Prevention Initiative and the
President\'s Emergency Plan for AIDS Relief.]{.underline}

[Providing Health Care in Rural Communities]{.underline}

[Rural residents tend to have more difficulty accessing health care and
poorer health outcomes than their urban counterparts. The rural
provisions of the recently enacted Medicare Prescription Drug and
Modernization bill will substantially increase the resources available
to rural communities -- \$9 billion over the next 5 years. In addition,
nearly 7 of the 15 million patients served by health centers in FY 2005
will be from rural communities. The FY 2005 budget also requests \$52
million for targeted rural health programs, including \$22 million for
the Denali Commission.]{.underline}

[As noted in the PART review, independent evaluations indicate that
these rural health programs are effective and achieve results. However,
PART also found that a less fragmented and more seamless Federal effort
could help maximize access, generate effectiveness, yield cost
efficiencies, and reduce the number of specific and geographically
targeted projects funded each year.]{.underline}

[In FY 2005, the budget targets select activities. A total of \$17
million is requested for State Offices of Rural Health that monitor and
direct State-level strategy for rural health care, and for Federal
policy research studies and rural health information dissemination. An
additional \$13 million is requested for Rural Health Outreach and
Network Development grants, which enable community partnerships to
implement creative strategies to meet their unique health needs, and for
grants to purchase life-saving emergency devices. ]{.underline}

[Improving Maternal and Child Health]{.underline}

[The Department continues to work towards improved health outcomes for
all American women and children. The budget requests \$730 million for
the Maternal and Child Health (MCH) Block Grant, the same as FY 2004.
The Block Grant supports Federal and State partnerships that provide
critical services to 27 million women and children. 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.
The MCH Block Grant also provides support for newborn screening, lead
poisoning, and injury prevention. The budget also includes \$98 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.]{.underline}

[The budget maintains a \$278 million investment in the Family Planning
program. The program supports a network of more than 4,600 clinics
nationwide that provide access to a wide array of reproductive health
care and preventive services to nearly 5 million people. Counseling and
education regarding abstinence are required for all adolescent clients
through this program. ]{.underline}

[The budget also includes \$53 million to maintain three important
emergency services programs: Emergency Medical Services for Children,
\$20 million; Poison Control Centers, \$24 million; and Traumatic Brain
Injury, \$9 million. The EMS for Children program will award 51 grants
to States and Territories to improve care for the 31 million children
and adolescents who are seen in emergency departments each year, and 37
additional grants to medical schools to develop and evaluate improved
procedures and protocols for treating children. The Poison Control
Center program will award 80 stabilization and enhancement grants to
Centers, which provide expert advice to the public 24 hours a day
regarding exposure to poisons, and will maintain a national toll-free
number. The Traumatic Brain Injury program facilitates State-wide needs
assessments and implement action plans, thereby ensuring comprehensive
and coordinated services.]{.underline}

[Supporting Transplantation]{.underline}

[Each day approximately 68 people in the United States receive a
life-saving organ transplant, but another 17 people die because the
demand for transplantable organs far exceeds the available supply. The
FY 2005 budget includes \$25 million to maintain support for the Organ
Transplantation program, which funds the network that manages the
distribution of organs throughout the United States and the national
registry of transplant recipients that assists in organ allocation. The
program will also award 25 grants to evaluate strategies for increasing
the consent to donate and to refine methods for identifying those
patients with the greatest medical need for
transplantation.]{.underline}

[Each year approximately 38,000 Americans under 55 years old are
diagnosed with leukemia and other blood and genetic diseases, and about
16,000 of them cannot be successfully treated with therapy other than a
blood stem cell transplant. Blood stem cells can be obtained from the
bone marrow or circulating blood of volunteer adult donors or collected
from the newest source -- umbilical cord and placenta after a normal
birth. The FY 2005 budget requests \$23 million to maintain the National
Bone Marrow Donor Registry, which enables patients to search for a
suitable, unrelated bone marrow donor. The budget also includes \$10
million to maintain the newly funded Cord Blood Stem Cell Bank. This
level of funding, along with the FY 2004 funds, would increase the
national inventory of cord blood stem cells by approximately 25
percent.]{.underline}

[Other HRSA Programs]{.underline}

[The budget proposes \$30 million for the remaining HRSA programs
including Telehealth, Hansen\'s Disease, Black Lung, and Radiation
Exposure Compensation, maintaining FY 2004 levels.]{.underline}

[Program Management]{.underline}

[The budget requests \$158 million for HRSA\'s program management, an
increase of \$3 million over the FY 2004 level. Resources requested will
enable HRSA to manage and operate a wide array of Federal programs as
well as to fund Federal pay cost increases.]{.underline}

**[Indian Health Service]{.underline}**

  --------------------------------------------------------------------------------------------------------------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                                                                                                                                                           **[2005]{.underline}**
                                                                                                                                                                                                                           
  [\`]{.underline}                                                                                                                  **[2003]{.underline}**       **[2004]{.underline}**       **[2005]{.underline}**       **[+/- 2004]{.underline}**
                                                                                                                                                                                                                           
  [Indian Health Service:]{.underline}                                                                                                                                                                                     
                                                                                                                                                                                                                           
  [Clinical Services\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                        [\$2,560 ]{.underline}       [\$2,618 ]{.underline}       [\$2,693 ]{.underline}       [+\$75 ]{.underline}
                                                                                                                                                                                                                           
  *[Contract Health Services (Non-Add)\...\...\...\..... ]{.underline}*                                                             *[475 ]{.underline}*         *[479 ]{.underline}*         *[497 ]{.underline}*         *[+18 ]{.underline}*
                                                                                                                                                                                                                           
  [Preventive Health\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                            [103 ]{.underline}           [107 ]{.underline}           [112 ]{.underline}           [+5 ]{.underline}
  [Contract Support Costs\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                    [269 ]{.underline}           [267 ]{.underline}           [267 ]{.underline}           [ 0 ]{.underline}
  [Tribal Management/Self-Governance\...\...\...\...\...\..... ]{.underline}                                                        [8 ]{.underline}             [8 ]{.underline}             [8 ]{.underline}             [ 0 ]{.underline}
  [Urban Health\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                      [31 ]{.underline}            [32 ]{.underline}            [33 ]{.underline}            [+1 ]{.underline}
  [Indian Health Professions\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                      [31 ]{.underline}            [31 ]{.underline}            [31 ]{.underline}            [ 0 ]{.underline}
  [Direct Operations\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                          [60 ]{.underline}            [61 ]{.underline}            [62 ]{.underline}            [+1 ]{.underline}
  [Diabetes Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                        [100 ]{.underline}           [150 ]{.underline}           [150 ]{.underline}           [ 0 ]{.underline}
                                                                                                                                                                                                                           
                                                                                                                                                                                                                           
  [Subtotal, Services Program Level\...\...\...\...\...\...\..... ]{.underline}                                                     [\$3,162 ]{.underline}       [\$3,274 ]{.underline}       [\$3,356 ]{.underline}       [+\$82 ]{.underline}
                                                                                                                                                                                                                           
                                                                                                                                                                                                                           
                                                                                                                                                                                                                           
  [Indian Health Facilities:]{.underline}                                                                                                                                                                                  
                                                                                                                                                                                                                           
  [Health Care Facilities Construction\...\...\...\...\...\...\..... ]{.underline}                                                  [\$82 ]{.underline}          [\$94 ]{.underline}          [\$42 ]{.underline}          [-\$52 ]{.underline}
  [Sanitation Construction\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                   [93 ]{.underline}            [93 ]{.underline}            [103 ]{.underline}           [+10 ]{.underline}
  [Facilities & Environmental Health Support\...\...\.... ]{.underline}                                                             [132 ]{.underline}           [138 ]{.underline}           [143 ]{.underline}           [+5 ]{.underline}
  [Maintenance & Improvement\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                              [56 ]{.underline}            [55 ]{.underline}            [55 ]{.underline}            [ 0 ]{.underline}
  [Medical Equipment\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                              [17 ]{.underline}            [17 ]{.underline}            [17 ]{.underline}            [ 0 ]{.underline}
                                                                                                                                                                                                                           
                                                                                                                                                                                                                           
                                                                                                                                                                                                                           
  [Subtotal, Facilities Program Level\...\...\...\...\...\...\.... ]{.underline}                                                    [\$380 ]{.underline}         [\$397 ]{.underline}         [\$360 ]{.underline}         [-\$37 ]{.underline}
                                                                                                                                                                                                                           
  **[Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**                                  **[\$3,542 ]{.underline}**   **[\$3,671 ]{.underline}**   **[\$3,716 ]{.underline}**   **[+\$45 ]{.underline}**
                                                                                                                                                                                                                           
                                                                                                                                                                                                                           
  [Less Funds Allocated From Other Sources:]{.underline}                                                                                                                                                                   
                                                                                                                                                                                                                           
  [Health Insurance Collections\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                          [\$586 ]{.underline}         [\$593 ]{.underline}         [\$593 ]{.underline}         [ \$0 ]{.underline}
  [Rental of Staff Quarters\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                  [6 ]{.underline}             [6 ]{.underline}             [6 ]{.underline}             [ 0 ]{.underline}
  [Diabetes Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                        [100 ]{.underline}           [150 ]{.underline}           [150 ]{.underline}           [ 0 ]{.underline}
                                                                                                                                                                                                                           
  **[Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**                                      **[\$2,850 ]{.underline}**   **[\$2,922 ]{.underline}**   **[\$2,967 ]{.underline}**   **[+\$45 ]{.underline}**
                                                                                                                                                                                                                           
                                                                                                                                                                                                                           
                                                                                                                                                                                                                           
  [FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}   [ 15,020 ]{.underline}       [ 16,145 ]{.underline}       [ 16,251 ]{.underline}       [+106 ]{.underline}
                                                                                                                                                                                                                           
  --------------------------------------------------------------------------------------------------------------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------

[The IHS FY 2005 budget request is \$3.7 billion, a net increase of \$45
million over FY 2004. Additional funds are requested primarily for the
provision of safe water and sewage disposal for Indian communities and
to purchase additional health care from non--IHS hospitals and health
providers. The IHS anticipates receiving \$593 million in health
insurance reimbursements in FY 2005, primarily from Medicare and
Medicaid.]{.underline}

[Agency Description]{.underline}

[The IHS is the primary source of medical care for the 1.6 million
American Indians and Alaska Natives who are members of more than 560
Federally recognized tribes. Care is provided through a network of 49
hospitals and over 500 outpatient clinics and smaller facilities located
primarily in the Southwest, Oklahoma, the Northern Plains and Alaska.
Tribes currently operate 15 of the hospitals and three--quarters of the
clinics and smaller facilities under self--determination contracts with
the Agency. The IHS also purchases medical care for Indian people from
non--IHS hospitals and health providers and funds 34 urban Indian health
organizations. In addition to providing medical treatment, IHS carries
out substantial prevention and wellness activities including diabetes
prevention and disease management, sanitation construction to provide
water and waste disposal for Indian communities, injury prevention,
mental health services, and alcohol/substance abuse treatment and
prevention.]{.underline}

[Access to Health Care]{.underline}

[The population IHS serves increases annually at approximately 2
percent. Like any health care provider, IHS also experiences increases
in the cost of providing care.]{.underline}

[Contract Health Services: The budget includes \$497 million, an
increase of \$18 million over FY 2004, to purchase health care from
non--IHS hospitals and health providers. This funding increase, combined
with the additional purchasing power provided in the recently enacted
Medicare Prescription Drug, Improvement, and Modernization Act, will
allow the purchase of an estimated 35,000 additional outpatient visits
or 3,000 additional days of inpatient care. Section 506 requires
hospitals that participate in Medicare to provide inpatient treatment
services to IHS at rates determined by the Secretary. Contract Health
Service funds purchase specialty care, including most types of surgery,
and are used to purchase all medical care for Tribes that do not have an
IHS facility nearby.]{.underline}

[Opening New Health Facilities: An additional \$23 million is included
to add staff at five outpatient facilities scheduled to open during FY
2005. Tribes financed construction of three of these facilities saving
IHS \$37 million in construction costs. When fully operational, these
facilities will double the number of primary care provider visits that
can be provided at these sites and also provide new
services.]{.underline}

[Health Facility Construction: The budget includes \$42 million to
complete construction of two outpatient facilities, serving the Navajo
Nation at Red Mesa, Arizona and the Sisseton--Wahpeton Sioux Tribe at
Sisseton, South Dakota, and provide necessary staff housing for the
health facilities at Zuni, New Mexico and Wagner, South Dakota. When
completed, the outpatient facilities will provide an additional 36,000
primary care provider visits, replace the Sisseton hospital, which was
built in 1936, and bring 24 hour emergency care to the Red Mesa area for
the first time. IHS will add thirteen units of staff quarters and
replace 16 house trailers built during the 1950s and 1960s and excessed
to Zuni. Having decent local housing available will make it easier to
recruit and retain health professionals at these sites.]{.underline}

[Urban Indian Health Program: In addition to providing health care to
Indian people on or near reservations, IHS also provides over \$30
million annually to thirty--four urban Indian health organizations
providing services in cities with large numbers of Indian people. These
organizations provide primary medical services, basic preventive health
services, outreach and referral services and alcohol and drug treatment.
IHS funds account for about half of all funds available to these
organizations, major non--IHS funders are Medicaid, other Federal
programs, and State and local governments. A Program Assessment Rating
Tool (PART) review of the Urban Program found it has demonstrated
progress on its long--term goals as well as improved efficiencies and
cost effectiveness.]{.underline}

[Pay Costs: The budget includes an additional \$36 million to cover
increased pay costs for Federal and Tribal employees who operate health
facilities, and carry out prevention and wellness programs.]{.underline}

[Health Insurance Reimbursements: IHS facilities receive Medicare and
Medicaid under a cost--based methodology developed in close cooperation
with the Centers for Medicare & Medicaid Services. IHS expects to
receive a total of \$593 million from health insurance in FY 2005,
primarily from Medicare and Medicaid, but including nearly \$50 million
in third party employer provided health insurance.]{.underline}

[Preventive Health Improvements]{.underline}

[IHS has long recognized that preventing disease and promoting wellness
are often the most cost effective ways to raise the health status of
Indian people to the highest level. Substantial funds are devoted to
these activities in order to reduce the need for expensive medical
treatment. The budget request continues these investments in the areas
of diabetes, additional sanitation construction and several smaller
activities.]{.underline}

[Diabetes: Through the Special Diabetes Program for Indians grant
program, IHS provides funds to over 300 tribes and Indian organizations.
In FY 2005, IHS will award \$150 million. Over the past four years,
\$500 million has been provided to support diabetes prevention and
disease management activities at the local level. The program has
substantially increased the availability of services including basic
clinical exams, newer treatment medications and therapies, laboratory
tests to assess diabetes control and complications, screening for
diabetes and pre--diabetes in a variety of locations, nutrition
education, and physical fitness activities. These services have led to a
steady increase in the percent of diabetic patients with Ideal blood
sugar control. Starting in FY 2004, the program will include a new
competitive grant activity to identify successful examples of preventing
the onset of type II diabetes or of cardiovascular disease among
diabetics.]{.underline}

[Sanitation Construction: The budget includes \$103 million for
sanitation construction -- an increase of 11 percent or \$10 million
over FY 2004 -- to provide safe water and waste disposal systems to an
estimated 22,000 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. A recent
review of the program found that it demonstrated increased long--term
cost efficiencies and that it was optimally designed.]{.underline}

[Additional Preventive Health Investments: The budget requests \$7
million for three specific investments which will strengthen the ability
of IHS to prevent disease and promote wellness. An additional \$2
million is requested to expand the Director\'s Health Promotion and
Disease Prevention Initiative. Effective low cost health interventions
can be designed and implemented by people with knowledge of their local
communities. Funds will support implementation of 50 local community
interventions, best practice dissemination, and training for community
members. The request also adds \$3 million for epidemiol-ogy centers.
The seven existing epidemiology centers provide information for about
half of the population IHS serves, but do not cover the Navajo,
Oklahoma, Billings, or California areas. Additional funds will add three
or four new centers and increase support for the seven existing
centers.]{.underline}

[Some 50,000 Alaska Natives live in communities with no access to IHS
hospitals or outpatient facilities except by air travel. Community
Health Aides/Practitioners (CHA/Ps) are the only local source of health
care in many of these communities and are critical to reducing the high
transportation costs of bringing people to treatment. An additional \$2
million will add 30 CHA/Ps for a total of 516.]{.underline}

[Information Technology: The budget includes \$69 million for
information technology, an increase of \$4.5 million compared to FY
2004. A PART review of IHS\'s major information system -- the Resource
and Patient Management System (RPMS) -- found that RPMS compared
favorably with similar Federal information systems and consistently
scores well on information system reviews.]{.underline}

[Supporting Indian Self-Determination]{.underline}

[Tribes continue to increase the number of IHS programs they operate,
both in dollar terms and as a percentage of the Agency\'s budget. In FY
2005, Tribes will control an estimated \$1.8 billion, or 56 percent of
IHS\'s total budget request.]{.underline}

[To bring Indian issues to the attention of all parts of the Department,
the Secretary has reactivated the Intradepartmental Council on Native
American Affairs. To better understand the conditions in Indian country,
the Secretary or Deputy Secretary has visited Tribal Leaders and Indian
reservations in all twelve IHS areas, accompanied by senior HHS
staff.]{.underline}

**[Centers for Disease Control and Prevention]{.underline}**

+-------------+-------------+-------------+-------------+-------------+
|             | **[2003]{.u | **[2004]{.u | **[2005]{.u | *           |
|             | nderline}** | nderline}** | nderline}** | *[2005]{.un |
|             |             |             |             | derline}**\ |
|             |             |             |             | **[+/-      |
|             |             |             |             | 2004]{.u    |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Chronic    |             |             |             |             |
| Disease     |             |             |             |             |
| Prevention  |             |             |             |             |
| & Health    |             |             |             |             |
| P           |             |             |             |             |
| romotion:]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Steps To A | [\$15       | [\$44       | [\$125      | [+\$81      |
| Healthier   | ]{          | ]{          | ]{          | ]{          |
| US          | .underline} | .underline} | .underline} | .underline} |
| Initia      |             |             |             |             |
| tive\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\.....]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Youth      | [51         | [36         | [5          | [-31        |
| Media       | ]{          | ]{          | ]{          | ]{          |
| Campaign    | .underline} | .underline} | .underline} | .underline} |
| \...\...    |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\....]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Breast and | [199        | [210        | [220        | [+10        |
| Cervical    | ]{          | ]{          | ]{          | ]{          |
| Cancer      | .underline} | .underline} | .underline} | .underline} |
| \           |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\.....]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Diabetes,  | [525        | [564        | [566        | [+2         |
| Obesity,    | ]{          | ]{          | ]{          | ]{          |
| and Other   | .underline} | .underline} | .underline} | .underline} |
| Pro         |             |             |             |             |
| grams\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\.....]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Subtotal,  | [\$790      | [\$853      | [\$915      | [+\$62      |
| Chro        | ]{          | ]{          | ]{          | ]{          |
| nic\...\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [En         | [183        | [183        | [184        | [+1         |
| vironmental | ]{          | ]{          | ]{          | ]{          |
| H           | .underline} | .underline} | .underline} | .underline} |
| ealth\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
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| **[Total,   | **[\$4,340  | **[\$4,440  | **[\$4,180  | **[-\$260   |
| Proposed    | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| Law Budget  | nderline}** | nderline}** | nderline}** | nderline}** |
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[The FY 2005 budget requests a total program level of \$6.9 billion for
the Centers for Disease Control and Prevention (CDC), a net decrease of
\$58 million below FY 2004. This net change includes \$341 million in
expansions of on-going programs such as Steps To A Healthier US and the
National Breast and Cervical Cancer Early Detection Program; new
detection initiatives for bioterrorism and naturally occurring
infectious diseases; improvements in childhood immunizations; and a
major reinvestment in the health statistics needed for decision-making
in both government and the private sector. The increases are partially
offset by the completion of some new facilities, earmarked projects, and
retargeting of funds in some areas. The FY 2005 budget for CDC also
includes \$1.4 billion in mandatory immunization funding and \$249
million in Public Health Service evaluation transfer funds.]{.underline}

[Chronic Disease Prevention and Health Promotion]{.underline}

[More than 1.7 million Americans die of chronic diseases - such as heart
disease, cancer, and diabetes - each year, accounting for 79 percent of
all U.S. deaths. Although chronic diseases are among the most common and
costly health problems, they are also among the most preventable. The
budget includes \$915 million for Chronic Disease Prevention and Health
Promotion, a net increase of \$62 million over FY 2004.]{.underline}

[Steps To A Healthier US Initiative: The FY 2005 Budget includes \$125
million, an increase of \$81 million for the Steps To A Healthier US
Initiative. Of this request \$115 million, (including \$71 million of
the increase) will be used to expand the State and community grant
program initiated this past September to reduce the prevalence of
diabetes, obesity, and asthma-related complications through prevention
initiatives. Existing grantees will receive funding to carry out the
plans they are preparing to implement, and new projects will be started
in additional States, cities, and tribes. The initial 12 grants reach 23
communities including seven large cities, one Tribal consortium, and
four State-based grants that cover 15 smaller cities and rural areas.
These funds will help implement community-based programs targeting those
at high risk for diabetes, obesity, and asthma. Philadelphia plans to
expand supervised physical activity programs aimed at students with
chronic diseases at schools. In Michigan, a consortium of American
Indian Tribes will implement a program that seeks to encourage the
consumption of highly nutritious traditional foods and pass on wisdom
and cultural practices about them. New Orleans will develop neighborhood
walking and bicycling plans to build a more \"walkable and bikeable
city. A total of \$10 million will be used to expand the Diabetes
Detection Initiative, which targets at-risk populations to identify
undiagnosed diabetes. The aim of this initiative is to reach these
populations where they live, work, and play through a customized,
tailored approach with the aim of identifying undiagnosed diabetes. The
program design promotes the self-identification of risk status, follow
up to a health provider to assess the need for a diagnostic test, and
the administration of appropriate diagnostic tests, if
indicated.]{.underline}

[National Breast and Cervical Cancer Early Detection Program: CDC\'s
National Breast and Cervical Cancer Early Detection Program (NBCCEDP)
has helped to increase mammography use by women aged 50 and older by 20
percent since the program\'s inception in 1991. NBCCEDP targets
low-income women with little or no health insurance and has helped to
reduce disparities in screening for women from racial and ethnic
minorities. CDC will increase support to States in order to conduct
outreach and pay for additional breast and cervical cancer screens for
underserved women. The budget for NBCCEDP is \$220 million for FY 2005,
an increase of \$10 million. With the requested increase, CDC projects
providing an additional 32,000 diagnostic and screening services to
women who are hard-to-reach, have rarely, or have never been screened
for these cancers. ]{.underline}

[Youth Media Campaign: The budget requests \$5 million for the VERB
It\'s What You Do Youth Media Campaign targeted to increase and maintain
regular physical activity among tweens (youth ages 9-13) through paid
media, partnerships, and community efforts. These funds will enable CDC
to maintain a library of proven media messages for distribution as
public service announcements.]{.underline}

[Environmental Health]{.underline}

[The budget contains \$184 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.]{.underline}

[Health Statistics]{.underline}

[The budget requests \$150 million for Health Statistics, an increase of
\$22 million over FY 2004. This investment reflects 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. This increase will position the
surveys of NCHS to meet new challenges. This new investment will
preserve and modernize the Nation\'s vital statistics system. CDC will
expand contracts with States to purchase birth and death data and move
forward with e-government initiatives to update the content of birth and
death records. The increase will also provide the robust 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. Additionally funds will address major emerging
data gaps in the National Health Care Survey, such as long-term care and
assisted living facilities.]{.underline}

[Immunization]{.underline}

[A significant health goal of the Nation is to ensure that at least 90
percent of all two-year olds receive the full series of vaccines. The
budget request of \$1.9 billion includes two streams of funding to
improve immunization rates. The mandatory Vaccines for Children (VFC)
program provides free vaccine to Medicaid recipients, the uninsured,
American Indians and Alaskan Natives, and children with limited health
coverage that does not cover specific immunizations. The discretionary
Section 317 program provides funds for State immunization operational
costs and many of the vaccines provided in public health
clinics.]{.underline}

[The budget includes three important immunization initiatives. First,
under current law, CDC will continue to build a six-month,
vendor-managed stockpile of all routinely recommended childhood
vaccines. In FY 2003, CDC invested \$168 million in the VFC program to
begin building these stockpiles of varicella, Hepatitis A and B,
pneumococcal conjugate (PCV), and (Hib) vaccines. Between FY 2004 and FY
2006, CDC plans to invest an additional \$583 million to meet the target
quantities for a six-month stockpile. The stockpile serves dual
purposes. Vaccines from the stockpile can be distributed in the event of
a disease outbreak. The stockpile will also mitigate the effect of any
supply disruptions that might occur on the manufacturing side. Second,
with \$40 million in each of fiscal years 2004 and 2005, CDC will, for
the first time, create a stockpile of children\'s influenza vaccine
under the VFC program. The flu season of 2003-2004 was a reminder of the
need for rapid access to vaccines. This stockpile would provide a
vendor-managed supply of between 4 to 6 million doses of vaccine, enough
to provide the high-risk population of children aged 6--23 months with
the two doses each would need. The flu vaccine stockpile could also be
made available for older children as needed. ]{.underline}

[Finally, in FY 2005 legislation will be proposed to improve access to
VFC vaccines for children already entitled to them, through two changes.
First, the proposed legislation will expand the number of access points
for children whose private insurance does not cover immunizations by
allowing them to receive their VFC vaccines at State and local public
health clinics. Currently, these children must go to specially
designated Federally Qualified Health Centers to receive VFC vaccines --
even if they visit a different public health clinic for all of their
other medical needs. The second change proposed in this VFC legislation
will restore tetanus and diphtheria vaccines to the VFC program. The VFC
statute, as enacted in 1993, caps prices for the three vaccines that
were in use prior to enactment of the legislation. The price caps are so
low, however, that the tetanus booster vaccine was removed from the VFC
program in 1998 when no vendor would bid on the contract. With these
legislative changes, an additional \$165 million will be added annually
to the VFC budget to cover the additional vaccines that will be provided
under this program. These changes will reduce by \$110 million the
demand for Vaccines financed through the Discretionary 317 Immunization
Program.]{.underline}

[The immunization budget will continue to provide \$151 million for
global immunization activities, including polio eradication. While
tremendous progress has been made with the number of polio-endemic
countries declining from 120 in 1988 to seven in 2003, a major
international effort continues to strive for the goal set by the World
Health Organization: global polio eradication by 2005. ]{.underline}

[HIV/AIDS, Sexually Transmitted Diseases, and Tuberculosis: HIV/AIDS,
sexually transmitted diseases (STDs) and tuberculosis (TB) are among the
most prevalent, costly and preventable infectious diseases in the United
States. The request for HIV, STD, and TB Prevention budget activity is
\$1,143 million.]{.underline}

[Global AIDS Program (GAP): Through the Global AIDS Program (GAP), CDC
works in partnership with USAID, HRSA, the Department of State and other
federal agencies, and multilateral and bilateral partners to ameliorate
the devastation caused by HIV/AIDS. The budget requests a total of \$143
million in CDC for on-going prevention care, treatment, surveillance,
and capacity-building programs in 25 countries in Asia, Africa, Latin
America, and the Caribbean. ]{.underline}

[The expertise and infrastructure established in GAP are being utilized
to support the President\'s Emergency Plan for AIDS Relief (PEPFAR)
announced in the State of the Union address in January 2003. The
Emergency Plan, authorized by Congress, incorporates the President\'s
International Mother to Child HIV Prevention Initiative. Fourteen of the
Global AIDS Program countries are part of the President\'s International
Mother to Child HIV Prevention Initiative, jointly implemented with
USAID and other Federal Agencies. For greater government-wide
integration under the direction of the Global AIDS Coordinator, the FY
2005 President\'s Budget will present Mother to Child Prevention
Initiative Activities in the Department of State. Although there has
been a shift in the placement of funding, CDC will continue to be a
major implementing agency for this vital initiative. ]{.underline}

[Domestic HIV/AIDS Prevention: The budget requests a total of \$790
million for CDC\'s Domestic HIV/AIDS Prevention and Research activities,
of which \$696 million is in the National Center for HIV, STD, and TB
Prevention (NCHSTP) and \$94 million is in the National Center for
Infectious Diseases (NCID) and the National Center for Chronic Disease
Prevention and Health Promotion (NCCDPHP). 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. Therefore, the CDC has launched a new
prevention initiative, Advancing HIV Prevention: New Strategies for a
Changing Epidemic (AHP). AHP is aimed at reducing barriers to the early
diagnosis of HIV infection, and if positive, increasing access to
quality medical care, treatment, and ongoing prevention services. AHP
emphasizes the use of proven public health approaches to reduce the
incidence and spread of diseases, as well as capitalizing on new rapid
test technologies, interventions that bring persons unaware of their HIV
status to HIV testing, and behavioral interventions that provide
prevention skills to people living with HIV. This new intervention will
help CDC and its partners to target funds more efficiently and directly
to those people greatest in need. ]{.underline}

[Epidemic Services and Response/Infectious Diseases ]{.underline}

[Although modern advances have conquered some diseases, the outbreaks of
severe acute respiratory syndrome (SARS) and West Nile Virus are recent
reminders of the extraordinary ability of microbes to adapt and evolve.
In response to these events, CDC has developed a new Global Disease
Detection Initiative within its Epidemic Services and Response and
Infectious Disease Control Programs. The overall FY 2005 budget request
for Epidemic Services and Response includes \$92 million to coordinate
public health surveillance at CDC and provide support to the \"disease
detectives\" that determine the cause of outbreaks and develop the
countermeasures that stem the spread of illness. The Infectious Disease
Control request is \$401 million, an increase of \$31 million over FY
2004. The increases in Infectious Disease Control target \$2 million for
State and local health departments for surveillance, response, and
research for West Nile Virus activities. An additional \$27 million
increase is for the new global disease detection initiative in
coordination with existing programs in Epidemic Services and Response.
This new initiative\'s total funding for FY 2005 is \$51 million and it
will implement a comprehensive system of surveillance by expanding CDC
programs in five countries (Kenya, China, Brazil, Kazakhstan, and
Thailand) and creating new sites in six countries (Uganda, Zimbabwe,
Botswana, Ghana, Cote d\'Ivoire, and Guatemala). Additionally, the
Global Disease Detection Initiative will improve early warning systems,
research new viral strains, and aid in collaborations with multinational
organizations. The goals of this initiative are to recognize infectious
disease outbreaks faster, improve the ability to control and prevent
outbreaks, and to detect emerging microbial threats.]{.underline}

[Bioterrorism]{.underline}

[The President\'s Budget includes \$1.1 billion for bioterrorism
preparedness, the same level as FY 2004. Within this amount, funds will
be redirected to carry out a new interagency biosurveillance initiative
to prepare against a potential bioterrorist attack. CDC, in coordination
with FDA, the Department of Homeland Security and the Department of
Agriculture, will be working to improve the response to bioterrorism
through early detection. CDC\'s budget includes \$130 million in FY 2005
for its role in this initiative, the largest component of which is an
investment of \$100 million in its human health surveillance project,
\"BioSense\" BioSense is an advanced approach to infectious disease
surveillance that, unlike traditional approaches, does not rely upon
mandatory or voluntary case reports from healthcare providers to public
health officials, but uses automated analysis techniques on
electronically available health data to highlight a potential public
health problem. This will be integrated into a unified system. In
addition to developing better surveillance capacity, CDC will invest an
additional \$20 million to improve laboratory reporting capacity and to
advance integration between public health and commercial laboratories.
The remaining \$10 million will increase the number of border health and
quarantine stations from 8 to up to 25.]{.underline}

[CDC\'s commitment to State and local preparedness remains strong;
between FY 2002 and FY 2004, CDC invested a total of \$2.9 billion in
this activity. This year, CDC has budgeted another \$829 million. In FY
2005, HHS will be re-targeting preparedness resources, making modest
reductions in awards to States, and concentrating efforts in more
directed investments that will benefit States and communities as well as
the Nation as a whole. A specific example is the biosurveillance
initiative. CDC will be entering into contracts directly with health
departments and health systems to build a more complete network of
health information, which will assist in earlier threat detection. It
will provide public health officials with a sense for the health status
of their community and support them in providing early and effective
public health response.]{.underline}

[Investments in States have markedly improved capacity: the Laboratory
Response Network (LRN) now consists of 109 reference laboratories
distributed throughout all 50 States. There are also 59 Biosafety level
3 (BSL-3) laboratories located in 50 States \-- nearly three times the
number reported in 1999. Fifty members (46 percent) of the LRN are now
able to rule out the existence of smallpox, and 24 (22 percent)
laboratories can test for the existence of the smallpox virus on a
real-time basis.]{.underline}

[In addition to assistance to States and communities, CDC will invest
\$150 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. Investments in CDC\'s Health Alert
Network now mean that 89 percent of all health departments across the
country receive instant electronic messages about emerging health
threats and public health emergencies. Additionally, in 2002 and 2003,
CDC produced and delivered 35 smallpox education and training programs.
CDC currently estimates reaching approximately 1.3 million health
professionals through a multimedia approach to smallpox training. CDC
will continue to fund the 22 university-based Centers for Public Health
Preparedness (CPHP) to ensure that frontline public health workers have
the competencies to respond to emerging health threats. ]{.underline}

[Working in collaboration with the U.S. Department of Agriculture
(USDA), CDC implemented the notification of possession of select agents
and published an interim final rule in the Federal Register on December
13, 2002 for facilities that possess, use, or transfer agents or toxins
deemed a threat to public health and to animal or plant products. CDC
has a goal to inspect 300 laboratories in accordance with the rule in
2004. ]{.underline}

[Preventive Health and Health Services Block Grant]{.underline}

[Since 1981 the Preventive Health and Health Services Block Grant has
provided its 61 grantees (States, Tribes, and territories) with funds to
tailor prevention and health promotion programs to address their
particular needs. The budget for FY 2005 is \$133 million. States use
these funds to carry out a variety of activities including: helping
rural health departments to eliminate food and water contamination,
supporting childhood lead poisoning testing, and providing statewide
public health education. ]{.underline}

[Injury Prevention and Control]{.underline}

[Injuries are the primary killer 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 for FY 2005 includes \$154 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.]{.underline}

[Birth Defects, Developmental Disabilities, Disabilities and
Health]{.underline}

[Birth defects are the leading cause of infant mortality in the United
States. Additionally, the direct and indirect costs associated with
disabilities in the United States exceeds \$300 billion annually. CDC\'s
National Center for 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 FY 2005 includes \$113 million for these activities. 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 development disabilities, limb loss,
and spina bifida.]{.underline}

[Public Health Improvement]{.underline}

[The budget for FY 2005 requests a total of \$113 million. The \$59
million reduction from FY 2004 reflects one-time Congressional projects
that are not being continued in 2005 and funding for research activities
at \$16 million. Funding is maintained for REACH 2010 (Racial and Ethnic
Approaches to Community Health) which is intended to help racial and
ethnic minority communities mobilize and organize their resources to
support effective and sustainable programs that will contribute to the
elimination of health disparities. The National Electronic Disease
Surveillance System (NEDSS) is also included in the Public Health
Improvement Line. ]{.underline}

[Occupational Safety and Health ]{.underline}

[The estimated annual cost of occupational injuries in the United States
is more than \$240 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 2005 includes \$279 million for NIOSH
activities including 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 its
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. ]{.underline}

[Office of the Director]{.underline}

[The budget for the Office of the Director (OD) for FY 2005 is \$60
million. This includes funds for the Public Health Information Network
(PHIN), which will build upon and integrate existing public health
communication systems and will create public health data standards
necessary for interoperability between the health care sector and local,
State, and federal public health authorities. CDC and the Office of the
Director will also continue to coordinate management attention to
achieving results in accordance with the President\'s Management
Agenda.]{.underline}

[Modern and Secure Laboratories and Facilities ]{.underline}

[CDC is continuing its work to modernize its physical infrastructure. In
2003 CDC completed the critical Environmental Health Laboratory and the
Parasitology Laboratory. Between 2002 and 2003, CDC is completing more
than 1.6 million square feet of laboratory and other facility space. The
Environmental Health Laboratory completed in FY 2003 specializes in
biomonitoring; this new laboratory enabled staff to develop a rapid
toxic scree n to quickly analyze up to 150 chemicals likely to be used
by terrorists. In 2005, CDC will complete an Infectious Disease
Laboratory, the Scientific Communications Center, the Headquarters and
Emergency Operations Center, and the Environmental Toxicology
Laboratory. The request for Buildings and Facilities in FY 2005 includes
\$81.5 million to complete the Fort Collins, Colorado Bio Safety Level 3
Laboratory; to continue work on the East Campus Laboratory Consolidation
Project; and to provide for nation-wide maintenance, repairs, and
improvements.]{.underline}

[ATSDR (Agency for toxic substances and disease registry):]{.underline}

[ATSDR is managed as part of CDC and 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. ATSDR also maintains
the World Trade Center Exposure Registry to track the health effects of
100,000 to 200,000 individuals who may have been impacted by exposure to
substances at the World Trade Center site. The President\'s Budget for
FY 2005 for ATSDR is \$77 million, a \$4 million increase over FY 2004.
Increases in the budget will be directed to ATSDR\'s work with EPA and
other federal, State, and local environmental public health agencies to
evaluate sites that received vermiculite from Libby, Montana, to
identify past and present exposure pathways and to determine whether a
public health hazard, has existed or continues to exist. Increases will
also fund the maintenance costs of the World Trade Center Exposure
Registry. A recent PART review determined that ATSDR had strong program
design and management practices. The PART review suggested some
improvements that ATSDR has undertaken. ATSDR is reviewing and
clarifying its long term goals and measures to directly capture the
impact of the agency on mitigating disease. CDC has eliminated
administrative and management redundancies between ATSDR and CDC\'s
National Center for Environmental Health.]{.underline}

**[National Institutes of Health]{.underline}**

[Overview by Institute]{.underline}

  ------------------------------------------------------------------------------------------------------------------------------------------------ ----------------------------- ----------------------------- ----------------------------- -----------------------------
                                                                                                                                                                                                                                             **[2005]{.underline}**
                                                                                                                                                                                                                                             
                                                                                                                                                   **[2003]{.underline}**        **[2004]{.underline}**        **[2005]{.underline}**        **[ +/- 2004]{.underline}**
                                                                                                                                                                                                                                             
  [Institutes:]{.underline}                                                                                                                                                                                                                  
                                                                                                                                                                                                                                             
  [National Cancer Institute\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                    [\$4,584 ]{.underline}        [\$4,736 ]{.underline}        [\$4,870 ]{.underline}        [+\$134 ]{.underline}
  [National Heart, Lung, & Blood Institute\...\...\...\...\...\...\...\...\... ]{.underline}                                                       [2,792 ]{.underline}          [2,878 ]{.underline}          [2,964 ]{.underline}          [+86 ]{.underline}
  [National Institute of Dental & Craniofacial Research\..... ]{.underline}                                                                        [371 ]{.underline}            [383 ]{.underline}            [394 ]{.underline}            [+11 ]{.underline}
  [Natl Inst. of Diabetes & Digestive & Kidney Disease\... ]{.underline}                                                                           [1,721 ]{.underline}          [1,821 ]{.underline}          [1,876 ]{.underline}          [+55 ]{.underline}
  [National Institute of Neurological Disorders & Stroke.. ]{.underline}                                                                           [1,455 ]{.underline}          [1,501 ]{.underline}          [1,546 ]{.underline}          [+45 ]{.underline}
                                                                                                                                                                                                                                             
  [National Institute of Allergy & Infectious Diseases\...\... ]{.underline}                                                                       [3,703 ]{.underline}          [4,303 ]{.underline}          [4,426 ]{.underline}          [+123 ]{.underline}
                                                                                                                                                                                                                                             
  [National Institute of General Medical Sciences\...\...\...\...\... ]{.underline}                                                                [1,847 ]{.underline}          [1,905 ]{.underline}          [1,960 ]{.underline}          [+55 ]{.underline}
  [Natl Inst. of Child Health and Human Development\...\.... ]{.underline}                                                                         [1,204 ]{.underline}          [1,242 ]{.underline}          [1,281 ]{.underline}          [+39 ]{.underline}
  [National Eye Institute\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                               [632 ]{.underline}            [653 ]{.underline}            [672 ]{.underline}            [+19 ]{.underline}
                                                                                                                                                                                                                                             
  [National Institute of Environmental Health Sciences:]{.underline}                                                                                                                                                                         
                                                                                                                                                                                                                                             
  [Labor/HHS Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                              [612 ]{.underline}            [631 ]{.underline}            [650 ]{.underline}            [+19 ]{.underline}
                                                                                                                                                                                                                                             
  [VA/HUD Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                            [84 ]{.underline}             [78 ]{.underline}             [80 ]{.underline}             [+2 ]{.underline}
                                                                                                                                                                                                                                             
  [National Institute on Aging\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                       [993 ]{.underline}            [1,025 ]{.underline}          [1,056 ]{.underline}          [+31 ]{.underline}
                                                                                                                                                                                                                                             
  [Natl Inst. of Arthritis & Musculoskeletal & Skin Dis\..... ]{.underline}                                                                        [486 ]{.underline}            [501 ]{.underline}            [515 ]{.underline}            [+14 ]{.underline}
  [Natl Inst. on Deafness & Communication Disorders\...\... ]{.underline}                                                                          [370 ]{.underline}            [382 ]{.underline}            [394 ]{.underline}            [+12 ]{.underline}
  [National Institute of Mental Health\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                 [1,339 ]{.underline}          [1,382 ]{.underline}          [1,421 ]{.underline}          [+39 ]{.underline}
  [National Institute on Drug Abuse\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                 [961 ]{.underline}            [991 ]{.underline}            [1,019 ]{.underline}          [+28 ]{.underline}
  [National Institute on Alcohol Abuse & Alcoholism\...\... ]{.underline}                                                                          [416 ]{.underline}            [429 ]{.underline}            [442 ]{.underline}            [+13 ]{.underline}
  [National Institute for Nursing Research\...\...\...\...\...\...\...\...\... ]{.underline}                                                       [130 ]{.underline}            [135 ]{.underline}            [139 ]{.underline}            [+4 ]{.underline}
  [National Human Genome Research Institute\...\...\...\...\...\.... ]{.underline}                                                                 [464 ]{.underline}            [479 ]{.underline}            [493 ]{.underline}            [+14 ]{.underline}
  [Natl Inst. for Biomedical Imaging & Bioengineering\...\... ]{.underline}                                                                        [280 ]{.underline}            [289 ]{.underline}            [298 ]{.underline}            [+9 ]{.underline}
  [National Center for Research Resources\...\...\...\...\...\...\...\..... ]{.underline}                                                          [1,139 ]{.underline}          [1,179 ]{.underline}          [1,094 ]{.underline}          [-85 ]{.underline}
  [Natl Center for Complementary & Alternative Med\...\.... ]{.underline}                                                                          [113 ]{.underline}            [117 ]{.underline}            [121 ]{.underline}            [+4 ]{.underline}
  [Natl Center for Minority Health & Health Disparities\.... ]{.underline}                                                                         [186 ]{.underline}            [192 ]{.underline}            [197 ]{.underline}            [+5 ]{.underline}
  [Fogarty International Center\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                         [62 ]{.underline}             [65 ]{.underline}             [67 ]{.underline}             [+2 ]{.underline}
  [National Library of Medicine\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                         [306 ]{.underline}            [317 ]{.underline}            [325 ]{.underline}            [+8 ]{.underline}
  [Office of the Director\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                              [286 ]{.underline}            [327 ]{.underline}            [360 ]{.underline}            [+33 ]{.underline}
                                                                                                                                                                                                                                             
  [Buildings & Facilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                              [639 ]{.underline}            [99 ]{.underline}             [100 ]{.underline}            [+1 ]{.underline}
                                                                                                                                                                                                                                             
  [Nuclear/Radiological Countermeasures Research\...\...\.... ]{.underline}                                                                        [0 ]{.underline}              [0 ]{.underline}              [47 ]{.underline}             [+47 ]{.underline}
  [ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\..... ]{.underline}                                                                      [4 ]{.underline}              [5 ]{.underline}              [0 ]{.underline}              [-5 ]{.underline}
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  **[Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}**                                  **[\$27,178 ]{.underline}**   **[\$28,041 ]{.underline}**   **[\$28,805 ]{.underline}**   **[+\$764 ]{.underline}**
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  [Less Funds Allocated from Other Sources:]{.underline}                                                                                                                                                                                     
                                                                                                                                                                                                                                             
  [Nuclear/Radiological Countermeasures Res. (PHSSEF). ]{.underline}                                                                               [ \$0 ]{.underline}           [ \$0 ]{.underline}           [-\$47 ]{.underline}          [-\$47 ]{.underline}
  [ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\..... ]{.underline}                                                                      [-4 ]{.underline}             [-5 ]{.underline}             [ 0 ]{.underline}             [+5 ]{.underline}
  [PHS Evaluation Funds (NLM)\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                              [-8 ]{.underline}             [-8 ]{.underline}             [ 0 ]{.underline}             [+8 ]{.underline}
  [Type 1 Diabetes Research 1/\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                          [-100 ]{.underline}           [-150 ]{.underline}           [-150 ]{.underline}           [ 0 ]{.underline}
                                                                                                                                                                                                                                             
  **[Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**                                     **[\$27,066 ]{.underline}**   **[\$27,878 ]{.underline}**   **[\$28,607 ]{.underline}**   **[+\$729 ]{.underline}**
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  **[Labor/HHS Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**                                             **[\$26,983 ]{.underline}**   **[\$27,800 ]{.underline}**   **[\$28,527 ]{.underline}**   **[+\$727 ]{.underline}**
                                                                                                                                                                                                                                             
  **[VA/HUD Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}**                                          **[\$84 ]{.underline}**       **[\$78 ]{.underline}**       **[\$80 ]{.underline}**       **[+\$2 ]{.underline}**
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  [FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}   [17,596 ]{.underline}         [17,522 ]{.underline}         [17,522 ]{.underline}         [ 0 ]{.underline}
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  [1/ These funds were pre-appropriated in the Benefits Improvement and Protection Act of 2000 and P.L. 107-360.]{.underline}                                                                                                                
                                                                                                                                                                                                                                             
  ------------------------------------------------------------------------------------------------------------------------------------------------ ----------------------------- ----------------------------- ----------------------------- -----------------------------

[Overview by Mechanism]{.underline}

  ------------------------------------------------------------------------------------------------------------------------------------------------ ----------------------------- ----------------------------- ----------------------------- -----------------------------
                                                                                                                                                                                                                                             **[2005]{.underline}**
                                                                                                                                                                                                                                             
                                                                                                                                                   **[2003]{.underline}**        **[2004]{.underline}**        **[2005]{.underline}**        **[ +/- 2004]{.underline}**
                                                                                                                                                                                                                                             
  [Mechanism:]{.underline}                                                                                                                                                                                                                   
                                                                                                                                                                                                                                             
  [Research Project Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                   [\$14,239 ]{.underline}       [\$15,109 ]{.underline}       [\$15,512 ]{.underline}       [+\$403 ]{.underline}
                                                                                                                                                                                                                                             
  *[\[ \# of Non-Competing Grants \]\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}*                                        *[\[25,757\]]{.underline}*    *[\[27,094\]]{.underline}*    *[\[27,351\]]{.underline}*    *[\[+257\]]{.underline}*
  *[\[ \# of New/Competing Grants\]\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}*                                        *[\[10,393\]]{.underline}*    *[\[10,135\]]{.underline}*    *[\[10,393\]]{.underline}*    *[\[+258\]]{.underline}*
  *[\[ \# of Small Business Grants\]\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}*                                    *[\[2,020\]]{.underline}*     *[\[2,199\]]{.underline}*     *[\[2,242\]]{.underline}*     *[\[+43\]]{.underline}*
                                                                                                                                                                                                                                             
  *[\[ Total \# of Grants \]\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}*                               *[\[38,170\]]{.underline}*    *[\[39,428\]]{.underline}*    *[\[39,986\]]{.underline}*    *[\[+558\]]{.underline}*
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  [Research Centers\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                          [2,425 ]{.underline}          [2,552 ]{.underline}          [2,704 ]{.underline}          [+152 ]{.underline}
  [Research Training\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                            [712 ]{.underline}            [749 ]{.underline}            [764 ]{.underline}            [+15 ]{.underline}
  [Research & Development Contracts\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                      [2,395 ]{.underline}          [2,817 ]{.underline}          [2,706 ]{.underline}          [-111 ]{.underline}
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  [Intramural Research\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                              [2,547 ]{.underline}          [2,662 ]{.underline}          [2,768 ]{.underline}          [+106 ]{.underline}
  [Other Research\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                        [2,119 ]{.underline}          [2,214 ]{.underline}          [2,264 ]{.underline}          [+50 ]{.underline}
  [Extramural Research Facilities Construction\...\...\...\...\...\..... ]{.underline}                                                             [495 ]{.underline}            [118 ]{.underline}            [150 ]{.underline}            [+32 ]{.underline}
  [Research Management and Support\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                       [921 ]{.underline}            [985 ]{.underline}            [1,017 ]{.underline}          [+32 ]{.underline}
  [National Library of Medicine\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                         [306 ]{.underline}            [317 ]{.underline}            [325 ]{.underline}            [+8 ]{.underline}
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  [Office of the Director\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                              [286 ]{.underline}            [327 ]{.underline}            [360 ]{.underline}            [+33 ]{.underline}
  [Buildings and Facilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                 [646 ]{.underline}            [107 ]{.underline}            [108 ]{.underline}            [+1 ]{.underline}
  [NIEHS VA/HUD Appropriation (Superfund)\...\...\...\...\...\.... ]{.underline}                                                                   [84 ]{.underline}             [78 ]{.underline}             [80 ]{.underline}             [+2 ]{.underline}
  [Nuclear/Radiological Countermeasures Research\...\...\.... ]{.underline}                                                                        [ 0 ]{.underline}             [ 0 ]{.underline}             [47 ]{.underline}             [+47 ]{.underline}
  [ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\..... ]{.underline}                                                                      [4 ]{.underline}              [5 ]{.underline}              [ 0 ]{.underline}             [-5 ]{.underline}
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  **[Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}**                                  **[\$27,178 ]{.underline}**   **[\$28,041 ]{.underline}**   **[\$28,805 ]{.underline}**   **[+\$764 ]{.underline}**
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  [Less Funds Allocated from Other Sources:]{.underline}                                                                                                                                                                                     
                                                                                                                                                                                                                                             
  [Nuclear/Radiological Countermeasures Res. (PHSSEF). ]{.underline}                                                                               [ \$0 ]{.underline}           [ \$0 ]{.underline}           [-\$47 ]{.underline}          [-\$47 ]{.underline}
  [ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\..... ]{.underline}                                                                      [-4 ]{.underline}             [-5 ]{.underline}             [ 0 ]{.underline}             [+5 ]{.underline}
  [PHS Evaluation Funds (NLM)\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                              [-8 ]{.underline}             [-8 ]{.underline}             [ 0 ]{.underline}             [+8 ]{.underline}
  [Type 1 Diabetes Research 1/\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                          [-100 ]{.underline}           [-150 ]{.underline}           [-150 ]{.underline}           [ 0 ]{.underline}
                                                                                                                                                                                                                                             
  **[Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**                                     **[\$27,066 ]{.underline}**   **[\$27,878 ]{.underline}**   **[\$28,607 ]{.underline}**   **[+\$729 ]{.underline}**
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  **[Labor/HHS Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**                                             **[\$26,983 ]{.underline}**   **[\$27,800 ]{.underline}**   **[\$28,527 ]{.underline}**   **[+\$727 ]{.underline}**
                                                                                                                                                                                                                                             
  **[VA/HUD Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}**                                          **[\$84 ]{.underline}**       **[\$78 ]{.underline}**       **[\$80 ]{.underline}**       **[+\$2 ]{.underline}**
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  [FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}   [17,596 ]{.underline}         [17,522 ]{.underline}         [17,522 ]{.underline}         [ 0 ]{.underline}
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  [1/ These funds were pre-appropriated in the Benefits Improvement and Protection Act of 2000 and P.L. 107-360.]{.underline}                                                                                                                
                                                                                                                                                                                                                                             
  ------------------------------------------------------------------------------------------------------------------------------------------------ ----------------------------- ----------------------------- ----------------------------- -----------------------------

[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 NIH has driven these advances, and the FY 2005
budget request seeks to capitalize on the resulting opportunities to
improve the health of the nation. Building on the research momentum
generated by the fulfillment of the President\'s commitment to complete
the five year doubling of the NIH budget, the FY 2005 request provides
\$28.8 billion for NIH. This is an increase of \$764 million, or 2.7
percent, over the FY 2004 level. These funds will support a record total
of nearly 40,000 research project grants in FY 2005, including an
estimated 10,393 new and competing awards, an increase of 258 over FY
2004. ]{.underline}

[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
2005, nearly 85 percent of the funds appropriated to NIH will flow out
to the extramural community, which supports work by more than 212,000
research personnel affiliated with about 2,800 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 4 percent will
provide for research management and support.]{.underline}

[Research Priorities in FY 2005]{.underline}

[In fulfilling its mission, NIH strives to maintain a diverse portfolio
of research founded on both public health need and scientific
opportunity. The FY 2005 budget request will allow NIH to address
imperative requirements in biodefense; implement the NIH Roadmap for
Medical Research; pursue an obesity research initiative; and manage a
research initiative on developing nuclear and radiological threat
countermeasures. Additional support will be provided to continue
progress in promising arenas of science related to specific diseases
such as cancer, HIV/AIDS, diabetes, Parkinson\'s disease, and
Alzheimer\'s disease; while also pursuing whole new avenues of
post-genomics research. ]{.underline}

[Biodefense: For FY 2005, the President\'s budget proposes a total of
\$1.7 billion for NIH biodefense efforts, an increase of \$121 million,
or 7.5 percent, over FY 2004. 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, NIH\'s biodefense
research 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. NIH will continue to ensure full coordination of these
research activities with other Federal agencies in the war against
terrorism. ]{.underline}

[In just the past two years, NIH has made tremendous strides towards
developing countermeasures to protect all Americans from bioterrorism.
For example, researchers supported by NIH have sequenced genomes
representative of all bacteria considered bioterrorism threats, and are
sequencing genomes for at least one strain of every potential viral and
protozoal bioterrorism pathogen. 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 more than 100 grants and contracts with
pharmaceutical and biotechnology companies in collaborative projects to
develop high-priority biodefense products. Work on a second-generation
anthrax vaccine has rapidly progressed to the point that a vaccine
product is expected to be ready for procurement later this year through
the new DHS BioShield program.]{.underline}

[In FY 2005, NIH will complete the national network of extramural
Regional Centers of Excellence for Biodefense and Emerging Infectious
Diseases Research, including awarding the last two of the planned 10
regional centers. Also in FY 2005, NIH will continue testing a range of
candidate vaccines in clinical and pre-clinical studies, including
third-generation vaccines against smallpox; a DNA vaccine to prevent
Ebola virus; and new vaccines for plague, tularemia, Rift Valley Fever,
and other viral hemorrhagic fevers, such as Marburg and Lassa
viruses.]{.underline}

[The FY 2005 budget requests \$150 million to continue support for
construction of specialized biosafety laboratories at universities and
research institutions across the country. Prior to FY 2002, only a few
of these specialized laboratories existed in the United States that were
capable of conducting research on potential bioterrorism agents. The
\$150 million investment in FY 2005 will fund an additional 20 Level 3
laboratories in metropolitan areas throughout the country. Once these
facilities are completed, we will be able to support over 200 research
projects at the same time aimed at developing medical protection from
bioterrorism. These facilities will also back up State and Federal
public health laboratories if there is an actual or suspected
bioterrorism attack. This increase in FY 2005 will be funded as a result
of the completion of NIH\'s applied research on new anthrax and smallpox
vaccines.]{.underline}

[The ability to mitigate the health effects of radiation exposure in the
potential event of the use of a limited nuclear or radiological device
in a terrorist attack presents a critical challenge for which little
progress has been made in the last 40 years. The FY 2005 biodefense
request for NIH includes \$47 million for the Public Health and Social
Services Emergency Fund to support specific targeted research activities
needed to develop medical countermeasures to more rapidly and
effectively treat nuclear or radiological injuries. This research
initiative will focus on a) developing drugs that can be used to prevent
injury from radiological exposure; b) improving methods for measuring
radiological exposure and contamination; and c) developing methods or
drugs to restore injured tissues and eliminate radioactive materials
from contaminated tissues.]{.underline}

[NIH Roadmap for Medical Research: In an effort to target major
opportunities and gaps in biomedical research that no single institute
at NIH could tackle alone, the FY 2005 budget allocates a total of \$237
million for the \"Roadmap\" initiative, an increase of \$109 million
over FY 2004. The request includes \$60 million in the Office of the
Director, an increase of \$25 million, and \$177 million, an increase of
\$84 million, in the budgets of the Institutes and Centers and used in a
coordinated effort to support the Roadmap. ]{.underline}

[The Roadmap will help transform new scientific knowledge that will
result in tangible benefits for the American public of new treatments,
prevention strategies, and diagnostics through overcoming barriers to
rapid progress in biomedical research. The Roadmap is organized into
three core themes: New Pathways to Discovery; Research Teams of the
Future; and Re-engineering the Clinical Research
Enterprise.]{.underline}

[HIV/AIDS Research: The FY 2005 budget includes a total of \$2.9 billion
for HIV/AIDS-related research. This is an increase of \$80 million, or
2.8 percent over the FY 2004 level. In addition to these funds, the FY
2005 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.]{.underline}

[The FY 2005 NIH HIV/AIDS research agenda continues the following
overarching themes: HIV prevention research, including development of
vaccines, 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. All of these efforts require a strong foundation in basic
science. ]{.underline}

[NIH research has heavily informed the President\'s Emergency Plan for
AIDS Relief. NIH research proved the safety and efficacy of a drug
regimen for preventing transmission of HIV from an infected mother to
her newborn that is more affordable and practical than any other course
of therapy examined to date. The NIH-sponsored study demonstrated that a
single oral dose of the antiretroviral drug, nevirapine, given to an
HIV-infected woman in labor and another dose given to her baby within
three days of birth reduced the transmission rate by about half compared
with a course of AZT given only during labor and delivery. Additional
data from this study demonstrated the continued benefit and safety of
nevirapine in reducing mother-to-child transmission of HIV up to 18
months, even in a breastfeeding population. ]{.underline}

[Obesity: The epidemic of obesity threatens the Nation\'s health by
sharply increasing the incidence of type 2 diabetes, fatty liver
disease, kidney failure, and cardiovascular and other diseases. However,
dramatic advances in our understanding of how appetite and weight are
regulated offer new opportunities to develop methods to treat obesity
and to prevent type 2 diabetes and other obesity-related diseases. In FY
2005, NIH plans to expand its obesity research portfolio by \$40
million, for a total of \$440 million. This includes a targeted, \$22
million, trans-NIH initiative that will seek to better understand the
neurobiological, genetic, behavioral, and environmental basis of obesity
and its co-morbid conditions; improve strategies for maintaining healthy
weight in adults and children, particularly in primary care, school, and
workplace settings; and develop new therapeutic anti-obesity modalities
to complement lifestyle interventions.]{.underline}

[This obesity initiative will complement the ongoing work of NIH on
diabetes, including, for example, efforts to build upon the Secretary\'s
Diabetes Detection Initiative by discovering new approaches to
accurately and effectively diagnose type 2 diabetes; and moving forward
with a full-scale, landmark, clinical trial to test the best approaches
to lowering the risk of heart disease and stroke in adults with type 2
diabetes.]{.underline}

[Research Project Grants]{.underline}

[The support of basic medical research through competitive,
peer-reviewed, and investigator-initiated research project grants (RPGs)
represents 54 percent of NIH\'s total budget request for FY 2005.
]{.underline}

[In FY 2005, the NIH budget provides \$15.5 billion, a 2.7 percent
increase over FY 2004, to fund 39,986 total projects, the highest level
in the agency\'s history. This is 558 more grants in total than are
expected to be funded in FY 2004. Within this total, NIH estimates it
will support 10,393 competing RPGs in FY 2005, an increase of 258 over
FY 2004. The average cost of research project grants will increase in
the aggregate by 1.3 percent. ]{.underline}

[Facilities Construction]{.underline}

[During FY 2004, both the Mark O. Hatfield Clinical Research Center and
part of the John E. Porter National Neurosciences Research Center are
scheduled to open, which together will provide an additional 1,115 gross
square feet of laboratory and patient research space to NIH\'s main
campus in Bethesda, Maryland. These two new major research assets have
been designed and will be managed specifically to allow the NIH
Institutes and Centers to work more collaboratively to speed the pace of
fundamental discoveries and their translation into effective therapies
and prevention strategies. In addition, over the past two years,
approximately \$800 million has been appropriated for both intramural
and extramural biosafety laboratory construction which are currently in
design stages. In FY 2005, as discussed above, another \$150 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 \$108 million for other
non-biodefense intramural facilities projects, such as general repairs
and improvements across NIH\'s nearly 200 total buildings. No funds are
requested for non-biodefense extramural research facilities construction
grants. Over the past 10 years, \$633 million have been appropriated for
non-biodefense extramural construction projects. In FY 2005, NIH\'s
budget places a higher priority on the support of additional research
project grants.]{.underline}

**[Substance Abuse and Mental Health Services
Administration]{.underline}**

+-------------+-------------+-------------+-------------+-------------+
| [\`]{       | **[2003]{.u | **[2004]{.u | **[2005]{.u | *           |
| .underline} | nderline}** | nderline}** | nderline}** | *[2005]{.un |
|             |             |             |             | derline}**\ |
|             |             |             |             | **[         |
|             |             |             |             | +/-2004]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Substance  |             |             |             |             |
| Abuse:]{    |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Substance  | [\$1,754    | [\$1,779    | [\$1,832    | [+\$53      |
| Abuse Block | ]{          | ]{          | ]{          | ]{          |
| Grant\...\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [ Programs  |             |             |             |             |
| of Regional |             |             |             |             |
| and         |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [National   |             |             |             |             |
| Sign        |             |             |             |             |
| ificance:]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Treatmen   | [317        | [419        | [517        | [+98        |
| t\...\...\. | ]{          | ]{          | ]{          | ]{          |
| ..\...\...\ | .underline} | .underline} | .underline} | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Preven     | [197        | [199        | [196        | [-3         |
| tion\...\.. | ]{          | ]{          | ]{          | ]{          |
| .\...\...\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *           | **[\$2,268  | **[\$2,397  | **[\$2,545  | **[+\$148   |
| *[Subtotal, | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| Substance   | nderline}** | nderline}** | nderline}** | nderline}** |
| Abuse       |             |             |             |             |
| \...\..     |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Mental     |             |             |             |             |
| Health:]{   |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Mental     | [\$437      | [\$434      | [\$436      | [+\$2       |
| Health      | ]{          | ]{          | ]{          | ]{          |
| Block       | .underline} | .underline} | .underline} | .underline} |
| Grant\...   |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [PATH       | [43         | [50         | [55         | [+5         |
| Homeless    | ]{          | ]{          | ]{          | ]{          |
| Formula     | .underline} | .underline} | .underline} | .underline} |
| Grant\..    |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Programs   |             |             |             |             |
| of Regional |             |             |             |             |
| and         |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [National   | [245        | [241        | [271        | [+30        |
| S           | ]{          | ]{          | ]{          | ]{          |
| ignificance | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [           | [98         | [102        | [106        | [+4         |
| Children\'s | ]{          | ]{          | ]{          | ]{          |
| Mental      | .underline} | .underline} | .underline} | .underline} |
| Health      |             |             |             |             |
| Servic      |             |             |             |             |
| es\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Protection | [34         | [35         | [35         | [ 0         |
| and         | ]{          | ]{          | ]{          | ]{          |
| Ad          | .underline} | .underline} | .underline} | .underline} |
| vocacy\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Samaritan  | [ 0         | [ 0         | [10         | [+10        |
| Initiativ   | ]{          | ]{          | ]{          | ]{          |
| e\...\...\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *           | **[\$857    | **[\$862    | **[\$913    | **[+\$51    |
| *[Subtotal, | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| Mental      | nderline}** | nderline}** | nderline}** | nderline}** |
| Health      |             |             |             |             |
| \..         |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Program    | [\$87       | [\$92       | [\$92       | [ \$0       |
| Man         | ]{          | ]{          | ]{          | ]{          |
| agement\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
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| ...\...\... |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total,   | **[\$3,212  | **[\$3,351  | **[\$3,550  | **[+\$199   |
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| Lev         | nderline}** | nderline}** | nderline}** | nderline}** |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Less Funds |             |             |             |             |
| Allocated   |             |             |             |             |
| from Other  |             |             |             |             |
| Sources:]{  |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [PHS        | [-74        | [-117       | [-121       | [-4         |
| Evaluation  | ]{          | ]{          | ]{          | ]{          |
| Funds\.     | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total,   | **[\$3,138  | **[\$3,234  | **[\$3,429  | **[+\$195   |
| Di          | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| scretionary | nderline}** | nderline}** | nderline}** | nderline}** |
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| ..\...\...\ | ]{          | ]{          | ]{          | ]{          |
| ...\...\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
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| ...\...\... |             |             |             |             |
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| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

[The FY 2005 budget requests \$3.6 billion for SAMHSA, a net increase of
\$199 million, or 6 percent, over FY 2004. The request continues the
President's commitment to reduce current illicit drug use by doubling
the Access to Recovery State Voucher program initiated in FY 2004. The
budget includes the implementation of the new substance abuse Strategic
Prevention Framework, a new initiative to transform the mental health
system in response to the recommendations of the President's Commission
on Mental Health, and increases funding for services targeted towards
homeless individuals. Resources are also provided to enhance Federal and
State level drug and mental health data collection
activities.]{.underline}

[Substance Abuse]{.underline}

[In February 2002, the President set aggressive goals to reduce youth
drug use by 10 percent in two years and 25 percent in five years.
National survey data confirm that the President's two-year goal has been
exceeded. Current use of any illicit drug among students declined 11
percent between 2001 and 2003, resulting in 400,000 fewer teen drug
users. However, with this decrease in drug use, there continues to be an
unmet need for treatment services. In 2002, 88,000 individuals
recognized they needed treatment, but were unable to attain it. The
request continues to expand clinical treatment and recovery support
services to people with drug and alcohol problems. It includes \$2.5
billion, a net increase of \$148 million, or 6 percent, for substance
abuse treatment and prevention activities. ]{.underline}

[Expanding Access to Treatment: The FY 2005 budget represents the fourth
year of the President's commitment to expand drug treatment and recovery
support services over five years. The request proposes to double funding
for the Access to Recovery State Voucher program for a total funding
level of \$200 million. The initiative would allow individuals seeking
clinical treatment and recovery support services to exercise choice
among qualified community provider organizations, including those that
are faith-based. The program's emphasis is on results -- measured by
outcomes including decreased or no substance use, no involvement with
the criminal justice system, attainment of employment or enrollment in
school, family and living conditions, social support, access/capacity,
and retention in services. Approximately 100,000 people will receive
services through this program in FY 2005. ]{.underline}

[Promoting Effective Prevention: Current research shows that
science--based substance abuse prevention is effective not only in
preventing youth from initiating substance use in the first place, but
also in reducing the number of addicted individuals. This budget
includes \$196 million to implement SAMHSA's new Strategic Prevention
Framework. The Strategic Prevention Framework's objectives are to
promote the use of performance measures and evaluation tools by
substance abuse prevention providers; to increase substance abuse
prevention programming throughout the United States, and to support the
implementation of effective prevention programs in States and
communities. Through the Strategic Prevention Framework, SAMHSA builds
capacity within States and the prevention field to promote resiliency
and decrease risk factors in individuals, families, and communities. The
budget will focus on efforts to enhance implementation of effective
programs at the community level, with an emphasis on the prevention of
underage drinking.]{.underline}

[Substance Abuse Block Grant: A total of \$1.8 billion is requested for
the Substance Abuse Prevention and Treatment (SAPT) Block Grant, an
increase of \$53 million over FY 2004. The SAPT Block Grant provides
treatment services to over 425,000 individuals and supports over 10,500
community-based organizations. It is the cornerstone of States'
substance abuse financing, accounting for at least 40 percent of public
funds expended for prevention and treatment. ]{.underline}

[A recent Program Assessment Rating Tool (PART) identified the SAPT
Block Grant as the only Federal program that provides funds to every
State to support State-wide substance abuse treatment and prevention
services, noting that the program has adopted new long-term outcome
measures and annual outcome and output measures. SAMHSA is undergoing a
transition from Block Grants to Performance Partnerships, in which all
States will be required to provide outcome information that can be
aggregated to monitor program performance. The same performance measures
that are to be used in Access to Recovery will be adopted for
Performance Partnerships.]{.underline}

[Mental Health]{.underline}

[The budget includes \$913 million for mental health services, a net
increase of \$51 million over FY 2004. The request provides resources
for a new initiative to respond to the recommendations of the
President's Commission on Mental Health and increases access to mental
health services to some of our most vulnerable citizens. ]{.underline}

[Transforming the Mental Health System: In July 2003, the President's
Commission on Mental Health released its final report, calling for a
fundamental overhaul of how mental health care is delivered in America
-- to achieve the promise of recovery for families and children. SAMHSA
has the lead role for HHS in developing an action agenda to incorporate
the Report's recommendations into service delivery improvements. As an
important step in reshaping this delivery system, the budget proposes
\$44 million for State Incentive Grants for Transformation. These new
grants will support the development of comprehensive State mental health
plans to reduce system fragmentation, and increase services and supports
available to people living with mental illness. In the first year,
States will establish a planning dialogue across multiple service
systems and agencies, such as criminal justice, housing, child welfare,
labor and education. In subsequent years, 85 percent of funds may be
used to support programs at the community level as proposed in the State
Plan. The remaining 15 percent will continue to support State planning
and coordination activities. ]{.underline}

[Homeless Services: Recent studies have found that 20 percent of
individuals experiencing chronic homelessness also have a serious mental
illness. The request includes \$10 million for the HHS contribution for
the Samaritan initiative, an Administration-wide initiative to reduce
chronic homelessness jointly administered with the Departments of
Housing and Urban Development, and Veterans Affairs. This initiative
will support service providers that better enable access to the full
range of services that chronically homeless people need including
housing, outreach and support services such as mental health services,
substance abuse treatment, and primary health care. Priority will be
given to grantees who initiate activities to expand access to mainstream
Federal programs for those who experience chronic homelessness. The
request also includes \$55 million for the Projects for Assistance in
Transition from Homelessness (PATH), a \$5 million increase over FY
2004. These funds will allow grantees to reach out to 154,000 homeless
individuals, getting them off the streets and into mental health and
substance abuse treatment services, as well as adequate
housing.]{.underline}

[Other Mental Health: The budget also supports assistance to States in
developing programs for individuals with co-occurring mental health and
substance abuse disorders, and continues to support efforts with other
Federal partners on youth violence.]{.underline}

[A total of \$436 million is requested for the Community Mental Health
Services Block Grant to support comprehensive community services to
approximately 220,000 adults with serious mental illness and children
with serious emotional disturbances. A recent PART review determined
that the Mental Health Block Grant is the only Federal program that
provides funds to every State to provide State-wide community-based
mental health services. The program has adopted new long-term outcome
measures to advance strategic planning and will be converting to
Performance Partnerships in FY 2005. This transition from Block Grants
to Performance Partnerships will require States to collect and report
performance data to better measure program effectiveness.]{.underline}

[Program Management]{.underline}

[The budget includes \$92 million to maintain staff, and related program
management and support activities necessary to effectively administer a
wide array of Federal programs. As part of the President's Management
Agenda, SAMHSA has implemented changes in its grant announcements,
creating process efficiencies within the Agency and leading to increased
clarity for applicants. Under the new process, four standard grant
announcements have been created based on common elements such as
purpose, standard of evidence base, award size, eligibility, allowable
activities, and review criteria. Each of the grant announcements include
standard performance measures, ensuring increased accountability
Agency-wide.]{.underline}

**[Agency for Health Research and Quality]{.underline}**

+----------+----------+----------+----------+----------+----------+
|          | **[200   | **[200   | **[200   | **[200   | **[2005  |
|          | 2]{.unde | 3]{.unde | 4]{.unde | 5]{.unde | ]{.under |
|          | rline}** | rline}** | rline}** | rline}** | line}**\ |
|          |          |          |          |          | *        |
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+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Health  | [\$248   | [\$253   | [\$246   | [\$246   | [ \$0    |
| Costs,   | ]{.un    | ]{.un    | ]{.un    | ]{.un    | ]{.un    |
| Quality  | derline} | derline} | derline} | derline} | derline} |
| and      |          |          |          |          |          |
| Outcomes |          |          |          |          |          |
| Research |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| *        | *[55     | *[60     | *[80     | *[84     | *[+4     |
| [Patient | ]{.und   | ]{.und   | ]{.und   | ]{.und   | ]{.und   |
| Safety   | erline}* | erline}* | erline}* | erline}* | erline}* |
| Research |          |          |          |          |          |
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| d)\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
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| ]{.und   |          |          |          |          |          |
| erline}* |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Medical | [49      | [53      | [55      | [55      | *[ 0     |
| Expe     | ]{.un    | ]{.un    | ]{.un    | ]{.un    | ]{.und   |
| nditures | derline} | derline} | derline} | derline} | erline}* |
| Panel    |          |          |          |          |          |
| Surveys  |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
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| ]{.un    |          |          |          |          |          |
| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
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|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| [Program | [3       | [3       | [3       | [3       | [ 0      |
| Supp     | ]{.un    | ]{.un    | ]{.un    | ]{.un    | ]{.un    |
| ort\...\ | derline} | derline} | derline} | derline} | derline} |
| ...\...\ |          |          |          |          |          |
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+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| **[S     | **[\$299 | **[\$309 | **[\$304 | **[\$304 | **[ \$0  |
| ubtotal, | ]{.unde  | ]{.unde  | ]{.unde  | ]{.unde  | ]{.unde  |
| Program  | rline}** | rline}** | rline}** | rline}** | rline}** |
| Le       |          |          |          |          |          |
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+----------+----------+----------+----------+----------+----------+
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| [PHS     | [\$296   | [-\$304  | [-\$304  | [-\$304  | [ \$0    |
| Ev       | ]{.un    | ]{.un    | ]{.un    | ]{.un    | ]{.un    |
| aluation | derline} | derline} | derline} | derline} | derline} |
| Funds\.  |          |          |          |          |          |
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+----------+----------+----------+----------+----------+----------+
| [Public  |          | [-5      | [ 0      | [ 0      | [ 0      |
| Health & |          | ]{.un    | ]{.un    | ]{.un    | ]{.un    |
| Social   |          | derline} | derline} | derline} | derline} |
| Services |          |          |          |          |          |
| E        |          |          |          |          |          |
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| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| *        | **[\$3   | **[ \$0  | **[ \$0  | **[ \$0  | **[ \$0  |
| *[Total, | ]{.unde  | ]{.unde  | ]{.unde  | ]{.unde  | ]{.unde  |
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|          |          |          |          |          |          |
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| derline} |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+

[The FY 2005 request for AHRQ provides a total program level of \$304
million, the same as FY 2004. This request reflects priority of a
continued focus on improving patient safety and reducing medical errors,
through the implementation of targeted efforts to make safety-improving
technologies available to hospitals and health systems.]{.underline}

[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. In
FY 2004 and FY 2005, 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. ]{.underline}

[Health Costs, Quality, and Outcomes]{.underline}

[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 \$246 million. Within this total funding, spending
on patient safety efforts will increase from \$80 million to \$84
million. ]{.underline}

[Patient Safety: Of the total \$84 million, \$50 million again will be
made available for health system-based information technology
investments designed to enhance patient safety, with an emphasis on
small community and rural hospitals and systems and the importance of
partnerships across communities.]{.underline}

[Information technology has the potential to improve the quality, safety
and efficiency of health care by helping health care professionals make
the best decisions and by assuring that those decisions are implemented
as intended. These investments will continue to 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 will be made in
summer 2004. AHRQ will provide up to 50 percent of the total project
costs, up to \$500,000 per year per project.]{.underline}

[Adoption of information technology applications requires the
development of a business case for these tools. Working with public and
private partners, AHRQ will help use data from hospital IT investment
demonstrations to help spread proven technology through the healthcare
system.]{.underline}

[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.]{.underline}

[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 reporting
burden for their partners in the health care community. This streamlined
reporting system will integrate data from such systems as the National
Healthcare Safety Network operated by CDC as well as the reporting
systems for drugs, biologics, vaccines, and medical devices operated by
FDA.]{.underline}

[This past year, AHRQ launched a monthly, peer-reviewed, Web-based
medical journal that showcases patient safety lessons drawn from actual
cases of near-errors. Morbidity and Mortality Rounds on the Web helps to
educate providers about ways to prevent errors, in a blame-free
environment. AHRQ has also been working with external partners such as
the American Academy of Pediatrics to put together a fact sheet for
pediatricians and parents of children: \"20 Tips to Help Prevent Medical
Errors in Children.\" Finally, AHRQ will continue a number of research
grants and contracts designed to understand how technologies, workforce,
and organizational structure affect patient safety, as well as a program
to train safety experts to assist States and local healthcare
organizations in developing a safety focus.]{.underline}

[Research and Dissemination Activities Outside Patient Safety: In FY
2005, AHRQ will invest \$162 million in research and dissemination
activities in prevention, acute-and long-term care, pharmaceutical
outcomes, informatics, and other areas to support the quality of health
care. The FY 2005 budget enables AHRQ to renew several grant programs
that help support the health care quality infrastructure. These include
Building Research Infrastructure & Capacity Program (BRIC), Minority
Research Infrastructure Support Program (M-RISP), Centers for Education
and Research on Therapeutics (CERTs) program, and Practice-Based
Research Networks (PBRNs). In addition, AHRQ will fund \$6 million in
new grants and contracts for Research Empowering America\'s Changing
Healthcare System (REACHES). These grants and contracts will expand work
in the area of adopting research findings in real-world settings,
assessing their impact and generalizability, and promoting rapid uptake
of successful efforts.]{.underline}

[A number of AHRQ efforts are oriented toward making research findings
accessible. For example, in the CERTs program, studies are 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, this past
year, AHRQ\'s Minnesota-based Evidence based Practice Center (EPC) set
out to review medical literature to answer questions such as: What are
the current indications for, and outcomes from, primary total knee
replacement? What factors explain disparities in the utilization of
total knee replacement in different populations?]{.underline}

[AHRQ will also continue to chair 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.]{.underline}

[Medical Expenditure Panel Surveys (MEPS)]{.underline}

[The FY 2004 budget for MEPS includes a request for \$53 million, the
same as the FY 2004 level. 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 to continue to inform 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. One
of the agency\'s recent accomplishments is the publication of two
first-ever two reports, required by the agency\'s 1999 reauthorization,
that represent the first national comprehensive effort to measure the
quality of health care in America and differences in access to health
care services for priority populations.]{.underline}

[National Reports on Quality and Disparities in Health Care: 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.]{.underline}

[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. The NHDR was developed in partnership
with other HHS agencies to ensure synergy with existing
efforts.]{.underline}

[The first editions of both reports are available on a new Web site,
www.qualitytools.ahrq.gov. 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. Both the NHQR and the NHDR will be
released annually. AHRQ has budgeted \$3 million in FY 2005 for these
projects.]{.underline}

[In FY 2005, AHRQ will be fully funded through inter-agency transfers of
evaluation funds.]{.underline}

**[Centers for Medicare & Medicaid Services]{.underline}**

# [CMS Summary]{.underline}

+-------------+-------------+-------------+-------------+-------------+
|             | **[2003]{.u | **[2004]{.u | **[2005]{.u | **[         |
|             | nderline}** | nderline}** | nderline}** | 2005]{.un   |
|             |             |             |             | derline}**\ |
|             |             |             |             | **[+/-      |
|             |             |             |             | 2004]{.u    |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Current    |             |             |             |             |
| Law:]{      |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Medicare   | [\$277,866  | [\$302,610  | [\$331,261  | [+\$28,651  |
| /1\         | ]{          | ]{          | ]{          | ]{          |
| ...\...\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Medicaid   | [160,693    | [177,107    | [183,197    | [+6,090     |
| /2\         | ]{          | ]{          | ]{          | ]{          |
| ...\...\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [SCHIP\...  | [4,355      | [5,232      | [5,299      | [+67        |
| \...\...\.. | ]{          | ]{          | ]{          | ]{          |
| .\...\...\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [State      | [15         | [47         | [304        | [+257       |
| Grants and  | ]{          | ]{          | ]{          | ]{          |
| Demonstrat  | .underline} | .underline} | .underline} | .underline} |
| ions\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total    | *           | *           | *           | *           |
| Outlays,    | *[\$442,929 | *[\$484,996 | *[\$520,061 | *[+\$35,065 |
| Current     | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| Law\        | nderline}** | nderline}** | nderline}** | nderline}** |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Premiums   | [-28,433    | [-32,169    | [-36,839    | [-4,670     |
| \...\       | ]{          | ]{          | ]{          | ]{          |
| ...\...\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Other      | [-58        | [ 0         | [ 0         | [ 0         |
| Offsetting  | ]{          | ]{          | ]{          | ]{          |
| C           | .underline} | .underline} | .underline} | .underline} |
| ollections/ |             |             |             |             |
| Rec         |             |             |             |             |
| eipts\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total    | *           | *           | *           | **[\$30,395 |
| Net         | *[\$414,438 | *[\$452,827 | *[\$483,222 | ]{.u        |
| Outlays,    | ]{.u        | ]{.u        | ]{.u        | nderline}** |
| Current     | nderline}** | nderline}** | nderline}** |             |
| Law\..      |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Proposed   |             |             |             |             |
| Law:]{      |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Medicare   | [ \$0       | [ \$0       | [-\$205     | [-\$205     |
| Adminis     | ]{          | ]{          | ]{          | ]{          |
| tration\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Medicare   | [ 0         | [ 0         | [-150       | [-\$150     |
| Benefi      | ]{          | ]{          | ]{          | ]{          |
| ts\...\...\ | .underline} | .underline} | .underline} | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [SMI        | [ 0         | [ 0         | [136        | [\$136      |
| Transfer to | ]{          | ]{          | ]{          | ]{          |
| Medicaid    | .underline} | .underline} | .underline} | .underline} |
| for         |             |             |             |             |
| QIs\...\.   |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Medicaid   | [ 0         | [ 0         | [-380       | [-\$380     |
| Adminis     | ]{          | ]{          | ]{          | ]{          |
| tration\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Medicaid   | [ 0         | [175        | [-753       | [-928       |
| Benefi      | ]{          | ]{          | ]{          | ]{          |
| ts\...\...\ | .underline} | .underline} | .underline} | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total    | **[ \$0     | **[\$175    | **[-\$1,352 | **[-\$1,527 |
| Proposed    | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| La          | nderline}** | nderline}** | nderline}** | nderline}** |
| w\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Premiums,  | [ \$0       | [ \$0       | [\$36       | [\$36       |
| Proposed    | ]{          | ]{          | ]{          | ]{          |
| Law\...     | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [One-Time   | [ \$0       | [ \$0       | [\$181      | [\$181      |
| Military    | ]{          | ]{          | ]{          | ]{          |
| Service     | .underline} | .underline} | .underline} | .underline} |
| Credits     |             |             |             |             |
| Adjustment  |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total    | *           | *           | *           | **[\$29,085 |
| Net         | *[\$414,438 | *[\$453,002 | *[\$482,087 | ]{.u        |
| Outlays,    | ]{.u        | ]{.u        | ]{.u        | nderline}** |
| Proposed    | nderline}** | nderline}** | nderline}** |             |
| Law         |             |             |             |             |
| /3\...\.    |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [1/         |             |             |             |             |
| Includes    |             |             |             |             |
| benefits,   |             |             |             |             |
| admi        |             |             |             |             |
| nistration, |             |             |             |             |
| Medicare    |             |             |             |             |
| T           |             |             |             |             |
| ransitional |             |             |             |             |
| Drug        |             |             |             |             |
| Assistance, |             |             |             |             |
| and the     |             |             |             |             |
| Medicare    |             |             |             |             |
| P           |             |             |             |             |
| rescription |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [ Drug      |             |             |             |             |
| Account.]{  |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [2/ Net     |             |             |             |             |
| outlays,    |             |             |             |             |
| without FY  |             |             |             |             |
| 2003/04     |             |             |             |             |
| outlays for |             |             |             |             |
| QMBs;       |             |             |             |             |
| without FY  |             |             |             |             |
| 2005 State  |             |             |             |             |
| low-income  |             |             |             |             |
| determ      |             |             |             |             |
| inations.]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [3/ Total   |             |             |             |             |
| net outlays |             |             |             |             |
| equal       |             |             |             |             |
| current     |             |             |             |             |
| outlays     |             |             |             |             |
| minus the   |             |             |             |             |
| impact of   |             |             |             |             |
| proposed    |             |             |             |             |
| le          |             |             |             |             |
| gislation]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [ and       |             |             |             |             |
| offsetting  |             |             |             |             |
| receipts.]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

[The FY 2005 budget request for the Centers for Medicare & Medicaid
Services (CMS) is \$482.1 billion in net outlays. The request finances
Medicare, Medicaid, the State Children\'s Health Insurance Program
(SCHIP), the Health Care Fraud and Abuse Control Program (HCFAC), State
insurance enforcement, and CMS operating costs. This budget reflects an
increase of \$29.1 billion over FY 2004.]{.underline}

[On December 8, 2003, President Bush signed the Medicare Prescription
Drug Improvement and Modernization Act of 2003 (MMA) into law. This is
the most significant overhaul of the Medicare program since its
inception in 1965, adding a long overdue prescription drug benefit and
expanded health choices for seniors. A top priority for CMS and HHS will
be the timely implementation of the sweeping changes in the law,
starting with providing Medicare beneficiaries a discount prescription
drug card by June 2004.]{.underline}

[Building upon the success of the Health Insurance Flexibility and
Accountability (HIFA) and Pharmacy Plus waivers, 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. As under last year\'s proposal,
States will have the option of receiving their SCHIP and Medicaid
funding together in an allotment. The allotment option requires States
to provide a specified benefit package for current Medicaid
beneficiaries whose coverage is mandated by law.]{.underline}

[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.]{.underline}

[Finally, the budget proposes to restrict the use of certain
intergovernmental transfers and cap Federal payments to individual State
and local providers. This will improve program integrity and help stem
the tide of rising costs in the Medicaid program.]{.underline}

# [Medicare Modernization Act]{.underline}

On December 8, 2003, the President signed into law the historic Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).
This Administration and Congress worked together to provide over 40
million Medicare beneficiaries with more choices in health care coverage
and better health care benefits. This law represents the most
significant and sweeping expansion of the Medicare program since its
enactment in 1965. As the President said, this new law will ease the
burden of high prescription drug costs on seniors and will give them the
extra help they need with these costs. MMA will strengthen and modernize
Medicare while still providing beneficiaries with the option to remain
in traditional Medicare. MMA creates a new Part D prescription drug
benefit, allows for competition among health plans to foster innovation
and flexibility in coverage, removes restrictions on Health Savings
Accounts (HSA), offers regulatory relief, and requires an analysis of
Medicare\'s potential long-term reliance on general tax-payer revenues.

Discount Drug Card

The MMA establishes a new Medicare approved prescription drug discount
card program that will immediately help Medicare beneficiaries reduce
their out--of--pocket spending on drugs. All Medicare beneficiaries,
except those who already have Medicaid drug coverage, will be able to
enroll in a prescription drug discount card program that allows them to
use a Medicare approved discount card in their local pharmacy. Seniors
and individuals with disabilities could save on average 10 to 15 percent
on their total drug costs, with savings of 25 percent or more off retail
prices on individual prescriptions. Beneficiaries can find comparative
information about drug card sponsors through www.medicare.gov and
1--800--MEDICARE after April 2004. Card enrollment begins as early as
May 2004, and discounts and transitional assistance begin in June 2004.

Discount cards will help to reduce out-of-pocket drug costs until the
Medicare drug benefit takes effect on January 1, 2006. HHS estimates
that the typical senior without drug coverage, who spends \$1,285
annually on medicine, could save as much as \$300 annually with their
discount card. Beneficiaries will pay no more than \$30 annually in 2004
and 2005 to enroll. Beneficiaries can also apply for transitional
assistance (TA). TA, for individuals whose income is less than \$12,123
each year or for married couples whose income is less than \$16,362
(based on 2003 Federal Poverty Levels), provides up to \$600 per year
for purchasing drugs. Medicare will cover the cost of the enrollment fee
for these low-income cardholders.

Beneficiaries will have a choice of at least two Medicare approved
cards, and they can change cards during an open enrollment period prior
to 2005 or if they move or enroll in a Medicare managed care plan. Any
company interested in providing a discount card must offer price
reductions on at least one medication per category in more than 200
therapeutic categories of drugs.

Voluntary Prescription Drug Benefit

The Administration delivered on the promise to provide Medicare
beneficiaries with prescription drug coverage. MMA establishes a new
voluntary prescription drug benefit under a new Medicare Part D. The
legislation implements many of the principles outlined in the
President\'s Framework to Modernize and Improve Medicare. It especially
helps those with low incomes and those with high drug expenses. HHS
places a high priority on educating Medicare beneficiaries about these
new choices and improved benefits. HHS will publish the proposed rule
implementing the drug benefit in calendar year 2004, and the final rule
in calendar year 2005.

Beginning January 1, 2006, approximately 40.7 million Medicare
beneficiaries who are entitled to Part A or enrolled in Part B will have
access to prescription drug benefits under the new Part D. Beneficiaries
can choose between at least two qualifying private drug plans from which
to receive their benefit. The law provides for a government fallback
plan for areas without at least two plan choices.

Current Medicare beneficiaries can enroll during an initial open
enrollment period between November 2005 and May 2006. For beneficiaries
eligible for Medicare in the future, Part D enrollment will correspond
to the enrollment period for Part B. At enrollees' option, Part D
premiums may be paid directly to the prescription drug plan or their
Medicare Advantage plan, deducted from the beneficiary\'s Social
Security check, or paid through an electronic funds transfer.

Beneficiaries can choose to enroll in a stand-alone private drug plan or
a Medicare Advantage prescription drug plan to get their prescription
drugs. Federal subsidies will encourage plan participation and better
enrollee benefits. Plans will negotiate drug prices with manufacturers
and provide these lower prices to beneficiaries. Beneficiaries will
receive monthly detailed explanations of their drug benefits from their
plan.

Beneficiaries will be able to get the types of drugs they need. Although
plans are permitted to use formularies, formularies have to meet
statutory standards. Formularies have to include drugs within each
therapeutic category and class of covered Part D drugs, so beneficiaries
keep their drug choices. And, beneficiaries can appeal to have a
non-formulary drug covered, if their formulary does not make their
preferred drug available and a doctor certifies the drug is necessary.

HHS will develop an electronic prescription program for Part D covered
prescription drugs. Electronic standards will reduce the number of
prescribing errors that occur each year and protect Medicare
beneficiaries against the possibility of medication errors.

State Effects

Under Part D of the MMA, States are relieved of a significant portion of
the costs of providing pharmaceutical benefits to individuals eligible
for both Medicare and Medicaid. This relief is mitigated somewhat by a
provision that mandates States maintain some percentage of the financial
responsibility for providing drugs to these individuals. State
contributions will be determined by first calculating the per capita
payment for dually eligible individuals. This figure will be multiplied
by the number of fully dually eligible individuals in the State to
calculate a Statewide total. In 2005, 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.

In addition to this Maintenance of Effort provision, States will also be
expected to participate in the eligibility determination process for the
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
SSA, with additional funds authorized to cover new administrative costs.

The MMA also includes two other provisions that will effect State
Medicaid programs. The first of these introduces significant changes to
the Medicaid Disproportionate Share Hospital program (DSH). The first
major change increases FY 2004 DSH allotments by 16 percent without
regard to a current cap, which ensures that States will not draw down
DSH money in excess of 12 percent of their total spending on medical
assistance. The second major provision changes the definition of low DSH
States from States with DSH programs accounting for between 0 and 1
percent of their total Medicaid program, to States whose DSH programs
represent 0 and 3 percent of total Medicaid spending. These low DSH
States will be given 16 percent increases in their DSH caps each fiscal
year between 2004 and 2009.

Finally, the 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.

Medicare Advantage

The new law replaces Medicare+Choice with the Medicare Advantage program
under Part C of Medicare. MMA changes how private plans will be paid in
2004 and thereafter. MMA allows for plans to be compensated
appropriately for the increasing costs of caring for Medicare
beneficiaries. Private plans will be able to use these enhanced payments
to offer beneficiaries more generous coverage and to provide additional
benefits that traditional Medicare may not. For example, plans can
provide Medicare beneficiaries with lower premiums, broader benefits, or
an improved physician network. With better compensation, more private
plans will voluntarily enter the Medicare market and improve
beneficiaries\' plan choices.

Local managed care plans will continue to be offered on a county-wide
basis. Beginning in 2006, Medicare Advantage will also include
coordinated care plans that offer both in- and out-of-network required
services on a regional basis. There will be at least 10 regions, but no
more than 50. Each regional plan must offer a maximum limit on
out-of-pocket expenses and a unified deductible. Also beginning in 2006,
the Secretary will determine Medicare Advantage payment rates by
comparing plan bids to a benchmark. Plans will bid to provide benefits,
and the Federal Government will pay the plans the amounts they bid. If
the plan\'s bid is below the benchmark, the beneficiary will receive 75
percent of the difference, either through additional benefits or lower
cost-sharing. If the Medicare Advantage plan\'s bid is above the
benchmark, the beneficiary will pay the additional amount. Beneficiaries
in Medicare Advantage plans will not be required to enroll in the new
prescription drug program, but beneficiaries can choose to receive an
integrated benefit (medical and prescription drugs) through Medicare
Advantage.

Comparative Cost Adjustment Demonstration

The MMA authorizes a six year demonstration of direct competition
between Medicare fee-for-service (FFS) and private plans beginning in
2010. The demonstration will be conducted in Metropolitan Statistical
Areas (MSA) with two local Medicare Advantage plans and local private
plan participation of not less than 25 percent. The Secretary will
choose not more than six qualified MSAs to participate in the
demonstration. Medicare Advantage plans will continue to be paid what
they bid, and traditional FFS and Medicare Advantage premiums will vary
depending on plan and local FFS costs. Low-income beneficiaries in the
demonstration areas will be protected from premium increases, and
premiums of FFS beneficiaries will not increase or decrease annually by
more than 5 percent relative to the FFS Part B premium.

Fee-for-Service Providers

MMA includes numerous provisions affecting Medicare providers, including
rural providers. Following are highlights of these changes:

Rural Providers: For rural hospitals, MMA equalizes urban and rural
standardized amounts under the inpatient hospital prospective payments
system and reduces the labor-related share of the wage index from 71.1
percent to 62 percent. In addition, the Disproportionate Share Hospital
(DSH) payment adjustment is increased from 5.25 percent to 12 percent
for qualified hospitals. Rural hospitals with fewer than 100 beds will
be protected from payment reductions associated with the outpatient
prospective payment system for an additional two years.

For Critical Access Hospitals (CAHs), MMA increases their bed limit from
15 to 25, allows periodic interim payments, loosens rules on distinct
part rehabilitation and psychiatric units, and increases reimbursement
for services to 101 percent of reasonable costs.

Physicians in newly established scarcity areas receive a 5 percent bonus
payment. Physicians in certain low-cost areas with geographic adjustment
factors below one will receive increased payments that raise this factor
to one, from 2004 to 2006. Home health agencies in rural areas will
receive a 5 percent increase in Medicare payments for one year starting
April 1, 2004. Ambulance providers receive a 2 percent increase in
reimbursement for rural ground trips, and an increase in payment for
ground ambulance trips over 50 miles. Rural hospice providers are
allowed more freedom to allow nurse practitioners to act as the
attending physician for a beneficiary who elects hospice.

Inpatient Hospitals: For fiscal years 2005 through 2007, hospitals will
receive the full market basket update if they submit 10 quality measures
established by the Secretary. If hospitals do not submit the quality
measures in any of these years, they will receive an update of market
basket minus 0.4 percentage points.

Physicians: The physician conversion update factor for 2004 and 2005
will be 1.5 percent, rather than the --4.5 percent update originally
scheduled for 2004. Starting in 2003, the formula for calculating the
sustainable growth rate (SGR) will be modified. The GDP factor will now
be based on a 10-year rolling average, replacing the current factor
which measures the one year change from the preceding year.

Skilled Nursing Facilities (SNFs): MMA increases the per diem payment
amount by 128 percent for a SNF resident with AIDS, effective until the
time the Secretary certifies that SNF case mix adjustment has been
appropriately modified to cover the increased costs of caring for these
residents.

Home Health Agencies: Home health payments are increased by the full
market basket during the last quarter of calendar year 2003 and the
first quarter of 2004. The update for the remainder of 2004, as well as
2005 and 2006, is the home health market basket increase minus 0.8
percentage points.

Durable Medical Equipment (DME): The payment update for most DME items
and services is frozen from 2004 to 2008, or until competitive bidding
is implemented.

Preventive Benefits

The MMA introduces a number of provisions that will expand 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 will include 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, will include a fasting plasma glucose test and other such
tests approved by the Secretary.

The cardiovascular screening blood tests 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.

Also, screening and diagnostic mammography will be excluded from the
outpatient prospective payment system and paid separately under the
physician fee schedule.

Part B Cost Sharing

MMA increases monthly Part B premiums for beneficiaries with higher
incomes beginning in January 2007. Prior to MMA, the Part B premium for
all beneficiaries, regardless of income, was set at 25 percent of
estimated program spending in a given year. Under MMA, individuals with
incomes above \$80,000 and married couples with incomes above \$160,000
will be subject to higher monthly premium amounts. The increases will be
calculated on a sliding scale basis and phased in over a five year
period. The highest category on the sliding scale will be for
individuals with incomes above \$200,000 (or \$400,000 for a married
couple).

MMA also makes changes to the Medicare Part B deductible. The deductible
will remain \$100 in 2004, increase to \$110 in 2005, and in subsequent
years, be indexed to inflation. Specifically, starting in 2006, the
deductible will be increased by the same annual percentage as the
monthly Part B premium increase (i.e., essentially the growth rate in
Medicare Part B program expenditures).

Regulatory Reform

MMA includes a number of administrative and operational reforms. For
example, regulatory reform provisions require the establishment of
overpayment recovery plans in case of hardship; prohibit contractors
from using extrapolation to determine overpayment amounts except under
specific circumstances; describe the rights of providers when under
audit by Medicare contractors; require the establishment of standard
methodology to use when selecting a probe sample of claims for review;
and prohibit a supplier or provider from paying a penalty resulting from
adherence to guidelines. In addition, MMA allows physicians to reassign
payment for Medicare services to entities with which the physicians have
an independent contractor arrangement. Finally, under the new law, final
regulations are to be published within three years, and all measures of
a regulation are to be published as a proposed rule before final
publication.

Contracting Reform

The 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;]{.underline}

-   [Allows the Secretary to renew contracts annually for up to five
    years;]{.underline}

-   [Requires that all contracts must be re-competed at least every five
    years;]{.underline}

-   [Limits contractor liability; and]{.underline}

-   [Allows incentive payments to improve contractor
    performance.]{.underline}

Fraud and Abuse

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

-   [Refinement of the average wholesale price (AWP) payments for
    Medicare\'s covered outpatient drugs provided in a doctor\'s
    office.]{.underline}

-   [Establishment of a competitive bidding program that would replace
    the current Medicare fee schedule payments for durable medical
    equipment (DME), enteral nutrition, and off-the-shelf orthotics. The
    competitive program will phase in all metropolitan statistical areas
    (MSA) over a three year period beginning in 2007.]{.underline}

-   [Development of quality and clinical standards for payment to DME
    suppliers.]{.underline}

-   [Implementation of a three-year pilot program in up to 10 States to
    conduct national and State background checks on workers in long-term
    care settings. The pilot program would 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. ]{.underline}

[Cost Containment/Long Term Financial Security]{.underline}

[A provision in the new MMA will now require that annual reports of the
Medicare Board of Trustees of the Hospital Insurance Trust Fund (Part A)
and the Supplementary Medical Insurance Trust Fund (Part B) 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. Dedicated
financing includes Medicare payroll taxes; premiums for Part A, Part B,
and Part D; transfers from the Railroad Retirement accounts; taxation of
certain OASDI benefits; State transfers for Medicare coverage of
beneficiaries who receive public assistance; and gifts. The Trustees
will be required to include the following information beginning in their
2005 annual report:]{.underline}

-   [General revenue Medicare growth projections as a percentage of the
    total Medicare outlays for each year within a seven-fiscal-year
    timeframe, and 10, 50, and 75 years after the fiscal year being
    reported;]{.underline}

-   [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;]{.underline}

-   [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. The President may then submit to Congress
    proposed legislation to respond to the warning;]{.underline}

-   [Comparisons with the growth trends for the gross domestic product,
    private health costs, national health expenditures, and other
    appropriate measures; and]{.underline}

-   [Expenditures and trends in expenditures under Part D.]{.underline}

[The law requires the Medicare Trustees to issue a \"warning\" if
general revenues are projected to exceed 45 percent of Medicare spending
in a year within the next seven years. If the Trustees issue such a
warning in two consecutive years, the law provides special legislative
conditions for the consideration of proposed legislation submitted by
the President to address the excess general revenue funding.
]{.underline}

[Appeals Reform]{.underline}

[MMA changes the Medicare fee--for--service appeals process. It requires
the Social Security Administration (SSA) and HHS to develop and
implement a plan for transferring the Medicare hearings function from
SSA to HHS, while maintaining independence of the administrative law
judges hearing the cases from CMS. MMA specifies that a plan for this
transfer must be submitted to Congress and the GAO by April 1, 2004, and
the transfer must occur between July 1 and October 1 of calendar year
2005. MMA struck the statutory language that requires SSA ALJs to hear
appeals of local coverage determinations. ]{.underline}

[MMA also changes the requirements for presentation of evidence,
notices, and the number of qualified independent contractors (QICs). It
reduces the number of QICs required by Section 521 of the Benefits
Improvement and Protection Act of 2000 (BIPA) from at least 12 to at
least four. It requires providers and suppliers to present all evidence
for an appeal at the reconsideration level. Previously, evidence could
be presented at any stage of the appeals process. MMA also provides for
the use of beneficiaries\' medical records in reconsiderations.
]{.underline}

[MMA increases the timeframes for decision-making at the lower levels of
the appeals process to 60 days from 30. It requires the dollar amounts
in controversy to be adjusted annually, and the Secretary to establish a
process to expedite access to judicial review for legal issues that
cannot be resolved administratively. Lastly, the MMA requires the
Secretary to establish a process for waiving disapproval of nurse-aide
training programs if an imposed civil money penalty (CMP) is not related
to quality of care.]{.underline}

[Health Savings Accounts]{.underline}

[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 \$2,600 for individuals and
\$5,150 for families in 2004 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.]{.underline}

# [Medicare]{.underline}

Medicare provides health insurance to 41.6 million individuals who are
either 65 or older, disabled, or suffer from end--stage renal disease
(ESRD). In FY 2005, spending on Medicare benefits will total \$324.5
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 in the Medicare Fact Sheet.

Medicare has not traditionally covered outpatient prescription drugs and
long-term care. As a result, many beneficiaries have some form of
supplemental insurance to fill Medicare\'s gaps. The four major sources
of supplemental coverage include: employer-sponsored benefits, a Medigap
policy, Medicaid, and Medicare Advantage plans, the majority of which
are HMOs.

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.

The Medicare Program PART summary identified three areas of improvement:

-   [Greater emphasis on sound program and financial
    managment;]{.underline}

-   [Legislative changes to modernize the benefit package to include
    prescription drug coverage and protection against catastrophic
    costs; and]{.underline}

-   [More effort to link Medicare payment to provider
    performance.]{.underline}

[The passage of MMA addresses two of these items, enacting both a
prescription drug benefit and contracting reform.]{.underline}

[Health Care Fraud and Abuse Control Program (HCFAC)]{.underline}

[The Health Insurance Portability and Accountability Act of 1996
(HIPAA), established the Health Care Fraud and Abuse Control (HCFAC)
Program to:]{.underline}

-   [coordinate Federal, State, and Local law enforcement
    programs;]{.underline}

-   [conduct investigations, audits, and evaluations relating to the
    delivery of and payment for health care;]{.underline}

-   [facilitate enforcement of statutes applicable to health care fraud
    and abuse;]{.underline}

-   [provide for the modification and establishment of safe harbors and
    to issue advisory opinions and special fraud alerts;
    and]{.underline}

-   [provide for the reporting and disclosure of final adverse actions
    against health care providers, suppliers, or
    practitioners.]{.underline}

[The HCFAC Program dedicates \$1.07 billion from the Medicare Part A
Trust Fund toward 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. Egregious cases of health care fraud are also prosecuted in
the courts. From 1997 to 2002, the HCFAC Program has returned
approximately \$4.9 billion to the Medicare Trust Fund.]{.underline}

[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. Total funding for
MIP has been capped at \$720 million since 2002. For this investment,
MIP is expected to save the Medicare Trust Funds \$9.9 billion in 2005
through recoveries, claims denials, and accounts receivable, a 14:1
return on investment. ]{.underline}

[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. ]{.underline}

[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:
Medicaid financial management oversight and data analysis projects to
detect patterns of fraud, educational activities at AoA , and
investigative and litigation support at OGC.]{.underline}

[Medicare Error Rate]{.underline}

[Medicare Integrity Program is the primary source of funds to lower the
Medicare payment error rate. The Department has lowered the Medicare
payment error rate from 14 percent in FY 1996 to 5.8 percent in FY 2003,
after adjusting for an unusually high non-response rate. We have set a
goal of further reducing the error rate to 4 percent by FY 2008.
Reducing the Medicare payment error rate is a major priority in the
Department\'s effort to implement the President\'s Management Agenda.
]{.underline}

[FY 2003 was the first year that CMS was responsible for estimating the
national Medicare error rate. Prior to that time, the Office of the
Inspector General (OIG) performed the national Medicare payment error
rate. The OIG used a sample size of approximately 6,000 claims each year
to determine its estimate. ]{.underline}

[CMS developed the Comprehensive Error-Rate Testing (CERT) and the
Health Payment Medicare Program (HPMP) to estimate the Medicare payment
error rate using a sample size of 140,000-170,000 claims. Whereas, the
OIG rate produced only one statistically significant number (the
national error rate), CERT and HPMP provide 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
error.]{.underline}

[In its first year using CERT, CMS encountered some difficulties in
estimating the error rate. CMS received fewer responses from health care
providers than OIG received in previous years. Because lack of response
equated with payment error, the CERT rate was considerably higher than
the OIG\'s 6.3 percent rate from FY 2002. We believe that the higher
non-response rate was not a fair representation of payment error in the
Medicare program. The contractor was asked to re-work their estimate to
lower the non-response rate to a level comparable to previous years.
When this was done, the rate came down to 5.8 percent compared to the
original statistically significant 9.8 percent. CMS is in the process of
implementing improvements to the CERT survey methodology to ensure that
the adjustments made this year will not be necessary in future
estimates.]{.underline}

[The Administration\'s health care fraud, waste, and abuse control
efforts have made progress in protecting the Medicare Trust Funds.
Recent Medicare Trustee\'s reports have cited our health care fraud,
waste, and abuse control efforts as a contributing factor in the slower
Medicare spending growth experienced over the last several years. We
hope to bring similar success to the state-administered Medicaid and
SCHIP programs as well.]{.underline}

[Quality Improvement Organizations (QIO) ]{.underline}

[QIOs (previously Peer Review Organizations) were established by Title
XI, Section 1151 of the Social Security Act, Part B, to serve the
following functions:]{.underline}

-   [Improve the quality of care for beneficiaries by ensuring that
    professionally recognized standards of care are met;]{.underline}

-   [Enhance program integrity by ensuring that Medicare only pays for
    items that are reasonable and medically necessary; and]{.underline}

-   [Protect beneficiaries by addressing individual beneficiary\'s
    complaints, hospital--issued notices of noncoverage, and Emergency
    Medical Treatment and Labor Act (EMTALA) \"dumping\"
    violations.]{.underline}

[QIOs are a central player in this Administration\'s efforts to improve
the quality of care provided to Medicare beneficiaries. Under their
current three year funding plan, totaling \$1.1 billion (see table
below), QIOs are part of groundbreaking efforts underway in Medicare to
promote public awareness of the quality of care delivered in nursing
homes, hospitals, home health agencies, and physicians offices, and to
assist providers seeking to improve on measures of quality. These
quality improvement efforts are essential to the Administration goals to
modernize and strengthen the Medicare program.]{.underline}

[In November 2002, HHS and CMS launched the national Nursing Home
Quality Initiative (NHQI). The initiative provides new comparative
information to consumers and new resources to facilities all aimed at
improving nursing home quality of care. This ground breaking 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 eight demonstration States.
]{.underline}

[CMS is in the process of completing implementation of the Hospital
Quality Initiative, which will provide comparative outcomes data on
hospitals. To date, over 2,300 hospitals have pledged to join this
voluntary effort. With incentives built into the MMA, most hospitals are
expected to participate. The results of these public information
programs will be better informed consumers and providers better able to
identify what they must do to improve quality.]{.underline}

[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.]{.underline}

[Clinical Laboratory Improvement Amendments of 1988 (CLIA)]{.underline}

[The Clinical Laboratory Improvement Amendments of 1988 (CLIA '88)
expanded survey and certification of clinical laboratories from
Medicare-participating and interstate commerce laboratories to all
facilities testing human specimens for health purposes. CLIA '88 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.]{.underline}

[The CLIA program is fully operational, with 177,400 laboratories
registered with CMS, 24 percent of which are subject to routine
inspection (every 2 years) under the program. The remainder are
exempted. Workload projections for the FY 2005-2006 cycle include 20,550
surveys of non-accredited laboratories, 802 State validation surveys of
accredited laboratories, and approximately 1,520 follow-up surveys and
complaint investigations.]{.underline}

[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.]{.underline}

[Medicare Legislative Proposals]{.underline}

[The CMS budget includes a net savings of \$130 million in FY 2005 from
two Medicare legislative proposals. One proposal will eliminate the 15
month durable medical equipment (DME) rental option by requiring that
continuous rentals be converted to purchase after 13 months. This
proposal eliminates access problems beneficiaries confront when DME
suppliers move, sell their business, or go into bankruptcy and can no
longer offer the DME rental to the beneficiary by converting rentals to
purchases under a faster time frame. It is also more cost effective for
both beneficiaries and the Medicare program to purchase rather than rent
DME for long periods of time due to the additional two months worth of
rental payments and the cost of semi-annual maintenance
fees.]{.underline}

[The second proposal will allow CMS to use the Administration for
Children and Families\' quarterly wage data base to determine secondary
payer status. The quarterly wage data base contains employment and
possible employer-sponsored health insurance data. Accessing this data
base will help CMS to more quickly identify instances where Medicare
coverage is secondary to a beneficiary\'s (or their spouse\'s) employee
health coverage, thereby reducing improper payments. Both of these
proposals are included in appropriations language in the budget
request.]{.underline}

[Medicare Trust Fund]{.underline}

+-------------+-------------+-------------+-------------+-------------+
|             | **[2003]{.u | **[2004]{.u | **[2005]{.u | *           |
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| iciaries\.. |             |             |             |             |
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[Medicare Outlays]{.underline}

+-------------+-------------+-------------+-------------+-------------+
|             | **[2003]{.u | **[2004]{.u | **[2005]{.u | *           |
|             | nderline}** | nderline}** | nderline}** | *[2005]{.un |
|             |             |             |             | derline}**\ |
|             |             |             |             | **[         |
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|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
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|             |             |             |             |             |
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| [Current    |             |             |             |             |
| Law:]{      |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [HI         | [           | [           | [           | [+15,168    |
| B           | \$150,970]{ | \$166,182]{ | \$181,350]{ | ]{          |
| enefits\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
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| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [SMI        | [121,628]{  | [127,786]{  | [140,455]{  | [+12,669    |
| Benefi      | .underline} | .underline} | .underline} | ]{          |
| ts\...\...\ |             |             |             | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
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| ..\...\...\ |             |             |             |             |
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| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [T          | [-          | [2,321]{    | [2,792]{    | [+471       |
| ransitional | ]{          | .underline} | .underline} | ]{          |
| Drug        | .underline} |             |             | .underline} |
| Assistance  |             |             |             |             |
| /1\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *           | **[\$       | **[\$       | **[\$       | **[+28,308  |
| *[Subtotal, | 272,598]{.u | 296,289]{.u | 324,597]{.u | ]{.u        |
| Medicare    | nderline}** | nderline}** | nderline}** | nderline}** |
| Benefits\   |             |             |             |             |
| ...\...\... |             |             |             |             |
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| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Other      |             |             |             |             |
| Medicare    |             |             |             |             |
| Ac          |             |             |             |             |
| tivities:]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
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| St          | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| abilization | nderline}** | nderline}** | nderline}** | nderline}** |
| Fund        |             |             |             |             |
| /2\...      |             |             |             |             |
| \...\...\.. |             |             |             |             |
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| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [           | [3,779]{    | [3,893]{    | [4,207]{    | [+314       |
| Adm         | .underline} | .underline} | .underline} | ]{          |
| inistration |             |             |             | .underline} |
| /3\         |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
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| ]{          |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
| [ MMA       | [-          | [671]{      | [753]{      | [+82        |
| Imp         | ]{          | .underline} | .underline} | ]{          |
| lementation | .underline} |             |             | .underline} |
| /4\...\.    |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [ Drug      | [-          | [190]{      | [250]{      | [+60        |
| Demons      | ]{          | .underline} | .underline} | ]{          |
| tration\... | .underline} |             |             | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
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| ]{          |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
| [ HCFAC     | [1,027]{    | [1,075]{    | [1,075]{    | [ 0         |
| /5\...\.    | .underline} | .underline} | .underline} | ]{          |
| ..\...\...\ |             |             |             | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
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| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [ Quality   | [350]{      | [367]{      | [379]{      | [+12        |
| Improvement | .underline} | .underline} | .underline} | ]{          |
| Organ       |             |             |             | .underline} |
| izations\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [ Transfers | [112]{      | [125]{      | [0]{        | [-125       |
| to          | .underline} | .underline} | .underline} | ]{          |
| Medicaid    |             |             |             | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
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| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total    | **[\$       | **[\$       | **[\$       | **[+28,651  |
| Outlays,    | 277,866]{.u | 302,610]{.u | 331,261]{.u | ]{.u        |
| Current     | nderline}** | nderline}** | nderline}** | nderline}** |
| Law\.       |             |             |             |             |
| ..\...\...\ |             |             |             |             |
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| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Offsetting |             |             |             |             |
| Col         |             |             |             |             |
| lections:]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [           | [-28,433]{  | [-32,169]{  | [-36,839]{  | [-4,670     |
| Premiu      | .underline} | .underline} | .underline} | ]{          |
| ms\...\...\ |             |             |             | .underline} |
| ...\...\... |             |             |             |             |
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| tions/Recei |             |             |             |             |
| pts\...\... |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total    | **[\$       | **[\$       | **[\$       | **[+23,981  |
| Net         | 249,375]{.u | 270,441]{.u | 294,422]{.u | ]{.u        |
| Outlays,    | nderline}** | nderline}** | nderline}** | nderline}** |
| Current     |             |             |             |             |
| Law\..      |             |             |             |             |
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| ..\...\...\ |             |             |             |             |
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| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
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| [Proposed   |             |             |             |             |
| Leg         |             |             |             |             |
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| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Medicare   | [0]{        | [0]{        | [-150       | [-150       |
| Benef       | .underline} | .underline} | ]{          | ]{          |
| its\...\... |             |             | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
| [SMI        | [0]{        | [0]{        | [+136       | [+136       |
| Transfer to | .underline} | .underline} | ]{          | ]{          |
| Medicaid    |             |             | .underline} | .underline} |
| for         |             |             |             |             |
| QIs\...\    |             |             |             |             |
| ...\...\... |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
| [Proposed   | [0]{        | [0]{        | [-205       | [-205       |
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| ]{          |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
| [Premium    | [0]{        | [0]{        | [+36        | [+36        |
| Int         | .underline} | .underline} | ]{          | ]{          |
| eractions\. |             |             | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
| [One-Time   | [0]{        | [0]{        | [+181       | [+181       |
| Military    | .underline} | .underline} | ]{          | ]{          |
| Service     |             |             | .underline} | .underline} |
| Credits     |             |             |             |             |
| Adjustme    |             |             |             |             |
| nt\...\.... |             |             |             |             |
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|             |             |             |             |             |
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| **[Total    | **[\$0]{.u  | **[\$0]{.u  | **[-\$2     | **[-2       |
| Medicare    | nderline}** | nderline}** | ]{.u        | ]{.u        |
| Proposed    |             |             | nderline}** | nderline}** |
| Le          |             |             |             |             |
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| **[Total    | **[\$       | **[\$       | **[\$       | **[+23,979  |
| Net         | 249,375]{.u | 270,441]{.u | 294,420]{.u | ]{.u        |
| Outlays,    | nderline}** | nderline}** | nderline}** | nderline}** |
| Proposed    |             |             |             |             |
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| Includes    |             |             |             |             |
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| inistrative |             |             |             |             |
| payments to |             |             |             |             |
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# [Medicaid]{.underline}

Medicaid is a jointly-funded, Federal-State program that provides
medical assistance to certain low-income groups. In FY 2005,
approximately 43.6 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 higher
income eligibility limits. Under current law, the Federal share of
Medicaid outlays is expected to be about \$183.2 billion in FY 2005.
This is a \$6.1 billion (3.4 percent) increase over projected FY 2004
spending.

Background

Under Medicaid, State expenditures for medical assistance are matched by
the Federal government using a formula based on per capita income in
each State relative to the national average per capita income. Federal
matching rates for FY 2005 will range from 50 to 75 percent for medical
assistance payments. The average Federal matching rate is about 57
percent. 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,\" are covered
under State Medicaid programs. States must cover two additional
groups: 1) pregnant women and infants whose family income does not
exceed 185 percent of the Federal poverty level; and 2) all children
under the age of 19 living below the poverty level.

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, which include prescription drugs,
clinic services, dental, eyeglasses, and services provided in
intermediate care facilities for those with mental retardation.

Program Developments

Medicaid Growth: Prescription drug spending, nursing home,
community-based long-term care costs, and payments to health plans are
significant contributors to growth in the 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 Medicaid
costs at an accelerated rate. According to State estimates, the fastest
growing service category in the Medicaid program is prescription drugs.
States expect the prescription drug category, which includes the drug
rebate offsets, to grow by \$2.4 billion, or 13 percent, between FY 2004
and FY 2005. The State-estimated increase for prescription drugs
accounts for 41.2 percent of the total FY 2005 benefit growth.

Waivers: States have sought waivers under section 1115 of the Social
Security Act to expand health care coverage to low-income, uninsured
populations and to test innovative approaches in health care service
delivery. Many of the demonstrations include the Temporary Assistance
for Needy Families (TANF) and related populations, and some include the
elderly and the disabled. Although demonstrations vary greatly, most
employ a common overall approach: expanding the use of managed care for
the Medicaid population.

To date, CMS has approved 27 Statewide comprehensive health care reform
demonstrations in 23 States. CMS has also approved two sub-State health
reform demonstrations and 12 demonstrations specifically related to
family planning.

Health Insurance Flexibility and Accountability (HIFA): 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 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 Administration developed the Pharmacy Plus waivers
under section 1115 to help low-income seniors and people with
disabilities who need assistance with prescription drug costs. Pharmacy
Plus is directed to Medicare beneficiaries and other low-income seniors
and people with disabilities with income of 200 percent or less of the
Federal Poverty Level (FPL) who are not eligible for full Medicaid
benefits. Four states have approved Pharmacy Plus demonstrations
(Florida, Illinois, South Carolina, and Wisconsin) and Maryland has
revised its Statewide 1115 demonstration to add a pharmacy benefit.

The Administration is working to address how the enactment of the
Medicare Prescription Drug, Improvement, and Modernization Act (MMA)
will effect the management of the Pharmacy Plus initiative.

Medicaid and SCHIP Reform

The past year has witnessed increasing dialogue on the subject of
Medicaid and SCHIP modernization. States have continued to express
concerns about the complexity of administering the Medicaid program.
Federal regulation of the Medicaid program is an increasing burden on
the ability of the States to address the unique needs of their
low-income uninsured residents. The Secretary is encouraged by the
current discussion and will look for new and innovative ways to address
these concerns in the coming year. Building on the foundation of last
year\'s Medicaid and SCHIP modernization proposal, the Secretary will
work with Congress to pass an option for States to receive Medicaid and
SCHIP funds in the form of flexible allotments. This strategy will
provide States with the greatest potential for innovation and stability
of funding.

Medicaid Legislative Proposals

New Freedom Initiative Demonstrations: The President\'s Budget
reproposes three demonstration projects under the New Freedom
Initiative. Each promotes at-home care as an alternative to
institutionalization. The demonstrations are:

-   [Respite services to the caregivers of disabled adults.]{.underline}

-   [Respite services to caregivers of children with severe
    disabilities. ]{.underline}

-   [Home and community--based services for children currently residing
    in psychiatric residential treatment facilities.]{.underline}

[These three demonstrations will cost \$13 million in FY 2005, and \$256
million over five years. They will be funded out of mandatory Medicaid
dollars.]{.underline}

[There is a fourth demonstration project that addresses shortages of
community direct care workers. This project is funded out of the CMS
Research, Demonstrations, and Evaluation budget and costs \$2.9 million
in FY 2005. ]{.underline}

[Money Follows the Individual Rebalancing Demonstration: The
Administration is also committed to promoting the use of at-home care as
an alternative to nursing homes for elderly and disabled Americans.
Under the \"Money Follows the Individual\" demonstration, at-home care
combines cost effective benefits with increased independence and quality
of life for the beneficiary.]{.underline}

[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
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 rates and to reduce institutional
long--term care. This demonstration will be have no cost in FY 2005 and
will cost \$500 million over five years.]{.underline}

[Living with Independence, Freedom, and Equality (LIFE) Accounts: Under
this proposal, States would have the option of allowing individuals who
self-direct all of their community-based long-term care services to
accumulate savings and still retain eligibility for Medicaid and
Supplemental Security Income (SSI). Under current law, beneficiaries are
discouraged from accumulating savings because it could jeopardize their
eligibility for Medicaid or SSI. This legislative proposal is estimated
to be cost neutral.]{.underline}

[Spousal Exemption: This proposal extends eligibility for Medicaid
benefits to the spouses of individuals with a disability individuals
entering the workforce. The lack of spousal coverage is a significant
impediment to employment for many low-income individuals with a
disability, and this exemption smooths the road to independence. The
Federal government will invest \$17 million in this program for FY 2005
and \$102 million over five years. ]{.underline}

[Presumptive Eligibility for Community-Based Services: This proposal
will establish 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 will have no effect on the Medicaid
budget.]{.underline}

[Extension and Simplification of Transitional Medical Assistance (TMA):
TMA was created to provide 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 benefits due to
earnings from work. This provision was enacted along with welfare reform
and was scheduled to sunset in September 2001. Congress has extended
this program under PL 108--89 through March 31, 2004. ]{.underline}

[In addition to this extension, the 2005 President\'s Budget includes
proposals to simplify eligibility for TMA benefits to the low-income
working poor. There are three provisions to the proposal. ]{.underline}

-   [States will be given the option to offer 12 months of continuous
    coverage to eligible participants. ]{.underline}

-   [States may waive income reporting requirements for
    beneficiaries.]{.underline}

-   [States that offer Medicaid eligibility for children and families
    with incomes up to 185 percent of poverty may waive their TMA
    program requirements. ]{.underline}

[This proposal will cost \$558 million in FY 2005 and \$3.24 billion
over five years.]{.underline}

[Partnership for Long Term Care: This proposal would eliminate 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 these 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 has no costs associated with it.]{.underline}

[Extension of Premium Assistance to Qualified Individuals (QI): Under
the QI program, Medicaid pays Medicare Part B premiums for Medicare
beneficiaries with incomes between 120 and 135 percent of poverty.
Currently Part B premiums cost about \$799 a year. The Administration
recognizes the economic burden these premiums place on low-income
beneficiaries and proposes to extend the QI benefit through FY 2005.
States will continue to be fully reimbursed for the cost of the program.
This extension is estimated to cost \$136 million in FY
2005.]{.underline}

[Disability Determination Proposal: The Social Security Administration
has proposed a management improvement that has a Medicaid impact. The
proposal requires that 50 percent of all favorable adult disability
benefit decisions be reviewed to verify eligibility. The program will
save money in the Medicaid program by insuring that only legally
disabled individuals are eligible for Medicaid services due to their SSI
status. The proposal saves the Medicaid program \$3 million in FY
2005.]{.underline}

[Improvements to the Vaccines for Children (VFC) Program: VFC is a CDC
administered, Medicaid funded program that administers free vaccines to
eligible children. The Administration is proposing two legislative
changes to the program. First, the President\'s Budget proposes to lift
the price cap on the tetanus-diphtheria booster, thereby increasing
access for VFC eligible children. Second, the President\'s Budget would
allow 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. These proposals will cost an
additional \$165 million in FY 2005. ]{.underline}

[Medicaid Program Integrity: Throughout the life of the Medicaid
program, States have used intergovernmental transfers (IGT) as a means
of inappropriately drawing down inordinate amounts of Federal Medicaid
funding. Past State funding mechanisms that manipulated the Medicaid
Upper Payment Limit, Disproportionate Share Hospital payments, and
provider taxes and donations would have been impossible without the use
of intergovernmental transfers. The FY 2005 President\'s Budget proposes
to further improve the fiscal integrity of Medicaid by curbing IGTs that
are in place solely to undermine the statutorily determined Federal
matching rate. The budget proposes to cap Medicaid payments to
individual State and local government providers at the cost of providing
services to Medicaid beneficiaries and restrict the use of ceratin
intergovernmental transfers. This proposal will save the Federal
Government \$1.5 billion in FY 2005 and \$9.6 billion over five
years.]{.underline}

[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. ]{.underline}

[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. This increased access to private health
insurance would lead to a decrease in Medicaid costs among TANF
families.]{.underline}

[These two proposals will be budget neutral in FY 2005, but will save
the Federal Government \$50 million over five years.]{.underline}

[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. Procedural delays
and asylee waiting lists have created a situation in which seven years
may not be enough for these groups of immigrants to gain American
citizenship. 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 years. The policy
would continue through 2007. The proposal will cost the Federal
Government \$29 million in FY 2005 and \$132 million over five
years.]{.underline}

[Temporary Assistance for Needy Families (TANF) Cost Allocation
Adjustment: This FY 2005 appropriations language proposal will reduce
the Federal reimbursement for administrative costs of Medicaid by \$300
million to reflect the share assumed in the Temporary Assistance for
Needy Families (TANF) block grant and will prohibit States from using
TANF funds to pay these costs during FY 2005. In the past, costs common
to AFDC, Medicaid and Food Stamps were charged to the former AFDC
program and included in each State\'s TANF base year. This proposal
allows the recovery of amounts that were funded in the TANF block grant
that States now charge to Medicaid. This one time reduction will
eliminate the dual payment to States for certain administrative costs in
the administration of the Medicaid program that was created by the TANF
welfare reform legislation. This proposal will be in effect for only FY
2005, and will save approximately \$300 million for the Federal
Government. ]{.underline}

[Reduce the Enhanced Federal Matching Rate for Information and Claims
Management Systems: Under current law States receive a 90 percent
matching rate on all expenditures related to the design, development,
and implementation of Medicaid claims processing and information
retrieval systems. A new proposal, included in the FY 2005 Medicaid
appropriations request, would reduce this matching rate to 75 percent,
which is consistent with other enhanced matching rates. This one-year
change will save the Federal Government approximately \$80 million in FY
2005. ]{.underline}

[Medicaid Outlays]{.underline}

+-------------+-------------+-------------+-------------+-------------+
| [Current    | *           | *           | *           | **[R        |
| Law:]{      | *[2003]{.un | *[2004]{.un | *[2005]{.un | equest]{.un |
| .underline} | derline}**\ | derline}**\ | derline}**\ | derline}**\ |
|             | **          | **[         | **[         | **[+/-      |
|             | [Actual]{.u | Enacted]{.u | Request]{.u | Enacted]{.u |
|             | nderline}** | nderline}** | nderline}** | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Benefits   | [           | [           | [           | [\$5,639]{  |
| /1          | \$152,673]{ | \$168,239]{ | \$173,878]{ | .underline} |
| \...\...\.. | .underline} | .underline} | .underline} |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [State      | [\$8,021]{  | [\$8,868]{  | [\$9,319]{  | [\$450]{    |
| Adm         | .underline} | .underline} | .underline} | .underline} |
| inistration |             |             |             |             |
| \...\...\   |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total    | *           | *           | *           | **[+\$6,090 |
| Net         | *[\$160,693 | *[\$177,107 | *[\$183,197 | ]{.u        |
| Outlays,    | ]{.u        | ]{.u        | ]{.u        | nderline}** |
| Current Law | nderline}** | nderline}** | nderline}** |             |
| \...\...\   |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [/1         |             |             |             |             |
| Includes    |             |             |             |             |
| Vaccines    |             |             |             |             |
| for         |             |             |             |             |
| Children    |             |             |             |             |
| Outlays.    |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

[Medicaid Enrollment]{.underline}

  -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------
                                                                                                                                                                             **[2003]{.underline}**   **[2004]{.underline}**   **[2005]{.underline}**
                                                                                                                                                                                                                               
  [Aged 65 and Over\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}              [4.3]{.underline}        [4.4]{.underline}        [4.4]{.underline}
  [Blind and Disabled\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}             [7.8]{.underline}        [8.0]{.underline}        [8.1]{.underline}
  [Needy Adults\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}       [10.5]{.underline}       [10.8]{.underline}       [10.9]{.underline}
  [Needy Children\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}         [19.3]{.underline}       [19.7]{.underline}       [20.2]{.underline}
                                                                                                                                                                                                                               
                                                                                                                                                                                                                               
  **[Total /1\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**   **[41.9]{.underline}**   **[42.9]{.underline}**   **[43.6]{.underline}**
                                                                                                                                                                                                                               
                                                                                                                                                                                                                               
                                                                                                                                                                                                                               
  [/1 Numbers may not add due to rounding.]{.underline}                                                                                                                                                                        
                                                                                                                                                                                                                               
  -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------

**[State Children]{.underline}[']{.underline}[s Health Insurance
Program]{.underline}**

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

[SCHIP is a partnership between Federal and State governments that helps
provide children with the health insurance coverage they need. The
program improves the access to health care and the qualify 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. ]{.underline}

[The number of uninsured children has decreased since the inception of
SCHIP. In fact, even in the recent period of State budget constraints,
the uninsurance rate among children continued to decline, from 10.5
percent in FY 2002 to 9.4 percent in the first half of FY
2003.]{.underline}

[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. ]{.underline}

[States have a high degree of flexibility in designing their programs.
They can implement SCHIP by: ]{.underline}

-   [expanding Medicaid, ]{.underline}

-   [creating a new, non-Medicaid Title XXI separate State program, or
    ]{.underline}

-   [a combination of both approaches. ]{.underline}

[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.]{.underline}

[Implementation and Enrollment]{.underline}

[Every State, the District of Columbia, and all five Territories have
approved SCHIP plans. As of January 2004, States have received approval
for 19 Medicaid expansion programs, 18 separate programs, 19 combination
programs, and 186 State plan amendments. ]{.underline}

[Today, 40 States cover children in families with incomes up to 200
percent of the FPL. Of these States, 13 cover children above that level.
Five of the States cover children up to 300 percent of the FPL, and one
State covers children up to 350 percent of the FPL.]{.underline}

[During FY 2003, preliminary estimates show 5.8 million children
enrolled in SCHIP. This represents an increase of half a million, or 9
percent, over FY 2002 enrollment.]{.underline}

[SCHIP Performance]{.underline}

[When SCHIP began in 1997, CMS adopted a goal of enrolling five million
children by FY 2005. Specifically, CMS set annual target goals for FYs
2000 through 2002 to enroll at least 1 million new children in SCHIP and
Medicaid per year. CMS has exceeded these enrollment goals every
year.]{.underline}

[The Office of Management and Budget (OMB) developed the Program
Assessment Rating Tool (PART) to evaluate programs in a systematic
manner, rating program effectiveness and highlighting strengths and
weaknesses. SCHIP was initially evaluated by OMB in the FY 2004 cycle
and received a score of 71. It was then reassessed in the FY 2005 cycle
and received a score of 66 and a rating of "Adequate." As a result of
OMB\'s findings, CMS developed an SCHIP Action Plan to further
strengthen the program.]{.underline}

[SCHIP Reports and Evaluations]{.underline}

[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 State evaluation
reports by March 31, 2000. These reports are available on the Centers
for Medicare & Medicaid Services (CMS) website. 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. ]{.underline}

[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 2004. ]{.underline}

[BBRA also directed the Secretary, through the Inspector General, to
evaluate SCHIP every three years. The 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 Office of Inspector General (OIG)
released two reports in February 2001 that fulfill these requirements.
To satisfy the OIG\'s requirement to submit these evaluations every
three years, the OIG has completed the first round of studies and will
publish its report in accordance with the BBRA mandate sometime this
year. ]{.underline}

[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. ]{.underline}

[SCHIP Waivers]{.underline}

[The requirements of Federal law and regulations can be waived by the
Department of Health and Human Services (HHS) to give States the
programmatic flexibility to increase health insurance coverage and
encourage innovation in their SCHIP programs. Waivers allow States to
improve children\'s coverage and the quality of services for children.
Using section 1115 waivers, 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. ]{.underline}

[As of January 2004, SCHIP waivers were approved for Maryland, Minnesota
(2), New Jersey, New Mexico (2), New York, Ohio, Rhode Island (2), and
Wisconsin. These Section 1115 waivers provide health insurance to
uninsured children, their parents, and pregnant women.]{.underline}

[States can also use a new section 1115 approach, the Health Insurance
Flexibility and Accountability (HIFA) waivers, to develop comprehensive
insurance coverage for individuals at twice the Federal poverty level
and below, using SCHIP and Medicaid funds.]{.underline}

[Since December 2001, the Administration has approved eight HIFA
demonstration waivers that affected SCHIP, in Arizona, California,
Colorado, Illinois, Michigan, New Mexico, New Jersey, and Oregon. 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.]{.underline}

[Recent Legislation]{.underline}

[On August 15, 2003, President Bush signed P.L. 108-74. The law restores
\$1.2 billion in FY 1998 and FY 1999 SCHIP funds, and makes them
available to States until September 30, 2004. The law also extends \$2.2
billion in FYs 2000 and 2001 SCHIP funds and revises the rule for
redistributing the unspent funds from those allotments. For the FYs 2000
and 2001 allotments, the law allows States that do not spend their
entire allotment within the three-year period of availability to keep
half of those respective year\'s unspent amounts. The other half would
be redistributed to States that have spent their entire amount of the
respective year\'s allotments. The law also extends the availability of
funds from the FY 2000 allotments through September 30, 2004, and the
availability of the FY 2001 allotment through September 30, 2005.
]{.underline}

[The law also gives some relief to States that expanded their Medicaid
programs to cover additional, low-income children prior to the enactment
of SCHIP. These States are given the option to use up to 20 percent of
any available SCHIP allotments from FYs 1998, 1999, 2000, or 2001 to pay
for certain Medicaid expenditures. Only Medicaid expenditures for
individuals under age 19 whose family income exceeds 150 percent of the
Federal poverty level qualify under this provision.]{.underline}

[Under P.L. 108-74, Connecticut, Minnesota, New Hampshire, Tennessee,
Vermont, Washington, and Wisconsin are considered \"qualifying\" States
and can use these SCHIP allotments for certain Medicaid expenditures.
Subsequently, P.L. 108-127 was passed, which defines Hawaii, Maryland,
New Mexico, and Rhode Island as \"qualifying\" States.]{.underline}

[Legislative Proposals]{.underline}

[Special Enrollment Period in Group Market for Medicaid/SCHIP Eligibles:
This legislative proposal would make it easier for Medicaid and SCHIP
beneficiaries to enroll in private health insurance, by making
eligibility for Medicaid and SCHIP a trigger for private health
insurance enrollment outside the plan\'s open season. This proposal will
help States implement premium assistance programs in Medicaid and SCHIP.
]{.underline}

[Please see the Medicaid section for additional proposals that affect
SCHIP.]{.underline}

# [SCHIP Outlays]{.underline}

+-----------+---+-----------+-----------+-----------+-----------+
|           |   | **[2      | **[20     | **[20     | **[20     |
|           |   | 003]{.und | 04]{.unde | 05]{.unde | 04]{.unde |
|           |   | erline}** | rline}**\ | rline}**\ | rline}**\ |
|           |   |           | **[Projec | **[Projec | **[+/-    |
|           |   |           | ted]{.und | ted]{.und | 2         |
|           |   |           | erline}** | erline}** | 005]{.und |
|           |   |           |           |           | erline}** |
+-----------+---+-----------+-----------+-----------+-----------+
|           |   |           |           |           |           |
+-----------+---+-----------+-----------+-----------+-----------+
| **        |   |           |           |           |           |
| *[Current |   |           |           |           |           |
| L         |   |           |           |           |           |
| aw]{.unde |   |           |           |           |           |
| rline}*** |   |           |           |           |           |
+-----------+---+-----------+-----------+-----------+-----------+
|           |   |           |           |           |           |
+-----------+---+-----------+-----------+-----------+-----------+
| [Total    |   | [\$4,355  | [\$5,232  | [\$5,299  | [+\$67    |
| Out       |   | ]{.u      | ]{.u      | ]{.u      | ]{.u      |
| lays\...\ |   | nderline} | nderline} | nderline} | nderline} |
| ...\...\. |   |           |           |           |           |
| ..\...\.. |   |           |           |           |           |
| .\...\... |   |           |           |           |           |
| \...\...\ |   |           |           |           |           |
| ...\...\. |   |           |           |           |           |
| ..\...\.. |   |           |           |           |           |
| .\...\... |   |           |           |           |           |
| \....]{.u |   |           |           |           |           |
| nderline} |   |           |           |           |           |
+-----------+---+-----------+-----------+-----------+-----------+
|           |   |           |           |           |           |
+-----------+---+-----------+-----------+-----------+-----------+

**[Medicaid and SCHIP Proposals]{.underline}**

  ----------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------- ----------------------------- --
                                                                                                                                                              **[2005]{.underline}**     **[2005-2009]{.underline}**   
                                                                                                                                                                                                                       
                                                                                                                                                                                                                       
                                                                                                                                                                                                                       
  **[MEDICAID PROPOSALS]{.underline}**                                                                                                                                                                                 
  [Spousal Exemptions\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}          [\$17 ]{.underline}        [\$102 ]{.underline}          
  [New Freedom Demonstration\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                        [\$13 ]{.underline}        [\$256 ]{.underline}          
                                                                                                                                                                                                                       
  [Presumptive Eligibility for Community Based Services\...\...\...\...\...\...\...\..... ]{.underline}                                                       [\$0 ]{.underline}         [\$0 ]{.underline}            
                                                                                                                                                                                                                       
  [\"Money Follows the Individual\" Rebalancing Demonstration\...\...\...\.... ]{.underline}                                                                  [\$0 ]{.underline}         [\$500 ]{.underline}          
  [Partnerships for Long-term Care\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                         [\$0 ]{.underline}         [\$0 ]{.underline}            
  [LIFE Accounts\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}   [\$0 ]{.underline}         [\$0 ]{.underline}            
  [Vaccines for Children (VFC) Adjustments\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                        [\$165 ]{.underline}       [\$810 ]{.underline}          
  [Extension of Transitional Medical Assistance with Modifications\..... ]{.underline}                                                                        [\$558 ]{.underline}       [\$3,240 ]{.underline}        
  [QI-1 transfer from Part B\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}            [\$136 ]{.underline}       [\$136 ]{.underline}          
  [Medicaid Program Integrity\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                   [(\$1,542)]{.underline}    [(\$9,649)]{.underline}       
  **[TOTAL OTHER PROPOSALS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**                               **[-\$653]{.underline}**   **[-\$4,605]{.underline}**    
                                                                                                                                                                                                                       
  **[OTHER PROPOSALS WITH IMPACT ON MEDICAID/SCHIP\...\... ]{.underline}**                                                                                                                                             
  [Child Support Enforcement - Medical Support From Either Parent\...\... ]{.underline}                                                                       [\$0]{.underline}          [-\$35]{.underline}           
  [Child Support Review and Adjustment\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                     [\$0]{.underline}          [-\$15]{.underline}           
  [Refugee Exemption Extension\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                        [\$39]{.underline}         [\$132]{.underline}           
  [SSA Disability Determinations (non-add)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                      [-\$3]{.underline}         [-\$237]{.underline}          
  **[TOTAL OTHER PROPOSALS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**                               **[\$36]{.underline}**     **[-\$155]{.underline}**      
                                                                                                                                                                                                                       
  **[TOTAL MEDICAID AND SCHIP]{.underline}**                                                                                                                  **[-\$617]{.underline}**   **[-\$4,760]{.underline}**    
                                                                                                                                                                                                                       
                                                                                                                                                                                                                       
                                                                                                                                                                                                                       
  ----------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------- ----------------------------- --

**[State Grants and Demonstrations ]{.underline}**

  ------------------------------------------------------------------------------------------------------------------------------------------- -------------------------- -------------------------- -------------------------- -------------------------- -------------------------------
                                                                                                                                              **[1999]{.underline}**                                                                                      **[Request ]{.underline}**
                                                                                                                                                                                                                                                          
                                                                                                                                              **[Actual]{.underline}**   **[2003]{.underline}**     **[2004]{.underline}**     **[2005]{.underline}**     **[+/- Enacted]{.underline}**
                                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                                          
  [Budget Authority]{.underline}                                                                                                              [ \$0 ]{.underline}                                                                                         
                                                                                                                                                                                                                                                          
  [Ticket to Work grant programs\...\...\...\...\...\...\..... ]{.underline}                                                                                             [\$72 ]{.underline}        [\$77 ]{.underline}        [\$81 ]{.underline}        [+\$4 ]{.underline}
  [Qualified High-Risk Pools grant programs\.... ]{.underline}                                                                                                           [\$60 ]{.underline}        [\$40 ]{.underline}        [ \$0 ]{.underline}        [-\$40 ]{.underline}
                                                                                                                                                                                                                                                          
  [Federal Reimbursement of Emergency Health Services - Undocumented Aliens............... ]{.underline}                                                                 [ \$0 ]{.underline}        [ \$0 ]{.underline}        [\$250 ]{.underline}       [+\$250 ]{.underline}
                                                                                                                                                                                                                                                          
  **[Total Budget Authority\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**                                                                                **[\$132 ]{.underline}**   **[\$117 ]{.underline}**   **[\$331 ]{.underline}**   **[\$214 ]{.underline}**
                                                                                                                                                                                                                                                          
  [Outlays]{.underline}                                                                                                                                                                                                                                   
  [Ticket to Work grant programs\...\...\...\...\...\...\..... ]{.underline}                                                                                             [\$15 ]{.underline}        [\$16 ]{.underline}        [\$28 ]{.underline}        [+\$12 ]{.underline}
  [Qualified High-Risk Pools grant programs\.... ]{.underline}                                                                                                           [ \$0 ]{.underline}        [\$31 ]{.underline}        [\$26 ]{.underline}        [-\$5 ]{.underline}
                                                                                                                                                                                                                                                          
  [Federal Reimbursement of Emergency Health Services - Undocumented Aliens.................................................. ]{.underline}                              [ \$0 ]{.underline}        [ \$0 ]{.underline}        [\$250 ]{.underline}       [+\$250 ]{.underline}
                                                                                                                                                                                                                                                          
  **[Total Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**                                      **[ \$0 ]{.underline}**    **[\$15 ]{.underline}**    **[\$47 ]{.underline}**    **[\$304 ]{.underline}**   **[\$257 ]{.underline}**
                                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                                          
  [/1 The Ticket to Work and Work Incentives Improvement Act was signed into law on December 17, 1999.]{.underline}                                                                                                                                       
                                                                                                                                                                                                                                                          
  [The legislation established appropriations for the grant programs starting in FY 2001.]{.underline}                                                                                                                                                    
                                                                                                                                                                                                                                                          
  ------------------------------------------------------------------------------------------------------------------------------------------- -------------------------- -------------------------- -------------------------- -------------------------- -------------------------------

[The Ticket to Work and Work Incentives Improvement Act
(TWWIIA)]{.underline}

[Ticket to Work and Work Incentives Improvement Act of 1999 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 provides 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. ]{.underline}

[In FY 2005, the budget authority provided by statute for the two grant
programs totals \$81 million. Medicaid Infrastructure Grants are
authorized and appropriated for \$40 million of non-matched Federal
funding. 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. ]{.underline}

[As of December 31, 2003, 43 entities (42 States and the District of
Columbia) were approved for funding from the Infrastructure Grant
Program since its inception. For fiscal year 2004, 29 entities (28
States and the District of Columbia) will receive funding through the
Medicaid Infrastructure Grant program. With this funding, States plan to
make systemic changes to the Medicaid program that will help individuals
with disabilities gain employment and retain their health care coverage.
These changes are designed to increase and improve Medicaid buy in
programs, enhance State personal assistance service programs, and
explore other employment support options.]{.underline}

[Three States (Rhode Island, Texas, and Mississippi) 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 the HIV/AIDS, Multiple Sclerosis, and
Bi-Polar/Schizophrenia populations. ]{.underline}

[Qualified High-Risk Pools]{.underline}

[The Trade Adjustment Assistance Reform Act of 2002 (TAA) establishes
two grant programs for States to provide health insurance coverage
through high-risk pools. The first program makes available a total of
\$20 million to States that, as of the day of enactment of the TAA, do
not already have a qualified high-risk pools. These funds will be used
for the creation and initial operation of pools. The second program
makes available \$40 million in both 2003 and 2004 for grants to States
with existing qualified high-risk pools to be used for the operation of
their pools.]{.underline}

[States that do not have existing qualified high-risk pools and will be
eligible to apply for up to \$1 million each to create and initially
operate a qualified high-risk pool. The TAA legislation makes available
\$20 million in FY 2003 for these \"seed grants.\" This money will be
available until the end of FY 2004. In November 2002, the Secretary sent
letters and instructions to the governors and State insurance
commissioners to announce the availability of the seed grants and invite
them to apply for funding. Applications must be received before March
31, 2004 to be considered for the grants. Two states, Maryland and South
Dakota, have received seed grant funding of \$1 million
each.]{.underline}

[The legislation also makes available \$40 million in both FY 2003 and
FY 2004 for the States that already operate qualified pools that meet
the requirements of the statute. The FY 2003 money will be 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. Twenty States applied for the first round of funding and \$29.8
million was awarded to the following 16 States: Alaska, Arkansas,
Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky,
Minnesota, Mississippi, Montana, Nebraska, New Hampshire, North Dakota,
and Oklahoma.]{.underline}

[Federal Reimbursement of Emergency Health Services for Undocumented
Aliens]{.underline}

[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.]{.underline}

**[Program Management]{.underline}**

+-------------+-------------+-------------+-------------+-------------+
|             | **[2003]{.u | **[2004]{.u | **[2005]{.u | *           |
|             | nderline}** | nderline}** | nderline}** | *[2005]{.un |
|             |             |             |             | derline}**\ |
|             |             |             |             | **[         |
|             |             |             |             | +/-2004]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Medicare   | [\$1,667    | [\$1,701    | [1,794      | [+\$93      |
| Operations  | ]{          | ]{          | ]{          | ]{          |
| \           | .underline} | .underline} | .underline} | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Survey and | [253        | [251        | [270        | [+19        |
| Certific    | ]{          | ]{          | ]{          | ]{          |
| ation\...\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Federal    | [572        | [577        | [589        | [+12        |
| A           | ]{          | ]{          | ]{          | ]{          |
| dministrati | .underline} | .underline} | .underline} | .underline} |
| on\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Resea      | [74         | [78         | [68         | [-10        |
| rch\...\... | ]{          | ]{          | ]{          | ]{          |
| \...\...\.. | .underline} | .underline} | .underline} | .underline} |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Rev        | [ 0         | [30         | [24         | [-5         |
| italization | ]{          | ]{          | ]{          | ]{          |
| Pl          | .underline} | .underline} | .underline} | .underline} |
| an\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[CMS      | **[\$2,565  | **[\$2,637  | **[\$2,746  | **[+109     |
| Budget      | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| Authority   | nderline}** | nderline}** | nderline}** | nderline}** |
| Subtotal    |             |             |             |             |
| /1\...\..   |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [CLIA/HMO   | [\$45       | [\$45       | [\$45       | [ \$0       |
| and Data    | ]{          | ]{          | ]{          | ]{          |
| Spending    | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [National   | [16         | [14         | [14         | [ 0         |
| Medicare    | ]{          | ]{          | ]{          | ]{          |
| Education   | .underline} | .underline} | .underline} | .underline} |
| Program     |             |             |             |             |
| \...\       |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[R        | **[\$61     | **[\$59     | **[\$59     | **[ \$0     |
| eimbursable | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| Spending    | nderline}** | nderline}** | nderline}** | nderline}** |
| Subtotal    |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [CLIA/Sale  | [-45        | [-45        | [-45        | [ 0         |
| of Data/HMO | ]{          | ]{          | ]{          | ]{          |
| User        | .underline} | .underline} | .underline} | .underline} |
| Fees\.      |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [National   | [-16        | [-14        | [-14        | [ 0         |
| Medicare    | ]{          | ]{          | ]{          | ]{          |
| Education   | .underline} | .underline} | .underline} | .underline} |
| Pr          |             |             |             |             |
| ogram\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[User Fee | **[-\$61    | **[-\$59    | **[-\$59    | **[ \$0     |
| Su          | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| btotal\...\ | nderline}** | nderline}** | nderline}** | nderline}** |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Proposed   | [ \$0       | [\$0]{      | [-\$205     | [-\$205     |
| Di          | ]{          | .underline} | ]{          | ]{          |
| scretionary | .underline} |             | .underline} | .underline} |
| User        |             |             |             |             |
| Fees\...    |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Proposed | **[\$2,565  | **[\$2,637  | **[\$2,541  | **[-\$96    |
| Budget      | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| Authority   | nderline}** | nderline}** | nderline}** | nderline}** |
| \           |             |             |             |             |
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Proposed   | [\$2,565    | [\$2,637    | [\$2,541    | [-\$96      |
| Outlay      | ]{          | ]{          | ]{          | ]{          |
| s\...\...\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [FTE        | [4,599      | [4,586      | [4,580      | [-6         |
| /2\...\...\ | ]{          | ]{          | ]{          | ]{          |
| ...\...\... | .underline} | .underline} | .underline} | .underline} |
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|             |             |             |             |             |
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| [1/ Numbers |             |             |             |             |
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|             |             |             |             |             |
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| and]{       |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
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| [Mo         |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

[Program Management Request]{.underline}

[The CMS FY 2005 Program Management budget request is \$2.7 billion in
budget authority, a \$109 million or 4.1 percent increase over the FY
2004 Congressional Conference level. As in past years, CMS is proposing
to finance \$205 million of this budget authority with proposed user
fees. The two proposed fees are for duplicate and unprocessable claims
and the filing of certain Medicare appeals. If the fees are enacted,
Program Management budget authority would be lowered by the amount of
the fee passed.]{.underline}

[The FY 2005 budget request includes funding for CMS operations to
support Medicare, Medicaid, and SCHIP related activities. These funds
are in addition to the \$1 billion provided by the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (MMA) budget,
legislative, and management priorities of the Administration, including:
reforming the Medicare appeals process; educating beneficiaries about
their health plan and benefit choices; reducing burden on our partners;
improving financial management performance through ongoing
implementation of the healthcare integrated general ledger accounting
system (HIGLAS); and strategic management of human
resources.]{.underline}

[Medicare Operations: The Medicare Operations budget supports a broad
array of activities. The budget is \$1.8 billion, an increase of \$93
million or 5.5 percent over FY 2004. ]{.underline}

[The Medicare program 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 on current contractor systems.]{.underline}

[CMS Medicare Operations includes:]{.underline}

-   [Ongoing Activities: carriers\' and fiscal intermediaries\' regular
    activities, such as processing claims, holding hearings and appeals,
    answering inquiries, and educating providers and
    beneficiaries.]{.underline}

-   [Information Technology Systems Maintenance and On-Going Operations:
    activities to keep shared claims processing systems current, Common
    Working File (CWF), and managed care systems
    maintenance.]{.underline}

-   [Operations: funding provider services and Medicare contractor
    oversight.]{.underline}

-   [Enterprise-Wide Activities: funding for the CMS Data Center
    (contractor-operated), the Medicare data communications network, and
    hardware and software maintenance.]{.underline}

-   [Legislative Mandates: 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), and the Chief Financial Officers
    Act of 1990. Funding for implementation of MMA has been appropriated
    separately from this request.]{.underline}

-   [Program Improvements: funds the long-term care
    initiative.]{.underline}

[In FY 2005, CMS will process 1.1 billion claims and answer an estimated
51 million inquiries. We expect little change in the unit cost to
process a claim from FY 2004 estimates. In FY 2005, the unit cost to
process a Part A claim will be \$0.87, the same as the estimate in FY
2004 unit cost projections. Part B unit costs are estimated to dip from
\$0.65 estimated in FY 2004 to \$0.63 in FY 2005.]{.underline}

[Approximately 68 percent of the FY 2005 Medicare operations program
level request will be spent on Medicare contractor on-going operations
including processing claims, on-going appeals (as distinguished from the
new appeals process), inquiries, and provider assistance. CMS will spend
\$1.2 billion in FY 2005, a 2.4 percent increase over FY 2004 estimates.
Medicare contractors expect a 4 percent increase in total claims volume
over the FY 2004 estimate.]{.underline}

[Legislative mandates comprise 21 percent of the Medicare Operations
budget and are funded at \$377 million in FY 2005, a 24 percent increase
over the FY 2004 enacted level. ]{.underline}

[CMS dedicates \$5 million to a special Long-Term Care (LTC)
Clearinghouse initiative. CMS will continue to work with the
Administration on Aging to develop a national clearinghouse for
individuals and families to obtain information on long-term care
services and financing options. A communications campaign is planned to
promote the initiative.]{.underline}

[Of the remaining spending in Medicare Operations, systems maintenance
and on-going information technology operations spending will be \$121.6
million in FY 2005. CMS operations spending will be \$14.6 million in FY
2005. Enterprise activity spending will remain steady at \$53.7 million
or an increase of \$0.6 million over FY 2004. Program Improvements will
be funded at \$5 million in FY 2005 reflecting the fact that many of
last year\'s program improvements have been absorbed in the MMA and in
regular Medicare Operations. ]{.underline}

[Finally, CMS will provide \$10 million towards the Department-wide
Information Technology (IT) Enterprise Infrastructure Fund (\$7.4
million) and Unified Financial Management System (\$2.6
million).]{.underline}

[Federal Administration: For FY 2005, the President\'s Budget requests
\$589.2 million for CMS Federal administrative costs. This is an
increase of \$12 million or 2.1 percent over FY 2004.]{.underline}

[The CMS budget proposes a total of 4,580 FTE, of which 3,040 FTE will
staff the central office and 1,540 FTE will staff the regional offices.
The FY 2005 CMS Federal Administration account supports a staffing level
of 4,398 direct FTE, a straight line from FY 2004. The remaining 182 FTE
are funded elsewhere in the CMS budget. Within the total level, 10 new
FTE are earmarked for CMS actuarial staff to support on-going Medicare
modernization analysis.]{.underline}

[CMS FTE request supports the agency\'s Government Performance and
Results Act (GPRA) goals through the development of a comprehensive
workforce planning process and automated system. Approximately 44
percent of FTE are eligible to retire between 2004 and 2009. Therefore,
CMS has created and is implementing a strategic human resources (HR)
plan to ensure that the agency has the human capital it needs to
accomplish its mission. ]{.underline}

[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 Medicaid
mothers. 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
8.8 million brochures in 37 states and the District of Columbia.
Approximately 14 percent of the brochures are in Spanish and 86 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.]{.underline}

[The CMS Federal Administration budget also includes \$3 million to
continue implementing the national and local coverage appeal provisions
of BIPA section 522. In addition, the request includes \$3.7 million to
support HIGLAS, a component of the Department\'s Unified Financial
Management System (UFMS).]{.underline}

[Research, Demonstrations and Evaluation: The FY 2005 budget requests
\$68.3 million for the Research, Demonstrations and Evaluation program,
\$9.5 million less than the FY 2004 level. This request includes \$40
million to support Real Choice Systems Change Grants, \$2.9 million for
the President\'s New Freedom Initiative, and \$25.4 million to continue
and refine projects initiated in previous years. ]{.underline}

[For the second year, the budget proposes \$40 million to continue
funding for Real Choice System Change Grants. These grants will help
States improve community- based support systems to enable people with
disabilities and long-term illnesses to live and participate in their
communities. These changes allow children and adults with disabilities
or long-term illnesses to (1) live in the most integrated community
setting possible, (2) exercise choices about their living environment,
and (3) obtain quality services in a manner as consistent as possible
with community living preferences and priorities. In FY 2003, 87 new
Real Choice System Change Grants were awarded.]{.underline}

[The budget requests \$2.9 million for New Freedom Demonstrations. The
demonstrations will continue State efforts to provide community-based
care for people with disabilities to improve the availability and
quality of home-based and community-based services. These grants will
also help States identify best practices and develop models to increase
access to personal assistance services for specific populations.
Research will also be conducted to identify future approaches to meet
the care needs of the developmentally disabled population.]{.underline}

[Another \$25.4 million of the request will continue and refine projects
initiated in previous years. These include the Medicare Current
Beneficiary Survey, beneficiary information campaign evaluations,
refinement and monitoring of prospective payment systems, and support
for legislative mandates in the BBA, BBRA, and BIPA.]{.underline}

[Survey and Certification: The FY 2005 budget request is \$270.4
million, an increase of \$19.1 million over the 2004 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. ]{.underline}

[Included in this total is \$25 million to support and implement
activities associated with the Nursing Home Oversight Improvement
Program (NHOIP), such as: imposing immediate sanctions on nursing homes
found guilty of a second offense that causes actual harm to residents;
conducting more frequent inspections of nursing homes with repeat
violations; and conducting more focused reviews of a nursing home\'s
efforts to prevent bed sores, dehydration, and malnutrition. CMS will
also continue to invest money to expedite investigation of resident
complaints within a 10-day time frame.]{.underline}

[Of the total request, \$227.7 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 2004
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 a total of 24,000 initial or recertification inspections. In
addition, CMS estimates conducting 51,900 visits in response to
beneficiary or family complaints.]{.underline}

[The remaining \$17.7 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.]{.underline}

[Revitalization Plan: The FY 2005 budget request includes \$24.4 million
in two-year money to continue funding for the second year of the
multi-year Revitalization Plan. This is \$5.2 million below the FY 2004
level. The Medicare program has relied on a number of antiquated legacy
systems that have been characterized by the General Accounting Office
(GAO) and the Department\'s Office of the Inspector General (OIG) as
inflexible, not secure, and obsolete. In addition to base problems,
extensive changes required by the MMA will require extensive upgrading
of CMS IT systems. ]{.underline}

[The Revitalization Plan will begin the process of modernizing the
agency\'s Medicare fee-for-service claims processing systems (\$21.1
million), modernizing CMS information technology data structure (\$2.3
million), and revamping the agency\'s internal infrastructure (\$1
million). These modernization efforts improve efficiency, enable e-gov
activities, and improve systems security at CMS, and our Medicare
contractors.]{.underline}

[The Revitalization Plan is an important step toward providing 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.]{.underline}

[Program Management Priorities]{.underline}

[Appeals Reform: The CMS FY 2005 budget includes \$129 million to
implement Medicare appeals reform as required by BIPA and modified by
MMA. Of this amount, \$126 million will go towards fee--for--service
claims appeals and \$3 million will go towards coverage appeals. The
\$129 million allows CMS to implement 4 Qualified Independent
Contractors (QIC) (\$65 million), reimburse the Social Security
Administration (SSA) for continuing to process Medicare appeals for
three-quarters of the year (\$50 million), fund start-up costs for the
transfer of the administrative law judge (ALJ) function (\$8 million),
provide funding for CMS new appeals system (\$3 million), and continue
the appeals process for coverage determinations (\$3 million). The four
QICs will be operational by mid-FY 2005 and able to process
approximately 200,000 second level appeals. ]{.underline}

[Currently, SSA continues to process Medicare appeals for
fee-for-service claims in dispute that rise to the ALJ level. HHS and
SSA entered into a MOU to allow SSA to continue processing the 2004
Medicare hearings workload. The Secretary signed a memorandum of
understanding (MOU) with the Commissioner of SSA. The Department intends
to enter into a similar arrangement with SSA in FY 2005, which will be
in effect until the function transfers to HHS in the last quarter of FY
2005. Thus, the CMS budget request includes \$50 million to reimburse
SSA to continued processing of Medicare cases, until the function
transfers to HHS.]{.underline}

[The National Medicare & You Education Program: Beneficiary education is
a high priority for CMS. CMS educates beneficiaries about their current
benefits and future choices so they can be informed health care
consumers. ]{.underline}

[The FY 2005 budget provides \$173.1 million (program level) to finance
NMEP activities. This represents a \$20.1 million increase over FY 2004.
NMEP is funded through a variety of sources, including \$142.1 million
from Program Management, \$17 million from the Quality Improvement
Organization account, and \$14 million from user fees. CMS will continue
to enhance beneficiary services in FY 2005, including
investing:]{.underline}

-   [\$61 million for customer service representatives to be available
    for beneficiaries on 1--800--MEDICARE 24-hours-a-day, 7-days-a-week;
    and]{.underline}

-   [\$32.5 million for the national advertising campaign, which
    encourages beneficiaries to call 1-800-MEDICARE and visit
    www.medicare.gov with their Medicare questions. ]{.underline}

[CMS anticipates 9.1 million calls on 1-800 MEDICARE in FY 2005, up from
an FY 2003 call volume of 5.6 million calls. The increase is due mostly
to questions concerning the new benefits available under the
MMA.]{.underline}

[NMEP funds additional national and local education efforts. CMS will
publish and mail 40 million Medicare & You handbooks, and send
additional Medicare information to consumers. CMS will continue
community-based outreach activities with the State Health Insurance
Assistance Programs (SHIPs), and will allow the Territory of Guam the
opportunity to participate in SHIP for the first time. NMEP funds will
support Regional Education About Choices in Health (REACH), which
focuses on local-level support involving health fairs and town hall
meetings, and Health Outreach Zeroing In On Needs (HORIZONS), which
improves health education communication to Medicare beneficiaries from
minority populations.]{.underline}

[Beneficiaries use the www.medicare.gov website. CMS expects 79 million
page views in FY 2005. The most popular databases on the website include
Nursing Home Compare, the Medicare Personal Plan finder, and the
Participating Physician directory. ]{.underline}

[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.]{.underline}

[In FY 2005, the President\'s Budget requests \$78.3 million (\$74.6
million in two-year money in Medicare Operations and \$3.7 million in
Federal Administration) an increase of \$21 million above the FY 2004
President\'s Budget request.]{.underline}

[CMS began developing HIGLAS in FY 2001. Thus far, it has mapped
software requirements and piloted a number of aspects of the system,
including the fit of the chosen software product to Medicare
requirements and the gaps in the software that must be further
developed. Currently, CMS is in the process of validating and
user--testing parts of the claims payment processing cycle at two
contractor pilot sites. Later this year, CMS will test all functions of
the claims payment processing system at these two pilot
sites.]{.underline}

[In FY 2005, CMS expects to begin administrative system planning, as
well as implementing the claims payment processing systems at additional
contractor sites. By the end of FY 2005, HIGLAS should be installed at
contractor sites comprising 75 percent of accounts receivable and more
than 50 percent of accounts payable transactions. At that point, CMS
will reach an acceptable standard to eliminate a material weakness in
its financial status and maintain its clean financial audit
opinion.]{.underline}

[The Nursing Home Oversight Improvement Program: The President\'s budget
for CMS commits a total program level of \$84.0 million in mandatory and
discretionary funds to the Nursing Home Oversight Improvement Program
(NHOIP) in FY 2005, a decrease of \$8.5 million over the CMS FY 2004
amount. In addition to the \$37.6 million discretionary request (\$32.6
from Survey and Certification and \$5 million from Federal
Administration), there is \$46.4 in mandatory Medicaid funding to
support NHOIP. CMS is committed to working with residents and their
families, advocacy groups, providers, States, and Congress to ensure
that residents receive quality care and protection. ]{.underline}

[In conjunction with States, CMS successfully imposes immediate
sanctions against nursing homes that have caused harm to a resident in
consecutive survey cycles, focuses on preventing bed sores,
malnutrition, and abuse as part of the annual nursing home survey;
investigates complaints alleging actual harm to residents within ten
days; and staggers surveys and conducts visits on weekends, early
mornings and evenings, when quality, safety and staffing problems may be
more likely to occur. CMS also conducts more frequent inspections of
nursing homes with repeated serious violations.]{.underline}

[HIPAA Implementation: The CMS FY 2005 President\'s Budget request
includes \$21.1 million for HIPAA implementation activities. CMS was
tasked with implementing the administrative simplification provisions of
HIPAA. In October 2002, CMS was also given the responsibility for
enforcing the HIPAA Administrative Simplification security,
transactions, identifiers, and code sets standards. ]{.underline}

[The FY 2005 request includes \$12 million to begin activities related
to the National Plan and Provider Enumeration System. Activities include
creating an enumeration system and enumerating one million providers.
The request also includes funding for enforcement, compliance outreach,
and implementing local systems changes, new standards, and technical
modifications.]{.underline}

[Legislation Supporting the Discretionary Budget]{.underline}

[The FY 2005 President\'s Budget includes two user fee proposals that,
if enacted, could improve the efficiency and lower the cost of
processing Medicare claims in the future. ]{.underline}

[Duplicate Claim Penalty: Allows the Secretary to assess a fee for each
duplicate or unprocessable claim submitted by providers. Duplicate or
unprocessable claims are a drain on a system that must process over a
billion claims over the course of a year (\$195 million).]{.underline}

[Appeals Filing Fee: This allows the Secretary to assess a \$50 fee for
providers who wish to elevate a fee-for-service appeal to the QIC level
of adjudication. Beneficiaries will not be charged this fee. CMS expects
200,000 providers to file these appeals (\$10 million).]{.underline}

[CMS Performance Highlights]{.underline}

[The primary CMS mission is to assure health care security for its
beneficiaries. The Annual CMS Performance Plan and Report (APP)
emphasizes this focus by helping CMS expand its resources in a way that
enhances service to the public, being accountable stewards of Agency
resources, and monitoring and evaluating the effectiveness of its
programs. To reinforce the linkage between performance goals, program
activities, and dollar amounts, CMS organizes the APP by budget
category. These linkages ensure that, in setting performance goals, CMS
selects goals that are representative of the full range of Agency
activities and resources. As a result of the enactment of the MMA, CMS
added three new goals to the APP to track the efforts of implementing
the prescription drug discount card, prescription drug benefit, and
Medicare contractor reform. ]{.underline}

[Following are some of the CMS performance achievements and advancements
that support important Administration priorities:]{.underline}

[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. ]{.underline}

[CMS cut the Medicare fee-for-service error rate by more than half over
the past few years, going from 14 percent in FY 1996 to 6.3 percent in
FY 2002. Although CMS did not meet its target of a five percent error
rate in FY 2003, they were successful in reducing the rate to 5.8
percent. 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. CMS believed this
higher rate of non-response was due to changes in the sampling method
and resulted in a distorted error rate computation. CMS re-estimated the
error rate to adjust for the higher rate of non-response by providers,
and calculated an adjusted rate of 5.8 percent for 2003. CMS will
implement improved survey methods to ensure that more providers respond
in future surveys.]{.underline}

[Quality Improvement: Improving the quality of care for Medicare
beneficiaries is one of the primary objectives for 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:]{.underline}

[A key performance goal is to increase the percentage of female Medicare
beneficiaries age 65 and older who receive a biennial mammogram. CMS
surpassed its FY 2002 target of 52 percent by reaching 52.2
percent.]{.underline}

[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. CMS plans to
continue the quality goal to increase special eye exams for
beneficiaries with diabetes. For FY 2002, CMS exceeded its target (of
68.6 percent) at 69.6 percent.]{.underline}

[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 2002, 69 percent (target 72 percent) received an
influenza vaccination and 64.6 percent (target 66 percent) received a
pneumococcal vaccination. Shortages of vaccination were among the
reasons for not reaching this target.]{.underline}

[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.]{.underline}

[CMS and States exceeded the FY 2002 goal to enroll an additional
1,000,000 children in SCHIP or Medicaid over the previous year\'s level.
In fact, CMS and the States enrolled 2,7500,000 children over the FY
2001 level. According to the Statistical Enrollment Data System (SEDS),
approximately 5.3 million children participated in SCHIP-funded coverage
(either a separate child health program or a Medicaid expansion) in FY
2002, and many more were enrolled in \"regular\" Title XIX Medicaid
through increased outreach efforts and application simplification
strategies undertaken as a result of SCHIP.]{.underline}

[CMS is also developing a performance goal for immunization of two-year
olds on Medicaid. In FY 2003, CMS continued to work with States on its
project to increase the percentage of Medicaid two-year old children who
are fully immunized.]{.underline}

[CMS is developing a goal to establish formal Federal-State
collaborations for improving 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.]{.underline}

[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.]{.underline}

[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 2003, CMS
continued to track beneficiary understanding of the Medicare Advantage
program..]{.underline}

[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.]{.underline}

**[Administration for Children and Families]{.underline}**

**[Discretionary Spending]{.underline}**

  ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
                                                                                                                                                                                                                                                                                                                                                                         **[2005]{.underline}**
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                               **[2003]{.underline}**        **[2004]{.underline}**        **[2005]{.underline}**        **[ +/- 2004]{.underline}**
                                                                                                                                                                                                                                                                                                                                                                         
  [Marriage and Healthy Family Development Initiative:]{.underline}                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                                                                                         
  [Community-Based Abstinence Education\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                                              [\$55 ]{.underline}           [\$74 ]{.underline}           [\$186 ]{.underline}          [+\$112 ]{.underline}
  [Abstinence Education State Grants \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                                    [50 ]{.underline}             [50 ]{.underline}             [50 ]{.underline}             [ 0 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Promoting Responsible Fatherhood/Healthy Marriage\...\...\...\...\...\...\...\.... ]{.underline}                                                                                                                                                                            [ 0 ]{.underline}             [ 0 ]{.underline}             [50 ]{.underline}             [+50 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Child Abuse State Grants \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                         [22 ]{.underline}             [22 ]{.underline}             [42 ]{.underline}             [+20 ]{.underline}
  [Community-Based Child Abuse Prevention\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                                                  [33 ]{.underline}             [33 ]{.underline}             [65 ]{.underline}             [+32 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Subtotal, Marriage and Healthy Family Development Initiative\...\... ]{.underline}                                                                                                                                                                                          [\$160 ]{.underline}          [\$179 ]{.underline}          [\$393 ]{.underline}          [+\$214 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Head Start\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                  [\$6,667 ]{.underline}        [\$6,775 ]{.underline}        [\$6,944 ]{.underline}        [+\$169 ]{.underline}
  [Faith-Based and Community Initiative Programs:]{.underline}                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                         
  [Compassion Capital Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                           [\$35 ]{.underline}           [\$48 ]{.underline}           [\$100 ]{.underline}          [+\$52 ]{.underline}
  [Mentoring Children of Prisoners\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                                 [10 ]{.underline}             [50 ]{.underline}             [50 ]{.underline}             [ 0 ]{.underline}
  [Maternity Group Homes\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                                                                                                            [ 0 ]{.underline}             [ 0 ]{.underline}             [10 ]{.underline}             [+10 ]{.underline}
  [Center for Faith-Based and Community Initiatives\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                                                      [1 ]{.underline}              [1 ]{.underline}              [1 ]{.underline}              [ 0 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Subtotal, Faith-Based Community Initiative\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                                                                                                                                   [\$46 ]{.underline}           [\$99 ]{.underline}           [\$161 ]{.underline}          [+\$62 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [LIHEAP:]{.underline}                                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                                                                                                         
  [Regular Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                       [\$1,788 ]{.underline}        [\$1,789 ]{.underline}        [\$1,800 ]{.underline}        [+\$11 ]{.underline}
  [Emergency Contingency Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                                [ 0 ]{.underline}             [99 ]{.underline}             [200 ]{.underline}            [+101 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Subtotal, LIHEAP\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                        [\$1,788 ]{.underline}        [\$1,888 ]{.underline}        [\$2,000 ]{.underline}        [+\$112 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Adoption Incentives /1\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                [43 ]{.underline}             [8 ]{.underline}              [32 ]{.underline}             [+24 ]{.underline}
  [Child Care & Development Block Grant:]{.underline}                                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                                                                                                                         
  [Block Grant\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                                                                                          [\$2,076 ]{.underline}        [\$2,078 ]{.underline}        [\$2,090 ]{.underline}        [+\$12 ]{.underline}
  [Research and Evaluation Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                              [10 ]{.underline}             [10 ]{.underline}             [10 ]{.underline}             [ 0 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
  [Subtotal, Child Care\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                      [\$2,086 ]{.underline}        [\$2,088 ]{.underline}        [\$2,100 ]{.underline}        [+\$12 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Refugee:]{.underline}                                                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                         
  [Refugee and Entrant Assistance\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                                [\$444 ]{.underline}          [\$394 ]{.underline}          [\$419 ]{.underline}          [+\$25 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Unaccompanied Alien Children\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                                                                                                                 [37 ]{.underline}             [53 ]{.underline}             [54 ]{.underline}             [+1 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Subtotal, Refugees\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                      [\$481 ]{.underline}          [\$447 ]{.underline}          [\$473 ]{.underline}          [+\$26 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Developmental Disabilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                    [160 ]{.underline}            [165 ]{.underline}            [165 ]{.underline}            [ 0 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Community Services:]{.underline}                                                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                                                                                         
  [Community Services Block Grant\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                                    [\$646 ]{.underline}          [\$642 ]{.underline}          [\$495 ]{.underline}          [-\$147 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
  [Individual Development Accounts\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                                     [25 ]{.underline}             [25 ]{.underline}             [25 ]{.underline}             [ 0 ]{.underline}
  [Community Services Discretionary Programs\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                                                 [64 ]{.underline}             [64 ]{.underline}             [32 ]{.underline}             [-32 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Subtotal, Community Services \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                                     [\$735 ]{.underline}          [\$731 ]{.underline}          [\$552 ]{.underline}          [-\$179 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [Native Americans\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                            [45 ]{.underline}             [45 ]{.underline}             [45 ]{.underline}             [ 0 ]{.underline}
  [Child Welfare Programs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                  [337 ]{.underline}            [336 ]{.underline}            [339 ]{.underline}            [+3 ]{.underline}
  [Adoption Awareness\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                [13 ]{.underline}             [13 ]{.underline}             [13 ]{.underline}             [ 0 ]{.underline}
  [Violence Against Women\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                                    [129 ]{.underline}            [129 ]{.underline}            [129 ]{.underline}            [ 0 ]{.underline}
  [Runaway and Homeless Youth\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                              [105 ]{.underline}            [105 ]{.underline}            [105 ]{.underline}            [ 0 ]{.underline}
  [Early Learning Fund \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                                                                                              [34 ]{.underline}             [33 ]{.underline}             [ 0 ]{.underline}             [-33 ]{.underline}
  [Child Abuse Discretionary Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                                                                                                                 [34 ]{.underline}             [35 ]{.underline}             [27 ]{.underline}             [-8 ]{.underline}
  [Promoting Safe and Stable Families (discretionary)\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                                                                                                                               [99 ]{.underline}             [99 ]{.underline}             [200 ]{.underline}            [+101 ]{.underline}
  [Independent Living (discretionary)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                              [42 ]{.underline}             [45 ]{.underline}             [60 ]{.underline}             [+15 ]{.underline}
  [Social Services Research & Demonstration\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                                        [35 ]{.underline}             [19 ]{.underline}             [6 ]{.underline}              [-13 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  *[PHS Evaluation Funds (non-add)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}*                                                                                                                                                  *[6 ]{.underline}*            *[6 ]{.underline}*            *[ 0 ]{.underline}*           *[-6 ]{.underline}*
                                                                                                                                                                                                                                                                                                                                                                         
  [Federal Administration \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                                 [172 ]{.underline}            [178 ]{.underline}            [190 ]{.underline}            [+12 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
  **[Total, Discretionary Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}**                                                                                                                                                            **[\$13,211 ]{.underline}**   **[\$13,417 ]{.underline}**   **[\$13,934 ]{.underline}**   **[+\$517 ]{.underline}**
                                                                                                                                                                                                                                                                                                                                                                         
  [Less Funds Allocated from Other Sources:]{.underline}                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                         
  [PHS Evaluation Funds\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                                                                                                 [-6 ]{.underline}             [-11 ]{.underline}            [-5 ]{.underline}             [+6 ]{.underline}
  [Abstinence State Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                                                                                                                  [-50 ]{.underline}            [-50 ]{.underline}            [-50 ]{.underline}            [ 0 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
  **[Total, Discretionary Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**                                                                                                                                                                **[\$13,155 ]{.underline}**   **[\$13,356 ]{.underline}**   **[\$13,879 ]{.underline}**   **[+\$523 ]{.underline}**
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                         
  [FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                                                                                                 [1,390 ]{.underline}          [1,425 ]{.underline}          [1,425 ]{.underline}          [ 0 ]{.underline}
                                                                                                                                                                                                                                                                                                                                                                         
  [/1 Reflecting the new bonus for older children enacted in the 2003 reauthorization of the Adoption Incentives program, payments to States increased from an actual \$15 million in FY 2003 to an estimated \$35 million FY 2004 and \$32 million in FY 2005.]{.underline}                                                                                             
                                                                                                                                                                                                                                                                                                                                                                         
  ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------

[The FY 2005 budget request for ACF totals \$46.6 billion, a net
decrease of \$2.4 billion, or 5 percent below the FY 2004 level. The
decrease from FY 2004 reflects that \$2.5 billion under TANF is
available for FY 2004 through FY 2009. Of total funds, \$13.9 billion is
the discretionary program level and \$32.7 billion is the entitlement
budget authority.]{.underline}

[Discretionary Spending]{.underline}

[The FY 2005 discretionary budget totals \$13.9 billion, a net increase
of \$517 million or 4 percent over the FY 2004 level.]{.underline}

[Marriage and Healthy Family Development Initiative]{.underline}

[The budget includes an initiative to build on the research that there
are life-long benefits of growing up in married-parent families. This
initiative, comprised of new and existing programs, has four
elements: 1) supporting marriage and families; 2) providing tools to
parents; 3) teaching values to children; and 4) encouraging community
and faith-based organizations to support families.]{.underline}

[Responsible Choices: The initiative will educate teens and parents
about the risks associated with early sexual activity and provide the
tools needed to help teens make responsible choices. To accomplish this
goal, the budget doubles funding for Abstinence Education activities
totaling \$273 million, of which \$236 million will be administered by
ACF.]{.underline}

[The Community-Based Abstinence Education program, funded at \$186
million, will support up to 440 grants to public and private entities
for the development and implementation of abstinence-only education
programs for adolescents, ages 12 through 18, in communities across the
country. This program, which began in FY 2001, is unique in that it
funds projects focused entirely on educating young people and creating a
positive environment within communities that support teen decisions to
postpone sexual activity until marriage. ]{.underline}

[In addition to the Community-Based discretionary grant program, ACF
will administer the \$50 million Abstinence Education Grants to States
program. This program provides grants to 59 States and Territories for
mentoring, counseling, and adult supervision to promote abstinence with
a focus on those groups which are most likely to bear children out of
wedlock. ]{.underline}

[HHS is proposing to transfer administration of the Community-Based
Abstinence Education and Abstinence Education Grants to States programs
from the Health Resources and Services Administration to ACF. This move
will foster linkages with ACF\'s existing efforts to promote
comprehensive positive youth development and reduce teen
pregnancy.]{.underline}

[Within the Office of Population Affairs, the budget also doubles
funding for the abstinence activities conducted through the Adolescent
Family Life program and supports a new public awareness campaign to help
parents communicate with their children about the health
risks.]{.underline}

[Responsible Fatherhood and Healthy Marriage: Over 25 million children
are growing up in homes without fathers. These children face a greater
chance of living in poverty, performing poorly in school, and developing
emotional and behavioral problems. The Administration is committed to
making responsible fatherhood and healthy marriage a national priority
and will continue to work with Congress to enact legislation to assist
non-custodial fathers to become more involved in the lives of their
children. The budget includes \$50 million for 75 competitive grants to
faith-based and community organizations, along with Indian Tribes and
Tribal organizations, to encourage and help fathers to support their
families, avoid welfare, improve fathers\' ability to manage family
business affairs, and support healthy marriages and married
fatherhood.]{.underline}

[Preventing and Treating Child Abuse: The most recent annual HHS Child
Maltreatment Report indicates that each year an estimated 903,000
children in the United States are victims of abuse and neglect including
1,300 child deaths. As part of this initiative, the FY 2005 request
doubles funding for two State child abuse grant programs totaling \$107
million, to reduce the incidence of child abuse and neglect and provide
services to those who are victims. Additional support for the
Community-Based Child Abuse Prevention program will fund prevention
services including, parent education and home visiting, available to an
additional 55,000 children and families. Funding for the Child Abuse
State Grant program will shorten the time to the delivery of
post-investigative services by 40 percent and increase the number of
children receiving those services by almost 20 percent. Examples of
post-investigative services include individual counseling, case
management, and in-home services such as encouraging good hygiene and
positive nutritional habits, providing parent education and lessons in
positive discipline.]{.underline}

[Supporting Healthy Marriages: The initiative builds further upon the
Administration\'s TANF Reauthorization proposal, which includes \$1
billion over five years to promote healthy marriage and family
formation. The budget proposes to increase Federal funds available for
this purpose to \$1.2 billion over five years -- a \$160 million
increase over the original TANF proposal. For a complete discussion of
the TANF proposal, see the ACF Entitlement Spending
section.]{.underline}

[Head Start ]{.underline}

[The budget request includes \$6.9 billion for Head Start, an increase
of \$169 million over the FY 2004 level. In FY 2005, 919,000 children
will receive Head Start services including 62,000 children in Early Head
Start. In FY 2005, ACF will continue to emphasize the goals of the
President\'s Good Start Grow Smart Initiative to strengthen Head Start
by partnering with States to improve early childhood education;
providing information on child development and early learning to
teachers, caregivers, parents, and grandparents; and closing the gap
between research and practice in early childhood education.]{.underline}

[The FY 2005 request includes \$45 million to support the President\'s
initiative to improve Head Start by funding nine State pilot projects to
coordinate State preschool programs, Federal child care grants, and Head
Start into a comprehensive system of early childhood programs. Last
year, the President proposed a comprehensive reauthorization of the Head
Start program with the goal of strengthening the program and, through
coordination, improving preschool programs in general to help ensure
that children are prepared to succeed in school. These new pilot
projects will provide States with assistance to implement these reforms.
The budget also includes an increase of \$124 million to allow grantees
to maintain competitive salaries for Head Start teachers and to support
program enhancements to promote early literacy and cognitive
development. Funds are also included for training and technical
assistance.]{.underline}

[Head Start will also contribute to the President\'s Marriage and
Healthy Family Development Initiative. In FY 2005, it will offer
training for between 2,000 and 3,000 Head Start parents in a
science-based curriculum designed to improve early language and literacy
skill outcomes. Those parents trained would then become mentors and
train thousands of other parents throughout the Country.]{.underline}

[Head Start programs are designed to promote school readiness by
enhancing the social and cognitive development of children through the
provision of educational, health, nutritional, social, and other
services. Head Start programs enhance cognitive, language and
socio-emotional development to enable each child to develop the early
reading and mathematic skills they need to succeed in school. They also
fully engage parents in their child\'s preschool experience by helping
them achieve their educational, literacy and employment goals,
supporting parent\'s role in their children\'s learning, and by
emphasizing the direct involvement of parents in the administration of
local Head Start programs.]{.underline}

[Faith-Based and Community Initiative]{.underline}

[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 offer a fresh approach to addressing the
unmet needs of Americans. The initiative creates results by empowering
those at the community level who can best identify the social and health
problems and produce change.]{.underline}

[Since the creation of the Center for Faith-Based and Community
Initiatives (CFBCI) in 2001, it has worked 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. Outreach activities include
providing technical assistance to faith-based and community groups on
relevant HHS program areas, including such Presidential initiatives as
the Compassion Capital Fund and the Mentoring Children of Prisoners
program.]{.underline}

[Compassion Capital Fund: The budget provides a total of \$100 million
for the Compassion Capital Fund, doubling the FY 2004 level. Initiated
in FY 2002, the Compassion Capital Fund awards grants to organizations
which provide technical assistance to help faith-based and community
organizations access funding sources, operate and manage their programs,
develop and train staff, expand the reach of programs into the
community, and replicate promising programs. Funds are also awarded for
smaller capacity-building grants, research into best practices, and to
develop a national resource center and information clearinghouse. At the
level requested in FY 2005, an estimated 78 intermediary organizations
will be funded.]{.underline}

[In FY 2002, Compassion Capital Fund grantees provided capacity-building
training and technical assistance to many local grassroots
organizations. In addition, these grantees made over \$10 million
available directly to 565 faith-based and community organizations in 34
States to support a range of activities including reduction of
homelessness, positive youth development, and transitioning individuals
who had been incarcerated back into the community. In FY 2003, the
Compassion Capital Fund expanded to begin work in 10 States, plus the
District of Columbia, and provided one-time capacity-building grants to
smaller faith-based organizations to expand existing services to at-risk
youth and people who are homeless.]{.underline}

[Mentoring Children of Prisoners: The request includes \$50 million,
maintaining the FY 2004 level, to provide grants of up to \$5 million
each 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. In FY 2003, programs linked 6,000
children with a mentor. In FY 2004 and continued in FY 2005, programs
will serve five times as many children, offering a mentoring
relationship to over 30,000 children with a focus on nutrition, physical
health, and messages about abstinence.]{.underline}

[Between 1991 and 1999, the number of children with a parent in a
Federal or State correctional facility increased by more than 100
percent, from approximately 900,000 to almost 2 million. Studies
indicate that children with incarcerated parents have a seven times
greater chance than the general population of becoming incarcerated
themselves and are more likely to succumb to substance abuse, gangs,
early childbearing, and delinquency. This program helps children through
the time their parents are imprisoned, including efforts to keep
children connected to a parent in prison, and increases the chances that
the family can successfully come together when the parent is
released.]{.underline}

[Maternity Group Homes: The budget includes \$10 million for the
recently authorized Maternity Groups Homes program. These homes provide
pregnant and parenting youth access to transitional living
opportunities, an alternative to the environments of violence and
despair which many young pregnant mothers face, to secure brighter
futures for their children. These funds will support adult-supervised
community-based group homes for mothers who cannot live safely with
their own families and a range of coordinated services including child
care, job training, and counseling.]{.underline}

[Low Income Home Energy Assistance Program (LIHEAP)]{.underline}

[The FY 2005 budget requests a total of \$2.0 billion for LIHEAP, an
increase of \$112 million. This 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.]{.underline}

[LIHEAP provides heating and cooling benefits to approximately 4.6
million households each year. Of the households receiving heating
assistance, about one-third include an elderly member 60 years or older,
over one-third include a person with a disability, almost one-half
include a child under age 18, and over one-third do not receive any
other public assistance.]{.underline}

[Adoption Incentives]{.underline}

[The Adoption Incentives program provides bonus payments to States that
are successful in increasing the number of children adopted from the
public foster care system. Despite recent progress, at the end of FY
2002, there were over 534,000 children in foster care, almost 120,000 of
whom had adoption as their permanent placement goal. Further, half of
those children waiting to be adopted were over the age of nine.
]{.underline}

[The FY 2005 request includes \$32 million to support all bonus earning
adoptions estimated to be completed in the prior year. Beginning in FY
2004 as part of the recent program reauthorization, and continued in FY
2005, States will be eligible to receive an award specifically for the
adoption of children over the age of nine. States would be eligible to
receive up to \$8,000 per child to use toward recruiting prospective
adoptive parents, child welfare staff training, and post-adoption family
support services. Reflecting the new bonuses, payments to States
increased from \$15 million in FY 2003 to an estimated \$35 million FY
2004.]{.underline}

[Data shows that once a child waiting for adoption reaches eight or nine
years old, the probability that the child will continue to wait in
foster care exceeds the probability that the child will be adopted. This
new bonus recognizes the need to move older children out of foster care
and into caring permanent homes. States will continue to be eligible for
bonus payments based on the total number of children adopted and the
adoption of children with special needs who are under the age of
nine.]{.underline}

[Child Care]{.underline}

[The Child Care and Development Block Grant program to States,
Territories and Tribes assists low-income families in accessing quality
child care for children when the parents work or participate in
education or training. While the majority of the funds support direct
child care assistance payments for parents, funds are also used to
provide consumer education to parents to enable them to make good child
care choices; to assist States in implementing health, safety,
licensing, and registration standards; and for research on innovative
child care strategies.]{.underline}

[ACF\'s most recent data indicates that \$4.8 billion in Federal and
related State child care funds provides 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 2.5 million children, representing an estimated 27 percent
of children eligible under State rules.]{.underline}

[Refugee Programs]{.underline}

[Refugee and Entrant Assistance: The budget includes \$419 million in FY
2005 to support refugees, asylees, Cubans/Haitians, and victims of
torture and trafficking. The FY 2005 request is sufficient to provide a
full eight months of cash and medical assistance and access to social
service programs such as English language training, case management,
employment preparation, and job placement and retention services for an
estimated 95,000 annual entrants, including 50,000 refugee entrants. In
addition, the budget continues support for services, including
rehabilitation, social, and legal services for those who have
experienced torture as well as benefits to victims of
trafficking.]{.underline}

[Unaccompanied Alien Children: Since the Unaccompanied Alien Children
(UAC) program was transferred to HHS in 2003, as part of the Homeland
Security Act, ACF has worked to ensure that children are cared for in
the least restrictive setting appropriate by increasing the use of
shelter and foster care facilities and reducing the use of secure
detention facilities. Currently, there are approximately 600 children in
care at any given time, 20 percent more than when the program was
transferred. In addition, the Homeland Security Act and existing legal
requirements, resulting from a class-action settlement with the former
Immigration Naturalization Service, mandated that ACF assume additional
responsibilities including a mechanism to coordinate and assign pro-bono
attorneys for UACs, a new system to maintain current and accurate
information about the children in care, and enhanced medical services.
In FY 2004, funding for the UAC program nearly doubled reflecting the
higher number of children in care and to begin work in meeting new and
existing requirements. The FY 2005 request includes a total of \$54
million to maintain the current level of program support.]{.underline}

[Developmental Disabilities ]{.underline}

[Today, there are nearly four 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.]{.underline}

[In FY 2005, the budget request includes \$165 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,
and community integration. This past year, a Program Assessment Rating
Tool (PART) review found that the activities of the Administration for
Developmental Disabilities (ADD) and its grantees complement other
public and private efforts by striving to provide services that fill
service gaps. ADD is planning to conduct a comprehensive, independent
evaluation to inform program improvements. ]{.underline}

[Since 2002, when Secretary Thompson announced its creation, the Office
on Disability (OD), in the Office of the Secretary, has been the focal
point within HHS for the implementation and coordination of policies,
programs, and special initiatives related to disabilities. The Office\'s
more recent achievements include co-sponsoring a symposium on
home-ownership for persons with disabilities to develop a roadmap to
help all consumers understand how States, communities, and local
constituent organizations can offer for home-ownership and coordinating
an intergovernmental planning initiative to assist States and local
communities develop and implement action plans to address the health,
human service, employment, education, housing, and transportation needs
of young adults (16-30 years) with disabilities. ]{.underline}

[Disabled Voter Services: The FY 2005 President\'s Budget maintains \$15
million for the Disabled Voter Services programs. These programs provide
support to States to establish, expand, and improve access for the
election process to the over 20 million individuals with disabilities
who are of voting age. In FY 2003, first-time grant awards supported a
range of activities including facilitating web-based communication
between people with disabilities and election officials and developing a
training video for election officials, poll workers, and volunteers on
providing assistance to voters with visual impairments.]{.underline}

[Community Services Programs]{.underline}

[Community services programs fund an array of programs and activities
providing housing and employment assistance, education and training
services, nutrition, energy assistance, health and substance abuse
treatment, as well as economic development opportunities.]{.underline}

[The budget proposes a total of \$552 million in support of the
Community Services Block Grant (CSBG), Individual Development Accounts
and other community services programs. This is \$179 million less than
the FY 2004 level. Of this overall decrease, \$147 million is in the
block grant. The budget request is consistent with the President\'s
reauthorization proposal to develop rigorous performance measures and
target funds to programs which have demonstrated success.]{.underline}

[The cornerstone of the President\'s CSBG reauthorization proposal is to
strengthen accountability and performance outcomes of the CSBG program.
The Administration continues to work toward legislation that provides
for the Secretary, in consultation with the States and the Community
Action Agencies (CAA), to establish a set of national outcome measures
and standards that would be universally applied in providing services
and administering programs using CSBG funds. Non-performing CAAs may
lose their historical designation and be subject to a State-run award
competition, open to other area community-based organizations.
]{.underline}

[A recent PART assessment of the CSBG program found that while the
program has a clear purpose and addresses a specific need, it has not
developed adequate national performance measures making results
difficult to demonstrate. Both the CSBG funding reduction included in
the FY 2005 budget and the reauthorization proposal are consistent with
the PART assessment.]{.underline}

[Native Americans]{.underline}

[The budget request includes a total of \$45 million for the programs of
the Administration for Native Americans. Through direct grants,
contracts, and interagency agreements, Native American programs provide
financial assistance for social and economic development and governance,
training and technical assistance, and research, demonstration and
evaluation. The programs foster a balanced developmental approach at the
community level through three major goals: self-governance, economic
development, and social development. ]{.underline}

[Other Children and Families Activities]{.underline}

[The FY 2005 budget includes \$339 million for ACF\'s Child Welfare
programs to support States and localities in their efforts to keep
families together. Services offered include preventive intervention,
where appropriate, so that children will not have to be removed from
their homes, identifying alternative placements like foster care when
necessary, and reunification services so that a child can return home.
Funds are also included to train child welfare service providers, remove
barriers to adoption, and to reduce the abandonment of infants and young
children exposed to HIV/AIDS and drugs.]{.underline}

[In addition, the budget includes \$13 million for the Adoption
Awareness program to support efforts to encourage adoptions. The budget
also maintains funds for programs that offer safe havens and access to
services for victims of domestic violence (\$129 million) and runaway
and homeless youths (\$105 million). As noted in a PART assessment
conducted this past year, runaway and homeless youth programs have a
clear purpose, address a specific need, and are not redundant or
duplicative of any Federal, State, local, or private effort. The
programs are developing new performance measures with ambitious targets
and expect to demonstrate results with data from a redesigned data
collection system.]{.underline}

[The FY 2005 budget does not request funds to continue support of the
Early Learning Fund, which was provided \$33 million in FY 2004. The
Administration continues to target resources on similar activities which
promote early literacy in the Department of Education and the Head Start
program. The budget also includes a reduction in discretionary child
abuse grants due to the completion of one-time projects.]{.underline}

[For a complete discussion of the Promoting Safe and Stable Families and
Independent Living Education and Training Vouchers programs see the ACF
Entitlement Spending section.]{.underline}

[Research/Federal Administration]{.underline}

[Central to the ACF mission is sound research to help guide State and
local efforts to help low-income families become and remain economically
self-sufficient and to strengthen families. The FY 2005 budget includes
\$6 million for the Social Services Research and Demonstration
program.]{.underline}

[The request includes \$190 million in FY 2005 to maintain related
program costs and support activities to administer the programs of ACF.
Consistent with the President\'s Management Agenda, the budget supports
efforts to reduce erroneous and improper payments including adding a new
data element in Head Start program reviews to confirm eligibility
determinations and working with States to identify improper payments
under the Child Care and Development Fund. The budget includes \$2
million for 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. In
FY 2005, ACF continues support for child welfare monitoring to ensure
that State child welfare agency practice is in conformity with Federal
child welfare requirements and to assist States in enhancing their
capacity to help children and families achieve positive
outcomes.]{.underline}

**[Entitlement Spending]{.underline}**

[The Department\'s FY 2005 ACF budget includes \$32.7 billion in budget
authority for entitlement programs. The apparent \$2.8 billion decrease
from FY 2004 is somewhat misleading because FY 2004 includes \$2.5
billion under TANF that is available from FY 2004 through FY 2009.
Regarding the decrease in Child Support Enforcement, States estimate
that they will spend almost \$400 million less on Child Support
Enforcement than expected in FY 2005. ]{.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, the Child Care
Entitlement, Foster Care, Independent Living, and Adoption Assistance.
This year\'s request anticipates the reauthorization of TANF and the
Child Care Entitlement. The budget also includes modifications in the
Child Support Enforcement program, 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 as well as a clarification of the eligibility
definition.]{.underline}

[Temporary Assistance for Needy Families]{.underline}

[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 accompanied by work
requirements through the new TANF program. PRWORA also created a new
partnership between States and the Federal government, giving States
considerable flexibility to design their own TANF programs.]{.underline}

[Welfare reform is widely regarded as a success. TANF caseloads have
continued to decrease. Almost 5 million individuals were receiving TANF
benefits in June 2003 --- 60 percent fewer than August 1996. According
to State reports, work effort among current welfare recipients in FY
2001 was three times the 1996 levels. According to the most recent data
available from HHS studies, 80 percent of former welfare recipients
worked at some point during the year after leaving welfare. When
employed, TANF leavers typically worked 40 hours per week and earned
between \$6.50-9.00 per hour, and their earnings rise, on average, over
the course of their first year off of welfare.]{.underline}

[TANF provides approximately \$16.9 billion annually to States,
Territories, and eligible Tribes for the design of creative programs to
help families transition from welfare to self-sufficiency. The program
expired at the end of FY 2002. However, to date, Congress has provided
funding for TANF State Family Assistance Grants through March 31, 2004.
Other components authorized through that date include supplemental
grants and the contingency fund.]{.underline}

[States have tremendous flexibility in determining how to use their TANF
dollars. States now spend much less on cash assistance payments than
during initial years of TANF implementation and more on education and
training, child care, and other work supports to help families achieve
self-sufficiency. In 1998, States spent 63 percent of combined State and
Federal funds on cash assistance and in FY 2002 spent only 37 percent.
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 transferable to SSBG. The
FY 2004 appropriation provides for a 10 percent SSBG transfer
authority.]{.underline}

[TANF Legislative Proposals ]{.underline}

[The FY 2005 budget reproposes the President\'s FY 2003 plan to build on
the considerable successes of welfare reform and reauthorize TANF. The
President\'s proposal strengthens work requirements while allowing
States greater flexibility in determining what should count as work. The
proposal also strives to strengthen marriage and families, making child
well-being a central tenet of the legislation (see the box outlining the
President\'s TANF Reauthorization Plan). In addition, the FY 2005 budget
request builds on the reauthorization proposal by adding a total of \$40
million per year, over the \$200 million per year included in
reauthorization, to increase support for healthy marriage and family
formation. ]{.underline}

[Child Care Entitlement to States]{.underline}

[The Child Care and Development Fund consists of the discretionary Child
Care and Development Block Grand (CCDBG) and the Child Care Entitlement
funds preappropriated under TANF. 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 80 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 the all child care funds - mandatory, matching,
and discretionary - to improve the quality and availability of healthy
and safe child care for all families. Additional amounts of the
discretionary funds are also set aside for quality improvements and
research and referral activities.]{.underline}

[For FY 2005, the budget funds the Child Care Entitlement at \$2.7
billion. This is equal to the funding level provided in FY 2004. These
funds will continue to provide valuable support for working families and
help move families from welfare to work.]{.underline}

[Child Support Enforcement]{.underline}

[The Child Support Enforcement (CSE) program is a joint Federal, State,
and local partnership that seeks to ensure 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. ]{.underline}

[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. Child support collections on behalf of
families receiving TANF, and some collections on behalf of former TANF
recipients, are shared between the State and Federal Governments. States
can choose to pass through a portion of the collections to these
families as well.]{.underline}

[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. 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. The CSE program also includes a capped entitlement of
\$10 million annually for grants to States to facilitate noncustodial
parents\' access to and visitation of their children. In FY 2005, the
Federal government will spend an estimated \$4.4 billion for all of
these costs.]{.underline}

[The CSE program continues to make impressive gains:]{.underline}

-   [Child support collections hit a record \$20 billion in FY 2002,
    serving an estimated 16 million child support cases. ]{.underline}

-   [IV-D child support professionals collected \$326,000 per FTE in
    FY 2002. States have increased collections by using a variety of
    approaches like income withholding, and offset of income tax
    refunds, among other tools provided by PRWORA. ]{.underline}

-   [The government collected\$1.5 billion in overdue child support from
    Federal income tax refunds, which benefitted more than 1.4 million
    families in tax year 2002. ]{.underline}

-   [Also in 2002, using the Federal Parent Locator Services (FPLS), the
    Federal Office of Child Support Enforcement provided information to
    States on more than 4.5 million non--custodial parents.
    ]{.underline}

-   [CSE established paternity for almost 1.5 million children in
    FY 2002. ]{.underline}

[In a recent Program Assessment Rating Tool (PART) assessment, CSE
received a rating of \"Effective\" with a score of 90, making it the
highest rated block/formula grant 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. ]{.underline}

[Child Support Legislative Proposals]{.underline}

[The budget anticipates the enactment of the child support provisions in
the President\'s 2003 welfare reform proposal, FY 2004 budget, as well
as two new proposals aimed at improving and increasing the collection of
medical child support (see box outlining FY 2003, FY 2004, and FY 2005
proposals).]{.underline}

[Children\'s Research and Technical Assistance (CRTA)]{.underline}

[The FY 2005 President\'s Budget includes \$49 million in this account.
Of this amount, \$34.4 million is devoted to: 1) training and technical
assistance (\$11.5 million) and 2) operating the FPLS (\$23 million).
The funds appropriated for these activities are equal to 1 and 2 percent
respectively of the amount paid to the Federal government for its share
of child support collections during the preceding fiscal year. The
remaining \$15 million funds welfare research. through FY
2008.]{.underline}

[Foster Care, Adoption Assistance, and Independent Living
Programs]{.underline}

[The FY 2005 budget request for the Foster Care, Adoption Assistance,
and the Independent Living programs is \$6.8 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.]{.underline}

[Of the total request, \$4.9 billion will support the Foster Care
program. This is a \$119 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 233,000 children per average
month. 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. ]{.underline}

[The budget includes \$1.8 billion for the Adoption Assistance program,
which supports families that adopt special-needs children. This is an
increase of \$70 million over the FY 2004 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 375,900
children each month.]{.underline}

[The budget also contains \$200 million for the Independent Living
Program (ILP). This includes \$140 million in mandatory funds, the same
as the FY 2004 request, for 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.
]{.underline}

[The Foster Care program received a rating of \"Adequate\" from the
Program Assessment Rating Tool (PART). 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. HHS is committed to improving PART ratings in line with the
President\'s Management Agenda initiative on Budget and Performance
Integration.]{.underline}

[Foster Care Legislative Proposals]{.underline}

[The FY 2005 President\'s Budget includes a legislative proposal for an
alternative funding option for foster care, and a legislative proposal
to clarify eligibility criteria for IV-E foster care maintenance
payments related to home of removal. 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. ]{.underline}

[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 stipulating that eligibility is based upon the home from which the
child is removed, not the home of the interim caretaker. HHS never has
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.]{.underline}

[Promoting Safe and Stable Families]{.underline}

[The Promoting Safe and Stable Families (PSSF) program is a capped
entitlement program designed 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 (AFSA) 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 2005 request for PSSF includes \$305 million
in mandatory funds. ]{.underline}

[Social Services Block Grant]{.underline}

[The Social Services Block Grant (SSBG), a capped entitlement, provides
funds to assist States in 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 2005. This is the
same level as FY 2004. 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.]{.underline}

[Performance Highlights]{.underline}

[HHS programs demonstrate, through their aggressive performance goals
and annual achievement, the Department\'s commitment to its strategic
goals and priorities. The programs highlighted below show the commitment
of HHS to improving the economic and social well-being of individuals,
families and communities, and improving the stability and development of
our Nation\'s youth. ]{.underline}

[Temporary Assistance for Needy Families:The Temporary Assistance for
Needy Families (TANF) program achieved remarkable success towards its
primary goal of moving TANF recipients from welfare to work and
self-sufficiency. In FY 2002, all States met the work requirement for
all families and 83 percent of States with two-parent family programs
met the rigorous two-parent family work participation rate. As of FY
2002, 36 percent of adult TANF recipients became newly employed, 59
percent of recipients or former recipients who were employed retained
their jobs over at least two quarters and 33 percent attained higher
earnings over two quarters. ]{.underline}

[Child Care Development Fund: 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. HHS estimates that in FY
2004 and 2005, CCDF funds will provide subsidies to at least 2.5 million
children on an average monthly basis. CCDF is developing and
implementing new and improved performance measures to better meet HHS
performance goals in the future. For example, in the FY 2005 performance
plan, CCDF is introducing two measures to track literacy, language,
pre-reading, numeracy, and school readiness. ]{.underline}

[Child Support Enforcement: Child Support Enforcement (CSE), which
assures that assistance in obtaining support is available to children,
consistently performs well. In FY 2002 the CSE program exceeded its
targets for three of its performance measures. CSE increased the
percentage of IV-D cases that have support orders to 70 percent,
increased the collection rate for current support to 58 percent, and
increased the percentage of paying cases among IV-D arrearage cases to
60 percent. The program also improved its performance on paternity
establishment to 95 percent in FY 2002 from 91 percent in FY
2001.]{.underline}

[Foster Care, Adoption Assistance, and Independent Living: The Foster
Care, Adoption Assistance and Independent Living programs demonstrated
success in improving safety, permanency, and well-being of children. In
CY 2002, the programs surpassed the targets for the performance measure
on safety. The programs also performed well on permanency measures. In
FY 2002, 68 percent of children who exited the foster care system exited
through reunification within one year of placement. The programs also
improved on the family and child well-being measure by ensuring that 81
percent of children who had been in care less than 12 months had no more
than two placement settings in FY 2002. ]{.underline}

**[Child Support Enforcement: Collections and Costs]{.underline}**

  -------------------------------------------------------------------------------------------------------------------------------------------------------- ---------------------------- ---------------------------- ---------------------------- -----------------------------
                                                                                                                                                                                        **[2004]{.underline}**       **[2005]{.underline}**       **[2005]{.underline}**
                                                                                                                                                                                                                                                  
                                                                                                                                                           **[2003\*]{.underline}**     **[Estimate]{.underline}**   **[Estimate]{.underline}**   **[+/- 2003]{.underline}**
                                                                                                                                                                                                                                                  
  **[Total Collections Distributed:]{.underline}**                                                                                                                                                                                                
                                                                                                                                                                                                                                                  
  [All Families\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}            [\$18,960]{.underline}       [\$20,270]{.underline}       [\$21,641]{.underline}       [+\$1,371 ]{.underline}
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
  [TANF program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                    [2,062]{.underline}          [2,082]{.underline}          [2,131]{.underline}          [+49 ]{.underline}
                                                                                                                                                                                                                                                  
  [Federal Share\*\*\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                       [1,128]{.underline}          [1,147]{.underline}          [1,174]{.underline}          [+27 ]{.underline}
  [State Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                 [924]{.underline}            [935]{.underline}            [957]{.underline}            [+22 ]{.underline}
                                                                                                                                                                                                                                                  
  [Foster Care program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                         [49]{.underline}             [50]{.underline}             [52]{.underline}             [+2 ]{.underline}
                                                                                                                                                                                                                                                  
  [Federal Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                    [28]{.underline}             [28]{.underline}             [29]{.underline}             [+1 ]{.underline}
  [State Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                 [21]{.underline}             [22]{.underline}             [23]{.underline}             [+1 ]{.underline}
                                                                                                                                                                                                                                                  
  [Total\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}   **[\$21,071]{.underline}**   **[\$22,402]{.underline}**   **[\$23,824]{.underline}**   **[+\$1,422 ]{.underline}**
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
  **[Administrative Costs:]{.underline}**                                                                                                                                                                                                         
                                                                                                                                                                                                                                                  
  [Federal Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}               [\$3,592]{.underline}        [\$3,898]{.underline}        [\$3,941]{.underline}        [+\$43 ]{.underline}
  [State Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}           [1,784]{.underline}          [1,871]{.underline}          [2,036]{.underline}          [+165 ]{.underline}
                                                                                                                                                                                                                                                  
  [Total\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}   **[\$5,376]{.underline}**    **[\$5,769]{.underline}**    **[\$5,977]{.underline}**    **[+\$208 ]{.underline}**
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
  [Incentive Payment to States\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                              **[\$461]{.underline}**      **[\$454]{.underline}**      **[\$446]{.underline}**      **[-\$8 ]{.underline}**
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
  **[Program Costs (Costs minus Distributed Collections ):]{.underline}**                                                                                                                                                                         
                                                                                                                                                                                                                                                  
  [Federal Costs \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}               [\$2,897]{.underline}        [\$3,177]{.underline}        [\$3,184]{.underline}        [+7 ]{.underline}
  [State Costs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}           [378]{.underline}            [460]{.underline}            [610]{.underline}            [+150 ]{.underline}
  [Net Costs to Taxpayers\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                              **[\$3,275]{.underline}**    **[\$3,637]{.underline}**    **[\$3,794]{.underline}**    **[+157 ]{.underline}**
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
  [NOTE: Program Costs equal the Administrative Costs minus the portion of collections distributed to TANF ]{.underline}                                                                                                                          
                                                                                                                                                                                                                                                  
  [ and Foster Care Programs]{.underline}                                                                                                                                                                                                         
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                  
  -------------------------------------------------------------------------------------------------------------------------------------------------------- ---------------------------- ---------------------------- ---------------------------- -----------------------------

**[ACF Proposed Entitlement Legislation]{.underline}**

  ---------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------- ----------------------------
                                                                                                                                                             **[FY 2005]{.underline}**   **[FY 05-09]{.underline}**
                                                                                                                                                                                         
  **[TANF (BA in millions)]{.underline}**                                                                                                                                                
                                                                                                                                                                                         
  [State Family Assitance Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                       [\$16,489]{.underline}      [\$82,443]{.underline}
  [Territory Family Assitance Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                           [\$78]{.underline}          [\$389]{.underline}
  [Matching Grants to Territories\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                      [15]{.underline}            [75]{.underline}
  [Supplemental Grants \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}           [319]{.underline}           [1,597]{.underline}
  [High Performance Bonus\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                  [\[400\]]{.underline}       [500]{.underline}
  [Family Formation, Research, Demonstration, and Techincal]{.underline}                                                                                                                 
                                                                                                                                                                                         
  [Assitance Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}               [240]{.underline}           [1,200]{.underline}
                                                                                                                                                                                         
  [Tribal Work Program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}           [8]{.underline}             [38]{.underline}
                                                                                                                                                                                         
  [Contingecy Fund \[Non-add\]\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                     [\[2,000\]]{.underline}     [2,000]{.underline}
                                                                                                                                                                                         
  **[TANF Subtotal\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**     [\$17,149]{.underline}      [\$88,242]{.underline}
                                                                                                                                                                                         
                                                                                                                                                                                         
                                                                                                                                                                                         
  **[Child Support Enforcement /1]{.underline}**                                                                                                                                         
                                                                                                                                                                                         
  [Health Insurance from Either Parent /2\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                 [\$0]{.underline}           [\$3]{.underline}
  [Send COBRA Notice to IV-D Agency\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                      [1]{.underline}             [5]{.underline}
  [Federal Seizure of Accounts in Multi-State Financial Institutions \..... ]{.underline}                                                                    [-2]{.underline}            [-43]{.underline}
  [Require Intercept of Gaming Proceeds\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                  [-1]{.underline}            [-22]{.underline}
  [Provide for Garnishment of Longshore and Harbor Worker\'s ]{.underline}                                                                                                               
                                                                                                                                                                                         
  [Compensation Act Benefits\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                          [-1]{.underline}            [-9]{.underline}
                                                                                                                                                                                         
  [FPLS Access to Insurance Settlement Databases\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                   [0]{.underline}             [-8]{.underline}
  [Increased Funding for Access and Visitation \...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                            [2]{.underline}             [32]{.underline}
  [Direct Access for Indian Tribes to the Federal Income Tax Refund ]{.underline}                                                                                                        
                                                                                                                                                                                         
  [Offset Program and the Federal FPLS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                                       [0]{.underline}             [0]{.underline}
                                                                                                                                                                                         
  [Contractor and Tribal Access to Tax Data\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                                       [0]{.underline}             [0]{.underline}
  [Optional Pass Through and disregard above Current Effort /3\...\...\..... ]{.underline}                                                                   [0]{.underline}             [102]{.underline}
  [Optional Simplified Distribution /3\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                           [0]{.underline}             [615]{.underline}
  [Review and Adjustment of Child Support Orders /2\...\...\...\...\...\...\...\...\..... ]{.underline}                                                      [0]{.underline}             [-40]{.underline}
  [Reduce Threshold for Passport Denial to \$2500\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                              [-1]{.underline}            [-10]{.underline}
  [\$25 Annual Fee for Never -TANF Cases with Collections\...\...\...\...\...\.... ]{.underline}                                                             [-55]{.underline}           [-305]{.underline}
                                                                                                                                                                                         
  [OASDI Benefit Match\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}               [-6]{.underline}            [-38]{.underline}
                                                                                                                                                                                         
  **[Child Suport Enforcement Subtotal\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**                                  [-\$64]{.underline}         [\$282]{.underline}
                                                                                                                                                                                         
                                                                                                                                                                                         
  **[Child Welfare (BA in millions)]{.underline}**                                                                                                                                       
                                                                                                                                                                                         
                                                                                                                                                                                         
                                                                                                                                                                                         
  [Child Welfare Program Option\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                        [\$37]{.underline}          [\$0]{.underline}
  [Clarify IV-E Eligibility Process\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                   [-\$77]{.underline}         [-\$375]{.underline}
                                                                                                                                                                                         
  [Contingency Fund /4\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}            [0]{.underline}             [0]{.underline}
                                                                                                                                                                                         
  **[Child Welfare Subtotal\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}**                [-\$40]{.underline}         [-\$375]{.underline}
                                                                                                                                                                                         
                                                                                                                                                                                         
                                                                                                                                                                                         
  [/1 All of the child support proposals, with the exception of the user fee and a portion of the impact of mandatory review and adjustment, ]{.underline}                               
                                                                                                                                                                                         
  [increase or decrease gross budget authority across the Federal government due to offsetting collections received by the Tresasury.]{.underline}                                       
                                                                                                                                                                                         
  [/2 These numbers do not reflect savings to Medicaid.]{.underline}                                                                                                                     
  [/3 These numbers do not reflect savings to Food Stamps.]{.underline}                                                                                                                  
                                                                                                                                                                                         
  [/4 The Child Welfare Program Option will provide States access to the TANF Contingency Fund. ]{.underline}                                                                            
                                                                                                                                                                                         
  [from FY 2004 - FY 2008 and \$40 million from FY 2004 - FY 2013.]{.underline}                                                                                                          
                                                                                                                                                                                         
                                                                                                                                                                                         
                                                                                                                                                                                         
  ---------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------- ----------------------------

**[Administration on Aging]{.underline}**

  ------------------------------------------------------------------------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------
                                                                                              **[2003]{.underline}**       **[2004]{.underline}**       **[2005]{.underline}**       **[ 2005 ]{.underline}[ +/-2004]{.underline}**
                                                                                                                                                                                     
                                                                                                                                                                                     
  [National Family Caregiver Support\...\...\...\...\...\... ]{.underline}                    [\$155 ]{.underline}         [\$159 ]{.underline}         [\$162 ]{.underline}         [+\$3 ]{.underline}
                                                                                                                                                                                     
  [Home and Community-Based]{.underline}                                                                                                                                             
                                                                                                                                                                                     
  [Supportive Services and Centers\...\...\...\...\...\... ]{.underline}                      [356 ]{.underline}           [354 ]{.underline}           [357 ]{.underline}           [+\$3 ]{.underline}
                                                                                                                                                                                     
                                                                                                                                                                                     
  [Nutrition Services:]{.underline}                                                                                                                                                  
                                                                                                                                                                                     
  [Home-Delivered Meals\...\...\...\...\...\...\...\...\...\..... ]{.underline}               [\$181 ]{.underline}         [\$180 ]{.underline}         [\$181 ]{.underline}         [+\$1 ]{.underline}
  [Congregate Meals\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}        [385 ]{.underline}           [387 ]{.underline}           [389 ]{.underline}           [+2 ]{.underline}
  [Nutrition Services Incentive Program\...\...\...\... ]{.underline}                         [149 ]{.underline}           [148 ]{.underline}           [149 ]{.underline}           [+1 ]{.underline}
                                                                                                                                                                                     
  **[Subtotal, Nutrition Programs \...\...\...\...\.... ]{.underline}**                       **[\$715 ]{.underline}**     **[\$715 ]{.underline}**     **[\$719 ]{.underline}**     **[+\$4 ]{.underline}**
                                                                                                                                                                                     
                                                                                                                                                                                     
  [Program Innovations\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}     [\$29 ]{.underline}          [\$34 ]{.underline}          [\$24 ]{.underline}          [-\$10 ]{.underline}
                                                                                                                                                                                     
  [Aging Network Support Activities\...\...\...\...\...\.... ]{.underline}                    [13 ]{.underline}            [13 ]{.underline}            [13 ]{.underline}            [ 0 ]{.underline}
  [Preventive Health Services\...\...\...\...\...\...\...\...\...\.... ]{.underline}          [22 ]{.underline}            [22 ]{.underline}            [22 ]{.underline}            [ 0 ]{.underline}
  [Grants for Native Americans\...\...\...\...\...\...\...\...\.... ]{.underline}             [27 ]{.underline}            [26 ]{.underline}            [26 ]{.underline}            [ 0 ]{.underline}
  [Protection of Vulnerable Older Americans\...\.... ]{.underline}                            [19 ]{.underline}            [19 ]{.underline}            [19 ]{.underline}            [ 0 ]{.underline}
  [Alzheimer\'s Disease\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}   [13 ]{.underline}            [12 ]{.underline}            [12 ]{.underline}            [ 0 ]{.underline}
  [Program Administration\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}         [18 ]{.underline}            [17 ]{.underline}            [18 ]{.underline}            [+1 ]{.underline}
  [Senior Medicare Patrols (HCFAC)\...\...\...\...\..... ]{.underline}                        [3 ]{.underline}             [3 ]{.underline}             [3 ]{.underline}             [ 0 ]{.underline}
  [White House Conference on Aging\...\...\...\...\...\... ]{.underline}                      [ 0 ]{.underline}            [3 ]{.underline}             [5 ]{.underline}             [+2 ]{.underline}
                                                                                                                                                                                     
                                                                                                                                                                                     
  **[Total, Program Level\...\...\...\...\...\...\...\...\..... ]{.underline}**               **[\$1,370 ]{.underline}**   **[\$1,377 ]{.underline}**   **[\$1,380 ]{.underline}**   **[+\$3 ]{.underline}**
                                                                                                                                                                                     
                                                                                                                                                                                     
                                                                                                                                                                                     
                                                                                                                                                                                     
  [Less Funds Allocated From Other Sources:]{.underline}                                                                                                                             
                                                                                                                                                                                     
  [Senior Medicare Patrols (HCFAC)\...\...\...\..... ]{.underline}                            [-\$3 ]{.underline}          [-\$3 ]{.underline}          [-\$3 ]{.underline}          [ \$0 ]{.underline}
                                                                                                                                                                                     
  **[Total, Budget Authority\...\...\...\...\...\...\...\.... ]{.underline}**                 **[\$1,367 ]{.underline}**   **[\$1,374 ]{.underline}**   **[\$1,377 ]{.underline}**   **[+\$3 ]{.underline}**
                                                                                                                                                                                     
                                                                                                                                                                                     
                                                                                                                                                                                     
  ------------------------------------------------------------------------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------

[The FY 2005 budget request for AoA is \$1.4 billion. This amount
includes increases to test new models of home and community-based care
and provide nutrition, caregiver, and supportive services. The budget
also includes \$5 million for the second year of funding for the White
House Conference on Aging.]{.underline}

[One of the most critical issues facing elderly Americans today is that
of long-term care. Elderly citizens overwhelmingly state a preference to
live at home as long as possible. Even small amounts of support can make
a significant impact in enabling elders to remain in their homes and out
of institutional care. The FY 2005 budget continues to emphasize AoA
programs that work together to support elders at home and in the
community. Services are provided through a nationwide network of State,
Tribal and area agencies on aging and by over 29,000 local service
providers.]{.underline}

[National Family Caregiver Support Program ]{.underline}

[Family caregivers have always been the main source of long-term care
services provided in the United States. AoA is committed to assisting
family caregivers by providing them with the resources to help them keep
their loved ones at home or in the community. The FY 2005 budget
includes \$162 million for the National Family Caregiver Support
Program. For a minimal cost, this national program provides information,
training, counseling, respite and assistance services that support the
efforts of America\'s caregivers. Research indicates that informal
caregiving supports can have a significant impact on the status of
caregivers, delay the need for institutionalization, and significantly
reduce costs to Medicare, Medicaid and private payers. ]{.underline}

[Caregivers provide an invaluable resource to their loved
ones:]{.underline}

-   [Approximately 95 percent of all older adults who experience
    limitations in their daily activities have family members involved
    in their personal care.]{.underline}

-   [22.4 million households are involved in providing care to persons
    aged 50 and older. These households are expected to increase to 39
    million by 2007. ]{.underline}

-   [The economic value of informal caregiving is estimated to be valued
    at \$257 billion.]{.underline}

-   [The average caregiver is a 46 year-old married female who works
    outside the home.]{.underline}

[Home and Community-based Supportive Services and Centers]{.underline}

[Home and Community-Based Supportive Services provide a variety of
activities that enable elderly Americans to remain at home and in their
communities. Three categories of services -- access, in-home, and
community -- work together to improve the quality of life for elderly
Americans. The budget for these services totals \$357
million.]{.underline}

[Activities including transportation assistance, information and
referral, chore, homemaker and personal care services, and adult day
care, to help seniors to remain independent for as long as possible. AoA
has established a target to provide an estimated 40 million rides in FY
2005 to help seniors visit health professionals, pharmacies, and grocery
stores. Information and referral services will empower individuals and
families to make informed choices about their service and care needs.
Personal care and homemaker services will enable elders to live with
dignity at home through assistance with activities of daily living.
These services are provided through senior centers and in other
community-based settings.]{.underline}

[Nutrition Programs ]{.underline}

[The budget requests a total of \$719 million for nutrition programs.
Through a variety of State and community mechanisms, these programs
provide nutritious meals to the nation\'s most frail and at-risk
elderly. Through the three nutrition programs and additional leveraged
resources, AoA\'s goal is for States to provide more than 300 million
meals in FY 2005. These programs also provide supplemental nutrition
screening, education, and counseling services which further enable
elders to maintain their own health and independence.]{.underline}

[Scientific evidence shows that adequate nutrition is essential for
healthy aging and the prevention or delay of chronic disease and related
disabilities. Research also indicates that meal preparation at home is
difficult or impossible for many older Americans, and that the
availability of a home-delivered meal is crucial to their ability to
function independently at home. For example, 79 percent of
home-delivered meal recipients have at least one limitation with
activities of daily living, and 30 percent have limitations with three
or more -- a level of frailty consistent with nursing home residents. In
many cases, home-delivered meals are the first in-home service an older
adult receives, and the program is therefore also a primary access point
for other in-home supportive services. ]{.underline}

[The Congregate Nutrition Services program supports the provision of
meals to elderly individuals in a variety of social settings such as
senior centers and faith-based organizations. In addition to serving as
a primary source of food for many participants, the program presents
critical opportunities for social engagement and meaningful volunteer
roles which contribute to individuals' overall health and mental
well-being. ]{.underline}

[In FY 2003, the Department successfully transferred the Nutrition
Services Incentive Program (NSIP) from the Department of Agriculture to
AoA. Funds continue to be distributed by its historic formula, which is
based on the number of meals served in the prior year. Under the Older
Americans Act, States can elect to receive commodities in lieu of cash
for part or all of their NSIP allocation. In FY 2004, 11 States have
elected this option.]{.underline}

[Program Innovations]{.underline}

[AoA continues to seek ways to leverage funding at the State and
community level to support seniors at home. To this end, it is crucial
to ensure that seniors have access to all available resources in their
home communities. ]{.underline}

[In FY 2003, AoA first partnered with the Centers for Medicare and
Medicaid Services to establish Aging and Disability Resource Centers in
12 States. These centers serve as reliable resources and help to
eliminate the confusion and frustration many older Americans face as
they search for information about long-term care by providing objective
information about the options -- both public and private -- that are
available to them. They also provide information on best practices and
assist States in replicating the significant strides that several other
States have made in creating more citizen-centered systems of care by
reducing nursing home expenditures and increasing community-based
choices, while containing costs. ]{.underline}

[In FY 2004, AoA expects to establish centers in an additional 12
States, and is requesting an investment of \$11 million (an increase of
\$6 million) in FY 2005 to further expand this collaboration with
CMS.]{.underline}

[In FY 2003, AoA launched an Evidence-Based Prevention Grants program to
demonstrate how community-based aging services providers can effectively
deliver programs that can reduce the risk of disease and disability in
the older population. AoA funded 13 local projects and a national
technical assistance center. AoA is partnering with CDC, ARHQ, and the
National Institute on Aging, as well as several private foundations on
this initiative, which is translating research into practice at the
community level. This activity will continue in FY 2005. The net \$8
million reduction in Program Innovations is due to the completion of
one-time projects.]{.underline}

[Grants for Native Americans]{.underline}

[The FY 2005 request includes \$26 million for grants for Native
Americans. These grants will enable 243 Tribal organizations serving
approximately 300 tribes to continue to provide services to American
Indians, Alaskan Natives, and Native Hawaiians who are over the age of
60, by providing nutritional and supportive services which help them
remain healthy and independent. ]{.underline}

[Prevention, Protection, and Network Support]{.underline}

[The FY 2005 request includes \$54 million to fund activities which
educate older Americans about healthier lifestyles in order to delay or
prevent the onset of chronic disease; protect vulnerable older Americans
from abuse/neglect and empower them to assert greater control over their
living situations; and identify additional local resources available for
older Americans and their families. ]{.underline}

[Alzheimer\'s Grants]{.underline}

[The FY 2005 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
incorporating new research findings, innovative approaches to care, and
cultural competencies into actual home and community-based
services.]{.underline}

[White House Conference on Aging]{.underline}

[The FY 2005 Budget requests a total of \$5 million for a White House
Conference on Aging, to take place by December 2005, as called for in
the Older Americans Act. The Conference will provide a national forum on
aging issues.]{.underline}

[Program Administration]{.underline}

[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.]{.underline}

**[Departmental Management]{.underline}**

  --------------------------------------------------------------------------------------------------------------------- ---------------------------- ---------------------------- ---------------------------- -----------------------------
                                                                                                                                                                                                               **[2005]{.underline}**
                                                                                                                                                                                                               
                                                                                                                        **[2003]{.underline}**       **[2004]{.underline}**       **[2005]{.underline}**       **[ +/- 2004]{.underline}**
                                                                                                                                                                                                               
  [General Departmental Management:]{.underline}                                                                                                                                                               
                                                                                                                                                                                                               
  [Adolescent Family Life\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                     [\$31 ]{.underline}          [\$31 ]{.underline}          [\$44 ]{.underline}          [+\$13 ]{.underline}
  [Natl Abstinence Education Campaign\...\...\...\...\...\.... ]{.underline}                                            [ 0 ]{.underline}            [ 0 ]{.underline}            [10 ]{.underline}            [+10 ]{.underline}
  [Physical Fitness & Sports\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                         [1 ]{.underline}             [1 ]{.underline}             [1 ]{.underline}             [ 0 ]{.underline}
                                                                                                                                                                                                               
  [Office of Minority Health\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                        [56 ]{.underline}            [55 ]{.underline}            [47 ]{.underline}            [-8 ]{.underline}
                                                                                                                                                                                                               
  [Office on Women\'s Health\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                          [29 ]{.underline}            [29 ]{.underline}            [29 ]{.underline}            [ 0 ]{.underline}
                                                                                                                                                                                                               
  [Office for Human Research Protections \...\...\...\...\.... ]{.underline}                                            [7 ]{.underline}             [7 ]{.underline}             [7 ]{.underline}             [ 0 ]{.underline}
  [National Vaccine Program Office\...\...\...\...\...\...\...\...\..... ]{.underline}                                  [7 ]{.underline}             [7 ]{.underline}             [7 ]{.underline}             [ 0 ]{.underline}
  [CCRF/ Reserve Affairs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                     [1 ]{.underline}             [1 ]{.underline}             [1 ]{.underline}             [ 0 ]{.underline}
  [Minority HIV/AIDS \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}                   [50 ]{.underline}            [50 ]{.underline}            [53 ]{.underline}            [+3 ]{.underline}
  [Office of Global Health Affairs\...\...\...\...\...\...\...\...\...\..... ]{.underline}                              [4 ]{.underline}             [9 ]{.underline}             [9 ]{.underline}             [ 0 ]{.underline}
  [Health Care IT\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}         [ 0 ]{.underline}            [ 0 ]{.underline}            [50 ]{.underline}            [+50 ]{.underline}
  [IT Security and Innovation Fund\...\...\...\...\...\...\...\...\.... ]{.underline}                                   [20 ]{.underline}            [15 ]{.underline}            [18 ]{.underline}            [+3 ]{.underline}
  [Other General Departmental Management \...\...\...\... ]{.underline}                                                 [153 ]{.underline}           [155 ]{.underline}           [162 ]{.underline}           [+7 ]{.underline}
  [Evaluation Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                 [22 ]{.underline}            [22 ]{.underline}            [22 ]{.underline}            [ 0 ]{.underline}
                                                                                                                                                                                                               
  [Health Care Fraud and Abuse Control \...\...\...\...\...\... ]{.underline}                                           [5 ]{.underline}             [5 ]{.underline}             [5 ]{.underline}             [ 0 ]{.underline}
                                                                                                                                                                                                               
  **[Total, GDM Program Level\...\...\...\...\...\...\...\...\...\...\... ]{.underline}**                               **[\$386 ]{.underline}**     **[\$387 ]{.underline}**     **[\$465 ]{.underline}**     **[+\$78 ]{.underline}**
                                                                                                                                                                                                               
  [Policy Research:]{.underline}                                                                                                                                                                               
                                                                                                                                                                                                               
  [Broad-Based Research\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                      [\$18 ]{.underline}          [\$21 ]{.underline}          [\$29 ]{.underline}          [+\$8 ]{.underline}
  [State Innovation Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                     [2 ]{.underline}             [ 0 ]{.underline}            [ 0 ]{.underline}            [ 0 ]{.underline}
                                                                                                                                                                                                               
  **[Total, PR Program Level\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}**                           **[\$20 ]{.underline}**      **[\$21 ]{.underline}**      **[\$29 ]{.underline}**      **[+\$8 ]{.underline}**
  **[Total, GDM and PR Program Level\...\...\...\...\...\.... ]{.underline}**                                           **[\$406 ]{.underline}**     **[\$408 ]{.underline}**     **[\$494 ]{.underline}**     **[+\$86 ]{.underline}**
                                                                                                                                                                                                               
  [Public Health and Social Services Emergency Fund:]{.underline}                                                                                                                                              
                                                                                                                                                                                                               
  [PHSSEF\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... ]{.underline}   [\$2,266 ]{.underline}       [\$2,164 ]{.underline}       [\$2,225 ]{.underline}       [+\$61 ]{.underline}
                                                                                                                                                                                                               
  **[Total, PHSSEF Program Level\...\...\...\...\...\...\...\...\... ]{.underline}**                                    **[\$2,266 ]{.underline}**   **[\$2,164 ]{.underline}**   **[\$2,225 ]{.underline}**   **[+\$61 ]{.underline}**
  **[Total, DM Program Level\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}**                            **[\$2,672 ]{.underline}**   **[\$2,572 ]{.underline}**   **[\$2,719 ]{.underline}**   **[+\$147 ]{.underline}**
                                                                                                                                                                                                               
  [Less funds from other sources:]{.underline}                                                                                                                                                                 
                                                                                                                                                                                                               
  [Evaluation Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}                 [\$40 ]{.underline}          [\$43 ]{.underline}          [\$51 ]{.underline}          [+\$8 ]{.underline}
                                                                                                                                                                                                               
  [Health Care Fraud and Abuse Control \...\...\...\...\...\... ]{.underline}                                           [5 ]{.underline}             [5 ]{.underline}             [5 ]{.underline}             [ 0 ]{.underline}
                                                                                                                                                                                                               
  --------------------------------------------------------------------------------------------------------------------- ---------------------------- ---------------------------- ---------------------------- -----------------------------

[Departmental Management (DM) includes funding for three appropriation
accounts in the Office of the Secretary: General Departmental Management
(GDM), Policy Research, and the Public Health and Social Services
Emergency Fund (PHSSEF).]{.underline}

[The FY 2005 budget request for GDM and Policy Research provides a total
program level of \$494 million, including appropriations of \$438
million, interagency transfers of \$51 million in evaluation funds, and
\$5 million in health care fraud and abuse funds. The FY 2005 budget
request for the PHSSEF account is \$2.2 billion.]{.underline}

[General Departmental Management]{.underline}

[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 13 Staff Divisions (STAFFDIVs). The GDM budget request for
FY 2005 totals \$465 million, an increase of \$78 million or 20.1
percent above the comparable FY 2004 level. The GDM request provides
funding for the following activities:]{.underline}

[Office of Population Affairs (OPA)/Adolescent Family Life (AFL): The
AFL request of \$44 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
doubles abstinence-only prevention projects, as defined by the Welfare
Reform legislation (P.L. 104-193) from \$13 million to \$26 million.
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).]{.underline}

[National Abstinence Education Campaign: The request of \$10 million
will provide funding to create a campaign designed to help parents
communicate with their children about the risks associated with early
sexual activity.]{.underline}

[Office of Minority Health (OMH): The OMH request of \$47 million, an
\$8 million decrease from FY 2004, 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 2004 Congressional earmarks which are not continued
in FY 2005.]{.underline}

[Office on Women\'s Health (OWH): The OWH request of \$29 million, the
same as FY 2004, 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.]{.underline}

[Office of Human Research Protections (OHRP): The OHRP request of \$7
million, the same as FY 2004, will be used to accomplish the following:
ensure implementation of Departmental regulations for the protection of
human subjects, negotiate formal written assurances of compliance with
institutions engaged in research covered by OHRP, investigate and
oversee institutional compliance, and expand its public education
campaign.]{.underline}

[National Vaccine Program Office (NVPO): The NVPO request of \$7 million
will be used to provide leadership and coordination among Federal
agencies as they work together to carry out the goals of the National
Vaccine Plan. The National Vaccine Plan provides a framework, including
goals, objectives, and strategies for pursuing the prevention of
infectious diseases through immunizations. The NVPO is also the lead on
the development of the U.S. Pandemic Influenza plan. Funds are also
requested in the Public Health and Social Services Emergency Fund to
ensure the Nation has the capacity to provide vaccines in a
pandemic.]{.underline}

[Commissioned Corps Readiness Force (CCRF): The CCRF request of \$1
million will continue to support a cadre of approximately 1,300 active
duty U.S. Public Health Service officers, qualified with special
training and skills and ready to rapidly deploy in emergency
situations.]{.underline}

[Minority HIV/AIDS: The FY 2005 request includes \$53 million, an
increase of \$3 million or 7 percent from FY 2004, 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.]{.underline}

[Office of Global Health Affairs (OGHA): The OGHA request of \$9 million
will continue to promote the health of the world\'s population by
advancing the Department\'s global strategies and partnerships. The OGHA
request includes \$5 million to continue support of HHS health care
initiatives in Afghanistan.]{.underline}

[Health Care IT: The request of \$50 million will be used to fund State,
regional, or local demonstration grants to test the feasibility of
information exchange among health care settings, and other innovative
information technology projects that improve health care.]{.underline}

[Information Technology Security and Innovation Fund: The FY 2005 budget
request includes \$18 million, an increase of \$3 million from FY 2004,
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 on
security and infrastructure to enable HHS common administrative
systems.]{.underline}

[Other General Departmental Management (GDM): The FY 2005 budget request
includes \$162 million, an increase of \$7 million from FY 2004, to fund
offices which provide leadership, policy, legal, and administrative
guidance to HHS components.]{.underline}

[Policy Research]{.underline}

[The Policy Research account examines broad issues that cut across
agency and subject lines, as well as new policy approaches developed
outside the context of existing programs. The FY 2005 request for Policy
Research includes \$29 million to support evaluation activities. It is
proposed that in FY 2005 the entire \$29 million request be derived
through interagency transfers of evaluation funds.]{.underline}

[Broad-Based Research: The FY 2005 Policy Research budget request of
\$29 million, an \$8 million increase from FY 2004, will support
research on issues that cut across agency and subject lines, as well as
new approaches developed outside the context of an existing program.
Priority issues that will be examined are those related to: the
well-being of children and youth; the outcomes of welfare reform and the
status of low-income families; reform of major public-sector programs,
especially Medicare and access for those who lack health insurance;
promoting and expanding consumer-directed home and community-based
services; nursing home quality; managed care and disability; post-acute
care; employment and disability; active aging; and science
policy.]{.underline}

[Of the total \$8 million increase, \$2 million will be used to continue
support of the National Electronic Health Information Initiative, to
focus on national electronic health information systems. This initiative
will accelerate the development and adoption of the technology and
national standards necessary for Electronic Health Record Information
Systems and their use by the health care and public health systems, as
well as related support for the National Health Information
Infrastructure.]{.underline}

[In addition, \$6 million will support the Current Population Survey
(CPS), which is conducted by the Bureau of the Census. The CPS is the
only government survey that produces annual estimates of the uninsured
at the State level. Improved data will help States make informed
decisions about their Medicaid, SCHIP, and other State-run insurance
programs.]{.underline}

[HHS agencies will conduct significant health services and policy
research in FY 2005. This body of research covers a wide range of
subjects, from assessing the quality of health care provided to the
nation\'s elderly, to evaluating the effectiveness of programs aimed at
reducing health risk behaviors among teens and other high-risk
populations. The HHS Research Coordination Council (RCC), chaired by the
Assistant Secretary for Planning and Evaluation, works to ensure that
agencies collaborate in the conduct of health services research in order
to ensure the most efficient and effective use of research resources in
support of the primary mission and objectives of HHS.]{.underline}

[Public Health and Social Services Emergency Fund (PHSSEF)]{.underline}

[The PHSSEF provides \$2.2 billion, a net \$61 million increase above FY
2004. This includes \$2.1 billion for bioterrorism and counterterrorism
and \$100 million to ensure that an adequate supply of vaccine could be
produced for the Nation in the event of a pandemic. The PHSSEF is the
source of funding for over half of the overall HHS terrorism budget of
\$4.1 billion.]{.underline}

[Pandemic Influenza: The budget includes \$100 million, an increase of
\$50 million, to ensure the Nation has the capacity to respond to an
influenza pandemic. The influenza strains circulating usually change
somewhat from year to year. Periodically, there is a major change in the
virus\'s genetic structure resulting from a strain that can cause
widespread disease and death. Three such global epidemics - 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
vaccine were not available quickly. Once a pandemic began, it would be
too late to accomplish the many key activities required to minimize this
toll. Funds will be used to provide appropriate incentives for vaccine
manufacturers to establish new domestic capacity using new manufacturing
techniques that can be scaled up rapidly.]{.underline}

[Bioterrorism: The HHS FY 2005 budget includes \$4.1 billion for
bioterrorism and counterterrorism activities. This is \$154 million
above FY 2004, and reflects several major changes: an inter-governmental
biosurveillance initiative, a research portfolio on countermeasures
against nuclear and radiological threats, and the return of both funding
for and management of the Strategic National Stockpile to HHS. Funds
contained in this request support activities in the Centers for Disease
Control and Prevention (CDC), HRSA, Office of the Secretary, the nuclear
and radiological countermeasures research at the National Institutes of
Health (NIH), and the Strategic National Stockpile. In addition, both
the Food and Drug Administration (FDA) and NIH receive direct
appropriations for their bioterrorism activities. HHS continues to work
with the Department of Homeland Security (DHS) on moving countermeasures
against terrorism from the research phase to the advanced scale-up and
production phase. Specifically, HHS is developing a contract for the
purchase of an advanced anthrax vaccine - the first procurement to be
made under the BioShield appropriations for DHS.]{.underline}

-   [Biosurveillance: the FY 2005 request introduces a new interagency
    biosurveillance initiative to prepare against a potential
    bioterrorist attack. CDC and FDA, in coordination with DHS, the
    Environmental Protection Agency, and the Department of Agriculture,
    will be working to improve the response to bioterrorism through
    early detection. The budget for CDC includes \$130 million in FY
    2005 for its role in this initiative, the largest of which is an
    investment of \$100 million in its human health surveillance
    project, \"BioSense.\" BioSense is an advanced approach to
    infectious disease surveillance that, unlike traditional approaches,
    does not rely upon mandatory or voluntary case reports from
    healthcare providers to public health officials, but uses automated
    analysis techniques on electronically available health data to
    highlight a potential health problem. In addition to developing
    better surveillance capacity, CDC will invest an additional \$20
    million to improve laboratory reporting capacity and to advance
    integration between public health and commercial laboratories, and
    an additional \$10 million to increase the number of border health
    and quarantine stations from 8 to up to 25.]{.underline}

-   [Food Defense: The budget for FDA includes \$246 million for
    bioterrorism activities. This total includes \$181 million for food
    defense activities, which represents an increase of \$65 million
    over FY 2004. The total food defense increase includes an additional
    \$35 million to increase analytic surge testing capacity for
    biological, chemical, and radiological threat agents for the Food
    Emergency Response Network (FERN), \$15 million for research, \$7
    million for domestic inspections and field exams, and \$3 million to
    develop an Emergency Response and Operations Network. FDA will use
    \$5 million to coordinate food surveillance activities within the
    biosurveillance initiative.]{.underline}

-   [National Institutes of Health: The FY 2005 request for NIH
    biodefense and other counterterrorism activities includes \$1.7
    billion, a net increase of \$121 million from FY 2004. Of this
    total, \$47 million is budgeted in the Public Health and Social
    Services Emergency Fund to be managed by NIH for support of targeted
    research activities needed to develop nuclear and radiological
    threat countermeasures. This research effort will improve methods
    for measuring radiological exposure and contamination as well as
    developing drugs that can be used to prevent injury from
    radiological exposure and developing methods or drugs to restore
    injured tissues and eliminate radioactive materials from
    contaminated tissues.]{.underline}

[Of the bioterrorism funds directly appropriated to NIH, \$1.5 billion
will fund basic research on the biology of microbial agents with
bioterrorism potential and the properties of the host\'s response
applied research for the development of new or improved diagnostics,
vaccines, and therapies. A complementary investment of \$150 million is
requested for developing this extramural capacity to conduct biodefense
research - a top priority of the FY 2005 budget. The research and
development of biodefense can only be performed safely and effectively
in specialized and secure biocontainment research facilities. Critical
research on a comprehensive range of biodefense countermeasures needed
to respond to future potential bioterror attacks. Work on a
second-generation anthrax vaccine has rapidly progressed to the point
that a vaccine product is expected to be ready for procurement later
this year through the new DHS BioShield program. DHS has been assigned
responsibility to finance the procurement of biodefense medical
countermeasures. HHS will continue to provide the scientific leadership
needed to determine what countermeasures are needed.]{.underline}

-   [Strategic National Stockpile (SNS): The FY 2005 budget includes
    \$400 million and reflects the Administration\'s plan to return the
    fiduciary management of the SNS to HHS. This change will better
    align and parallel the Federal role with the roles of the State and
    local public health departments, the lead agencies for planning and
    deployment of SNS assets. HHS has a long history of strong
    relationships with State and local public health officials, who rely
    on the scientific and clinical expertise that exists in HHS. This
    change will clarify for State and local officials a single Federal
    focal point for both strategic stockpile operations and public
    health emergency response.]{.underline}

-   [CDC Capacity and Anthrax Research: The FY 2005 request for the
    PHSSEF includes \$150 million for CDC to 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, laboratory safety inspections, and anthrax
    research. Included in this total is funding to support the expanded
    role of CDC in regulating transfer of select biological
    agents.]{.underline}

-   [HRSA Curriculum Development and Education: The FY 2005 request for
    the PHSSEF includes \$28 million for curriculum development, the
    same as the FY 2004 level. This program is focused on medical
    curricula for instruction on the detection and treatment of diseases
    that can be caused by bioterrorism. The Bioterrorism Training and
    Curriculum Development program, first initiated in FY 2003,
    facilitates the training and preparation of current medical,
    nursing, allied health, and other health professions
    students.]{.underline}

-   [State and Local Preparedness: The commitment at CDC and HRSA to
    preparing States and hospitals to respond to public health
    emergencies remains strong: between FY 2002 and FY 2004, CDC
    invested a total of \$2.9 billion in State and local preparedness
    and HRSA invested a total of \$1.2 billion. In FY 2005, CDC has
    budgeted another \$829 million and HRSA another \$476
    million.]{.underline}

[Investments in States have markedly improved capacity: the Laboratory
Response Network (LRN) now consists of 109 functional reference
laboratories distributed throughout all 50 States. There are also 59
biosafety level 3 (BSL-3) laboratories located in 50 States - nearly
three times the number reported in 1999. Fifty members of the LRN are
now able to rule out the existence of smallpox, and 24 labs can test for
the existence of the smallpox virus on a real-time basis. After several
years of targeted funding from HRSA, every State, Territory, and funded
municipality has a staffed hospital preparedness office and advisory
committee, has completed a needs assessment, and has developed a plan of
action in response to the identified needs. The FY 2005 budget requests
\$476 million to continue progress towards the goal of 100 percent of
States developing surge capacity plans, including communication and
connectivity among hospitals, outpatient facilities, public health
departments, emergency medical services units, and other health care
entities.]{.underline}

-   [Office of the Secretary: The FY 2005 request for the PHSSEF
    includes \$62 million for the Office of the Secretary, the same as
    FY 2004.]{.underline}

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-   [Office of the Assistant Secretary for Public Health and Emergency
    Preparedness (ASPHEP): Funding is maintained at \$42 million in
    FY 2005. This includes funding for the ongoing operations of ASPHEP
    at headquarters and in the field; supports the Secretary\'s
    Emergency Response Team and the Department\'s International Early
    Warning Surveillance efforts; provides funding for bioterrorism
    preparedness, planning, and evaluation studies and an advance
    research program to promote a national bioscience research and
    development effort related to civilian biodefense; and to continue
    the development of an effective risk communication and information
    strategy for the public. FY 2005 will mark the second year of
    funding for the procurement of medical countermeasures in DHS. This
    procurement strategy is an unprecedented effort to manage the
    development and acquisition of up to \$6 billion of drugs, vaccines,
    other biologics and supplies to be supplied to the SNS. ASPHEP has
    begun planning the operational structure to conduct the acquisition
    of vaccines and other pharmaceuticals that can be used to combat
    smallpox, anthrax, plague, and botulism.]{.underline}

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```
-   [Medical Reserve Corps: Funding is maintained at \$10 million in FY
    2005 for the Medical Reserve Corps, the Citizen Corps component that
    organizes local volunteers to assist regular medical response
    professionals and facilities during a large-scale local emergency,
    such as an influenza epidemic or a hazardous materials spill.
    Program oversight is the responsibility of the Office of the Surgeon
    General. It is estimated that approximately 200 grants to small
    cities, rural counties, and large metropolitan areas will be awarded
    in FY 2004.]{.underline}

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```
-   [CyberSecurity: The FY 2005 request for the PHSSEF includes \$10
    million 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.]{.underline}

# [Bioterrorism Overview]{.underline}

+-------------+-------------+-------------+-------------+-------------+
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| .underline} | nderline}** | nderline}** | nderline}** | 2005]{.un   |
|             |             |             |             | derline}**\ |
|             |             |             |             | **[         |
|             |             |             |             | +/-2004]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
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+-------------+-------------+-------------+-------------+-------------+
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| Health and  |             |             |             |             |
| Social      |             |             |             |             |
| Services    |             |             |             |             |
| Emergency   |             |             |             |             |
| Fund]{.u    |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
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| for Disease |             |             |             |             |
| Control and |             |             |             |             |
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| evention:]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Pandemic   | [ \$0       | [\$50       | [\$100      | [+\$50      |
| Influe      | ]{          | ]{          | ]{          | ]{          |
| nza\...\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total,   | **[\$2,264  | **[\$2,161  | **[\$2,222  | **[+\$61    |
| PHSSEF\...  | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| \...\...\.. | nderline}** | nderline}** | nderline}** | nderline}** |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [\`]{       | **[2003]{.u | **[2004]{.u | **[2005]{.u | **[         |
| .underline} | nderline}** | nderline}** | nderline}** | 2005]{.un   |
|             |             |             |             | derline}**\ |
|             |             |             |             | **[         |
|             |             |             |             | +/-2004]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Food and   |             |             |             |             |
| Drug        |             |             |             |             |
| Admini      |             |             |             |             |
| stration:]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Food       | [\$97       | [\$116      | [\$181      | [+\$65      |
| Safet       | ]{          | ]{          | ]{          | ]{          |
| y\...\...\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Vaccin     | [53         | [53         | [58         | [+5         |
| es/Drugs/Di | ]{          | ]{          | ]{          | ]{          |
| agnostics\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Physical   | [7          | [7          | [7          | [ 0         |
| Security\   | ]{          | ]{          | ]{          | ]{          |
| ...\...\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Subtotal   | [\$157      | [\$176      | [\$246      | [+\$70      |
| FDA\.       | ]{          | ]{          | ]{          | ]{          |
| ..\...\...\ | .underline} | .underline} | .underline} | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [National   |             |             |             |             |
| Institutes  |             |             |             |             |
| of          |             |             |             |             |
| Health:]{   |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Res        | [\$687      | [\$1,428    | [\$1,499    | [+\$71      |
| earch\...\. | ]{          | ]{          | ]{          | ]{          |
| ..\...\...\ | .underline} | .underline} | .underline} | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [rPA        | [123        | [117        | [ 0         | [-117       |
| Anthrax     | ]{          | ]{          | ]{          | ]{          |
| Vaccine     | .underline} | .underline} | .underline} | .underline} |
| I           |             |             |             |             |
| ntermediate |             |             |             |             |
| Scaleup\..  |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [MVA        | [ 0         | [75         | [45         | [-30        |
| Smallpox    | ]{          | ]{          | ]{          | ]{          |
| Vaccine     | .underline} | .underline} | .underline} | .underline} |
| I           |             |             |             |             |
| ntermediate |             |             |             |             |
| Scal        |             |             |             |             |
| eup\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Extramural | [373        | [ 0         | [150        | [+150       |
| Physical    | ]{          | ]{          | ]{          | ]{          |
| Security &  | .underline} | .underline} | .underline} | .underline} |
| Faciliti    |             |             |             |             |
| es\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Intramural | [370        | [ 0         | [ 0         | [ 0         |
| Physical    | ]{          | ]{          | ]{          | ]{          |
| Security &  | .underline} | .underline} | .underline} | .underline} |
| Facilities  |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Subtotal   | [\$1,554    | [\$1,620    | [\$1,694    | [+\$74      |
| NIH\...     | ]{          | ]{          | ]{          | ]{          |
| \...\...\.. | .underline} | .underline} | .underline} | .underline} |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [CDC        | [\$20       | [ \$0       | [ \$0       | [ \$0       |
| Physical    | ]{          | ]{          | ]{          | ]{          |
| Security    | .underline} | .underline} | .underline} | .underline} |
| and         |             |             |             |             |
| Faciliti    |             |             |             |             |
| es\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Subtotal,  | [\$1,731    | [\$1,796    | [\$1,940    | [+\$144     |
| B           | ]{          | ]{          | ]{          | ]{          |
| ioterrorism | .underline} | .underline} | .underline} | .underline} |
| Activities  |             |             |             |             |
| in Agency   |             |             |             |             |
| Budge       |             |             |             |             |
| ts\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total    | **[\$3,995  | **[\$3,908  | **[\$4,062  | **[+\$154   |
| B           | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| ioterrorism | nderline}** | nderline}** | nderline}** | nderline}** |
| Funding\.   |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| ]{.u        |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *[1/        |             |             |             |             |
| Displayed   |             |             |             |             |
| co          |             |             |             |             |
| mparably\-- |             |             |             |             |
| transferred |             |             |             |             |
| to DHS in   |             |             |             |             |
| FY03 and    |             |             |             |             |
| back to HHS |             |             |             |             |
| in          |             |             |             |             |
| FY05.]{.    |             |             |             |             |
| underline}* |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

**[Office for Civil Rights]{.underline}**

  ------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -------------------------------------------------
                                                                                        **[2003]{.underline}**   **[2004]{.underline}**   **[2005]{.underline}**   **[ 2005 ]{.underline}[ +/- 2004]{.underline}**
                                                                                                                                                                   
                                                                                                                                                                   
  [Program Level\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}             [\$33 ]{.underline}      [\$34 ]{.underline}      [\$35 ]{.underline}      [+\$1 ]{.underline}
                                                                                                                                                                   
                                                                                                                                                                   
                                                                                                                                                                   
  [FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... ]{.underline}   [244 ]{.underline}       [268 ]{.underline}       [268 ]{.underline}       [ 0 ]{.underline}
                                                                                                                                                                   
  ------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -------------------------------------------------

[The FY 2005 budget request for OCR is \$35 million, an increase of \$1
million over the FY 2004 level. OCR conducts public education; outreach;
complaint investigation and resolution; and other compliance activities
to prevent and eliminate discriminatory barriers, ensure the privacy of
protected health information, and enhance access to quality HHS-funded
health care and social services programs. OCR is responsible for
enforcing civil rights statutes that prohibit discrimination on the
basis of race; national origin; disability; age; and, in limited
instances, sex and religion.]{.underline}

[Some of the key priorities that the work of OCR currently supports and
will continue to support during FY 2004 and FY 2005 include: increasing
access to health services, improving the quality of health care, working
toward independence, leaving no child behind, protecting and
effectuating the rights of vulnerable populations, and minimizing health
differences and disparities - \"Closing the Gaps.\"]{.underline}

[The budget priorities of OCR for FY 2005 concentrate on:]{.underline}

-   [increasing access to and receipt of nondiscriminatory quality
    health care and treatment and social services, while protecting the
    integrity of HHS Federal financial assistance; and]{.underline}

-   [ensuring understanding of and compliance with the Health Insurance
    Portability and Accountability Act (HIPAA) Privacy
    Rule.]{.underline}

[OCR will address a broad array of concerns including: the New Freedom
Initiative and the Olmstead executive order; Title VI (race, color, and
national origin) access and disparities in health and human services
programs; and privacy of protected health information -
HIPAA.]{.underline}

[OCR enforces nondiscrimination requirements by processing and resolving
discrimination complaints; conducting reviews and investigations;
monitoring corrective action plans; and carrying out voluntary
compliance, outreach, technical assistance, and public education
activities. Each of the compliance activities for OCR ensures that
individuals are treated in a nondiscriminatory manner by health and
human services providers or facilities. 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.]{.underline}

[New Freedom Initiative and Olmstead]{.underline}

[OCR is involved in a range of efforts to increase the independence and
quality of life of persons with disabilities, including those with
long-term needs. OCR continues to support the President\'s New Freedom
Initiative and the Supreme Court\'s Olmstead decision in a variety of
ways.]{.underline}

[OCR provides expert consultant technical assistance to States as they
continue to develop comprehensive plans consistent with the requirements
of Olmstead. This decision found that unnecessary institutionalization
of individuals is a violation of the Americans with Disabilities Act,
and that under appropriate circumstances individuals have a right to
receive care in the \"most integrated\" setting that is appropriate for
them.]{.underline}

[OCR will continue its participation in the HHS New Freedom Initiative
Work Group, which serves as a forum to coordinate, develop, and
implement HHS disability policy and specific tasks and projects that
facilitate the community integration of people with disabilities. The
activities of OCR in this work group have included serving on a subgroup
to devise solutions to barriers to community integration posed by
inadequate housing and employment opportunities.]{.underline}

[Title VI (Race, Color, and National Origin) Access
Initiatives]{.underline}

[OCR ensures compliance with and enforcement of 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 have the effect of excluding
or limiting the participation of beneficiaries in their programs on the
basis of race, color, or national origin. In FY 2005, OCR will continue
to focus on a broad range of Title VI access issues including
disparities in access, quality, and availability of health services. For
example:]{.underline}

-   [OCR will focus technical assistance, public education, and
    awareness activities about civil rights issues in quality health
    care access by vulnerable rural populations such as person with
    disabilities, African-Americans, Native Americans, and national
    origin minorities in Southwestern, Midwestern, and Southern
    states.]{.underline}

[HIPAA - Health Information Privacy]{.underline}

[For the past three years OCR prepared for, then began implementing, a
new compliance, policy development, public education, outreach, and
technical assistance responsibility for protecting the privacy of health
information under HIPAA. OCR developed policy guidance, public
education, and technical assistance materials for health care providers,
health plans, and clearinghouses that maintain individuals\' health
information, as well as the public. The HIPAA Privacy Rule took effect
April 14, 2003. In FY 2005, the resources of OCR will
support:]{.underline}

-   [promoting compliance with the Privacy Rule by receiving,
    investigating and resolving complaints, and reviewing the compliance
    of covered entities;]{.underline}

-   [developing policy guidance and public education and technical
    assistance materials for covered entities and providing direct
    technical assistance to covered entities and the public;
    and]{.underline}

-   [analyzing and making recommendations with respect to any changes in
    the Privacy Rule to promote workability, and issuing additional
    guidance, as needed, to aid in implementation and to dispel
    misconceptions.]{.underline}

[Cross-Cutting Civil Rights Activities]{.underline}

[The work of OCR often addresses more than one of its legal authorities
simultaneously. For example, certain population groups may face multiple
barriers to services that cross-cut race, national origin, disability,
and age nondiscrimination authorities.]{.underline}

-   [In FY 2005, OCR will continue to work with the Administration for
    Children and Families, states, local governments, and other service
    providers to ensure that TANF welfare-to-work 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.]{.underline}

-   [OCR is making technical assistance available to all states and
    territories to ensure that the application processes for HHS-funded
    programs do not contain barriers to access for vulnerable
    populations and person with disabilities.]{.underline}

**[Office of Inspector General]{.underline}**

  ------------------------------------------------------------------------------------------------------------------------ ------------------------ ------------------------ ------------------------ ------------------------------------------------
                                                                                                                           **[2003]{.underline}**   **[2004]{.underline}**   **[2005]{.underline}**   **[ 2005 ]{.underline}[+/- 2004]{.underline}**
                                                                                                                                                                                                      
                                                                                                                                                                                                      
  [Program Level \\1\...\...\...\...\...\...\...\...\...\... ]{.underline}                                                 [\$197 ]{.underline}     [\$199 ]{.underline}     [\$200 ]{.underline}     [+\$1 ]{.underline}
                                                                                                                                                                                                      
                                                                                                                                                                                                      
                                                                                                                                                                                                      
  [FTE \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... ]{.underline}                                      [1,582 ]{.underline}     [1,549 ]{.underline}     [1,502 ]{.underline}     [-47 ]{.underline}
                                                                                                                                                                                                      
                                                                                                                                                                                                      
  [1/ The FY 2004 and FY 2005 levels assume \$160 million for Medicare and Medicaid related fraud and abuse]{.underline}                                                                              
                                                                                                                                                                                                      
  [ activities, the maximum allowed under the Health Care Fraud and Abuse Control program.]{.underline}                                                                                               
                                                                                                                                                                                                      
  ------------------------------------------------------------------------------------------------------------------------ ------------------------ ------------------------ ------------------------ ------------------------------------------------

[For FY 2005, the Office of Inspector General (OIG) requests a
discretionary appropriation of \$40 million, an increase of \$1 million
over the FY 2004 discretionary level. OIG will also receive between
\$150 and \$160 million in FY 2005 from the Health Care Fraud and Abuse
Control (HCFAC) Account for Medicare and Medicaid related fraud and
abuse activities. In the FY 2004 - FY 2005 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.]{.underline}

[The funding level of OIG for FY 2005 allows OIG to continue its efforts
in:]{.underline}

-   [bioterrorism oversight, investigations, audits, and
    evaluations;]{.underline}

-   [grant oversight and reviews that cover internal controls,
    accounting controls, performance measurements, and program
    evaluation; and]{.underline}

-   [nationwide involvement with the ten Project Save Our Children
    (PSOC) Task Forces that identify, investigate, and prosecute
    individuals who willfully avoid the payment of their child support
    obligations.]{.underline}

[In addition to this, OIG will continue its HCFAC activities to identify
and prosecute health care fraud, prevent future fraud or abuse, protect
HHS program beneficiaries, and ensure the solvency of the Medicare Trust
Fund.]{.underline}

[Bioterrorism]{.underline}

[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 2005, OIG has a variety of activities planned. For
example:]{.underline}

-   [Bioterrorism Investigations: after September 11, 2001, OIG received
    numerous requests for information and investigations relating to
    terrorist and bioterrorist activity. On December 12, 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.]{.underline}

-   [Follow-up on Departmental Laboratory Security: OIG will perform
    selected follow-up reviews at the National Institutes of Health
    (NIH), Centers for Disease Control and Prevention (CDC), and Food
    and Drug Administration (FDA) laboratories, focusing on whether
    these facilities have implemented the recommendations of OIG for
    bolstering physical security and determining if additional
    safeguards are necessary.]{.underline}

[Grants Oversight]{.underline}

[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.]{.underline}

[OIG anticipates conducting grant oversight activities that touch almost
every Operating Division within HHS in the FY 2004 - FY 2005 period
(NIH, CDC, the Health Resources and Services Administration, the
Substance Abuse and Mental Health Services Administration, the
Administration for Children and Families, and programs such as breast
and cervical cancer detection, the Ryan White Care Act, and Head
Start).]{.underline}

[Child Support Enforcement Program]{.underline}

[OIG will continue its coverage of all 50 States 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, U.S. Marshals Service personnel,
the Federal Bureau of Investigation, State and county child support
personnel, and all other interested parties. From 1998 to December 31,
2003, OIG opened 2,310 child support cases nationwide resulting in 815
Federal convictions and court-ordered restitution of \$37.5 million. The
task forces have resulted in an additional 293 convictions at the State
level and \$12.4 million in restitution.]{.underline}

[Health Care Fraud and Abuse]{.underline}

[Through the Health Insurance Portability and Accountability Act
(HIPAA), OIG receives mandatory funding for its activities that focus on
fraud, 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.]{.underline}

**[Program Support Center]{.underline}**

+-------------+-------------+-------------+-------------+-------------+
|             | \           | \           | \           | *           |
|             | **[2003]{.u | **[2004]{.u | **[2005]{.u | *[2005]{.un |
|             | nderline}** | nderline}** | nderline}** | derline}**\ |
|             |             |             |             | **[         |
|             |             |             |             | +/-2004]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Expenses\  | [\$491      | [\$517      | [\$545      | [+\$28      |
| ...\...\... | ]{          | ]{          | ]{          | ]{          |
| \...\...\.. | .underline} | .underline} | .underline} | .underline} |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [FT         | [1,289      | [1,419      | [1,419      | [ 0         |
| E\...\...\. | ]{          | ]{          | ]{          | ]{          |
| ..\...\...\ | .underline} | .underline} | .underline} | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

[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 at least 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, Housing and Urban Development, Interior, Justice,
Labor, State, Transportation, Treasury, Veterans Affairs, and the U.S.
Postal Service.]{.underline}

[Human Resources Service]{.underline}

[The FY 2005 estimated expenses for the Human Resources Service (HRS)
are \$53 million, representing an increase of \$1 million above the FY
2004 funding level. The increase of \$1 million is for increases in pay,
rent, and contractual costs. HRS provides an extensive array of
personnel and payroll systems administration and management, training,
and payroll services. These include automated personnel and payroll
systems support, equal employment opportunity, and workforce
development. During FY 2004, the personnel operations portion of HRS was
consolidated into the Human Resources Centers, described in a separate
section entitled \"Human Resources Centers\" below.]{.underline}

[Financial Management Service]{.underline}

[The FY 2005 estimated expenses for the Financial Management Service
(FMS) are \$56 million, the same as FY 2004. FMS supports the financial
operations of HHS and other departments through the provision of payment
management services for Departmental and other Federal grant and program
activities; accounting and fiscal services; debt management 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.]{.underline}

[Administrative Operations Service]{.underline}

[The FY 2005 estimated expenses for the Administrative Operations
Service (AOS) are \$90 million, an increase of \$2 million above the FY
2004 level. This increase reflects anticipated increases for pay, rent,
and contracts. 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, management of regional contracts for
administrative support, freedom of information act services, and
management of the business functions of the PSC.]{.underline}

[Federal Occupational Health Service]{.underline}

[The FY 2005 estimated expenses for the Federal Occupational Health
Service (FOHS) are \$195 million, an increase of \$22 million above the
FY 2004 level. The increase of \$22 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 160 Federal components across the
country.]{.underline}

[Strategic Acquisition Service]{.underline}

[The FY 2005 estimated expenses for the Strategic Acquisition Service
(SAS) are \$99 million, an increase of \$2 million above the FY 2004
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.]{.underline}

[Human Resources Centers]{.underline}

[The FY 2005 estimated expenses for the Human Resources Center (HRC) are
\$46 million, an increase of \$1 million above the FY 2005 level. The
increase is for pay and other costs. The HR Centers represent a
consolidation of human resources services within the Department, with
sites located in Rockville, Baltimore, and Atlanta. The HR Centers will
implement strategic human capital strategies designed to identify,
recruit, hire, and retain employees with the skills to accomplish the
mission of HHS.]{.underline}

**[Retirement Pay and Medical Benefits for Commissioned
Officers]{.underline}**

+-------------+-------------+-------------+-------------+-------------+
|             | \           | \           | \           | *           |
|             | **[2003]{.u | **[2004]{.u | **[2005]{.u | *[2005]{.un |
|             | nderline}** | nderline}** | nderline}** | derline}**\ |
|             |             |             |             | **[         |
|             |             |             |             | +/-2004]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Retirement | [\$214      | [\$228      | [\$241      | [+\$13      |
| Payment     | ]{          | ]{          | ]{          | ]{          |
| s\...\...\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [           | [13         | [14         | [15         | [+\$1       |
| Survivor\'s | ]{          | ]{          | ]{          | ]{          |
| B           | .underline} | .underline} | .underline} | .underline} |
| enefits\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Medical    | [64         | [80         | [75         | [-\$5       |
| Care\...    | ]{          | ]{          | ]{          | ]{          |
| \...\...\.. | .underline} | .underline} | .underline} | .underline} |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ]{          |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **[Total,   | **[\$291    | **[\$322    | **[\$331    | **[\$9      |
| Budget      | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| Authori     | nderline}** | nderline}** | nderline}** | nderline}** |
| ty\...\...\ |             |             |             |             |
| ...\...]{.u |             |             |             |             |
| nderline}** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

[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 retirees of the PHS
Commissioned Corps.]{.underline}

[The FY 2005 request of \$331 million is a net increase of \$9 million
over the FY 2004 level. This amount reflects increased retirement
payments of \$13 million, increased survivor benefits of \$1 million,
and increased medical benefits costs of \$5 million.]{.underline}