Department of Health and Human Services

HHS Annual Performance Plan

FY 2005

Justification of Estimates for Appropriations Committees

**Message from the Acting Assistant Secretary for Budget, Technology and
Finance**

I am pleased to present the Department of Health and Human Services
(HHS) Annual Performance Plan for fiscal year (FY) 2005. Our mission is
to enhance the health and well-being of Americans by providing effective
health and human services and by fostering strong, sustained advances in
the sciences underlying medicine, public health, and social services.
The Department executes this mission by managing more than 120
performance program areas with over 600 performance measures.
Agency-specific highlights in the Annual Performance Plan include:

-   The Health Resources and Services Administration Health Center
    program, a Presidential initiative to increase health care access
    for those uninsured and underserved Americans who are most in need
    of access to health care services;

-   The National Institutes of Health \"HapMap\" project, which will
    identify patterns of human genetic variations and increase
    understanding of the role of genetic factors contributing to health
    and disease;

-   The Administration for Children and Families Child Support
    Enforcement program, which seeks to assure that assistance in
    obtaining support is available to children, and is an integral part
    of the Department\'s effort to increase parental responsibility; and

-   The Indian Health Service Special Diabetes Program for Indians, that
    has a mission to develop, document, and sustain a public health
    effort to prevent and control diabetes in American Indian and
    Alaskan Native people.

These are just a few examples of the programs in which the Department is
working to achieve its strategic and performance goals. Additional
detail about particular agencies can be found in the individual
Operating Division Annual Performance Plans.

The FY 2005 HHS Annual Performance Plan integrates budget and
performance information and demonstrates how we are building a permanent
capability for ensuring that budget decisions are informed by program
results.

Sincerely,

Kerry Weems

February 2, 2004

**Table of Contents**

Message from the Acting Assistant Secretary for Budget, Technology, and
Finance 2

Overview

FY 2005 HHS Budget by Strategic Goals 4

Highlighted Performance Measures in FY 2005 Annual Performance Plan 8

**Strategic Goal 1**: Reduce the Major Threats to the Health and
Well-Being of Americans 13

National Immunization Program 14

HIV/AIDS Prevention in the U.S. 19

Substance Abuse Prevention and Treatment Block Grant 23

**Strategic Goal 2**: Enhance the Ability of the Nation\'s Health Care
System to Effectively Respond to Bioterrorism and Other Public Health
Challenges 26

Terrorism Preparedness and Emergency Response Program 27

Terrorism and Emergency Response Program: The Strategic National
Stockpile 31

Bioterrorism Hospital Preparedness Program 34

Foods Program 38

**Strategic Goal 3**: Increase the Percentage of the Nation\'s Children
and Adults Who Have Access to Health Care Services, and Expand Consumer
Choices 42

Medicare 43

Medicaid and State Children's Health Insurance Program 47

Health Center Program 50

IHS National Diabetes Program 53

**Strategic Goal 4**: Enhance the Capacity and Productivity of the
Nation\'s Health Science Research Enterprise 57

Map of Genetic Variation Across All Human Chromosomes 58

**Strategic Goal 5**: Improve the Quality of Health Care Services 62

Medical Devices & Radiological Health 63

**Strategic Goal 6**: Improve the Economic and Social WellBeing of
Individuals, Families, and Communities, Especially Those Most in Need 66

Temporary Assistance for Needy Families 67

Community Based Services Program 69

**Strategic Goal 7**: Improve the Stability and Healthy Development of
Our Nation\'s Children and Youth 73

Child Support Enforcement 74

Child Welfare 77

**Strategic Goal 8**: Achieve Excellence in Management Practices 81

Medicare Integrity Program 83

Office of Inspector General 86

**Overview**

The Department of Health and Human Services FY 2005 Annual Performance
Plan presents an illustrative group of key programs in which the
Department is working to fulfill its mission:

To enhance the health and well-being of Americans by providing for
effective health and human services, and by fostering sound, sustained
advances in the sciences underlying medicine, public, health, and social
services.

The Annual Performance Plan meets the reporting requirements of the
Government Performance and Results Act (GPRA) and supports the
President\'s Management Agenda initiative for Budget and Performance
Integration. The Annual Performance Plan, with its companion documents,
the FY 2005 Budget in Brief, and the Department Strategic Plan FY
2004-2009, presents an integrated picture of the Department\'s planned
efforts in FY 2005 to achieve its long-term strategic and performance
goals. The Strategic Plan describes the Department\'s goals for the FY
2004 through FY 2008 period; the Annual Performance Plan highlights
performance measures and targets specific to FY 2005.

The Annual Performance Plan presents 19 key programs covering all 8
Department Strategic Goals. The programs represent the breadth of
activities the Department is carrying out, in partnership with States,
localities, and the private sector, to meet the health and human service
needs of Americans. The Annual Performance Plan describes for each
program:

-   The program\'s background, context, and purpose;

-   Performance planning, including the primary or long-term goal of the
    program and one or two illustrative performance measures for FY
    2005;

-   Means and strategies to achieve performance goals; such as research,
    technical assistance, and the use of performance-based awards to
    program partners;

-   FY 2005 budget and policy priorities which support program
    performance;

-   How information from PART (Program Assessment and Rating Tool)
    Reviews has been used to justify funding requests, direct program
    improvements, develop legislative proposals, and guide management
    actions where appropriate; and

-   External factors affecting program performance.

Each HHS illustrative program includes the FY 2005 budget request amount
and the FY 2005 full cost request amount. The full cost request reflects
the Department's estimate of the full cost of a program including
overhead and other indirect costs, as part of the President's Management
Agenda budget and performance integration initiative.

The illustrative programs and performance goals in the FY 2005 Annual
Performance Plan, several related FY 2005 budget initiatives, and the
Department Strategic Goals they support, include:

*[Strategic Goal 1 - Reduce the major threats to the health and
well-being of Americans:]{.underline}*

-   The Centers for Disease Control and Prevention (CDC) will continue
    its efforts to prevent HIV infections through strengthening capacity
    nationwide to develop and implement effective prevention strategies;
    and to prevent diseases through increased childhood immunization.

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-   The Substance Abuse and Mental Health Services Administration will
    continue the President\'s commitment to reduce current illicit drug
    use. Two fundamental components of this initiative are the Substance
    Abuse Prevention and Treatment Block Grant - accounting for at least
    40 percent of all public financing for drug abuse prevention and
    treatment services - and the new Access to Recovery State Voucher
    program - that gives individuals the ability to choose effective
    treatment providers, including those that are faith-based.

*[Strategic Goal 2 - Enhance the ability of the Nation\'s health care
system to effectively respond to terrorism and other public health
challenges:]{.underline}*

-   CDC will continue its work to ensure that 100 percent of State
    public health agencies are prepared to use material in the Strategic
    National Stockpile and to annually exercise plans that demonstrate
    their capacity to respond to emergencies.

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-   CDC, through its Terrorism Preparedness and Emergency Response
    Program, will continue to work with State, local, and territorial
    public health departments to develop public health infrastructure,
    capacity and plans to respond to events of terror.

-   FDA will build upon its recent increase in the number of field
    examinations of imported food products, expand the laboratory
    capacity of State partners, and work to find faster and better
    detection methods.

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-   CDC and the Food and Drug Administration also will support the
    government-wide biosurveillance effort to develop new tools and
    procedures designed to provide the earliest possible detection of
    potential disease outbreaks or releases of deadly pathogens into
    food, water, or the environment.

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-   The Health Resources and Services Administration (HRSA) will seek to
    ensure that 100 percent of the Bioterrorism Hospital Preparedness
    Program awardees, including all 50 States, develop regional plans to
    address surge (a large and rapid increase in the number of persons
    requiring care) capacity.

*[Strategic Goal 3 - Increase the percentage of the Nation\'s children
and adults who have access to health care services, and expand consumer
choices:]{.underline}*

-   The President signed into law, on December 8, 2003, the Medicare
    Prescription Drug, Improvement, and Modernization Act (MMA), which
    provides enhanced coverage for the lowest income beneficiaries and
    an immediate prescription drug discount card for all beneficiaries
    until the full plan is available nationwide. To begin implementing
    this ground-breaking new legislation, the Centers for Medicare &
    Medicaid Services (CMS) will establish program regulations and a
    major initiative to educate health care providers and consumers.

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-   CMS, in partnership with the States, will maintain the number of
    uninsured and underserved children who enroll in Medicaid and the
    State Children\'s Health Insurance Program (SCHIP). CMS will assess
    health care quality for low-income children enrolled in Medicaid and
    SCHIP against a core set of performance measures developed with the
    States and establish formal collaborations to make improvements.

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-   HRSA will continue to expand access to health care services through
    the President\'s Health Center Initiative. Through this program, 15
    million individuals will receive health care services---40 percent
    of whom have no insurance coverage. By FY 2006, HRSA will have
    expanded access to 6.1 million individuals through over 1,200 new
    and expanded sites.

-   The Indian Health Service, through prevention and control activities
    including direct care and developing and sharing models of diabetes
    control, will seek to maintain the proportion of Indian, Tribal, and
    Urban (I/T/U) facilities Native American patients with diagnosed
    diabetes that have demonstrated improved glycemic control (blood
    sugar levels). This is an ambitious goal given that the number of
    diabetics that receive services through the I/T/U network is
    increasing three to four percent annually.

*[Strategic Goal 4 - Enhance the capacity and productivity of the
Nation\'s health science research enterprise:]{.underline}*

-   The National Institutes of Health (NIH) will continue its progress
    implementing the HapMap Project, which will contribute to research
    identifying the role of genetic factors contributing to underlying
    common diseases. In FY 2005, NIH has set the goal of developing a
    first-pass draft haplotype map, which will pinpoint, for the first
    time, genetic variations among individuals across all human
    chromosomes. The long-term benefits of the HapMap are increased
    understanding of the influence of genetics on health and disease and
    interventions that can be made more precise, predictable, and
    effective.

-   NIH will develop two new animal models to use in research on at
    least one agent of bioterror. This effort will increase the capacity
    of NIH and the extramural scientific community to evaluate products
    for biodefense, and aid in the development and testing of the
    growing number of promising biodefense therapies and vaccines.

*[Strategic Goal 5 - Improve the quality of health care
services:]{.underline}*

-   FDA will expand the network of facilities in the Medical Product
    Surveillance System (MedSun), a postmarket reporting system through
    which FDA receives reports of serious adverse events associated with
    medical devices. When fully implemented, MedSun will reduce
    device-related medical errors.

*[Strategic Goal 6 - Improve the economic and social well-being of
individuals, families, and communities, especially those most in
need:]{.underline}*

-   The Administration for Children and Families (ACF) will continue to
    provide leadership to States, Territories, and Tribes as they move
    families from welfare to work and self-sufficiency in their
    Temporary Assistance for Needy Families (TANF) programs. The
    President\'s FY 2003 TANF Reauthorization proposal refocuses
    financial incentives to program partners to provide performance
    bonuses based on achieving recipient employment goal, and supports
    initiatives that emphasize healthy marriages and child well-being..

-   The Administration on Aging is committed to work with its State and
    local partners to ensure that comprehensive social and supportive
    services are available to vulnerable elderly residents of rural
    areas.

*[Strategic Goal 7 - Improve the stability and healthy development of
our Nation\'s children and youth:]{.underline}*

-   ACF plans to continue to work with the States to increase the child
    support collection rate. ACF will provide performance-based
    incentive funding to States for current support collection, as well
    as paternity establishment, past-due cases payment, and
    cost-effectiveness.

-   In the area of child welfare, ACF has set an ambitious FY 2005 goal
    of finalizing 62,000 adoptions toward an overall goal of finalizing
    327,000 adoptions between 2003 and 2008. ACF will continue to
    monitor the overall performance of child welfare programs through
    Child and Family Services reviews, which focus on outcomes for
    children and families in the areas of safety, permanency, and child
    and family well-being. The FY 2004 President\'s Budget proposes the
    Child Welfare Program Option, which will provide flexible grants to
    States as an incentive to create innovative child welfare programs.

*[Strategic Goal 8 - Achieve excellence in management
practices:]{.underline}*

-   CMS will continue its focus on maintaining program integrity in the
    Medicare program, to ensure that it pays the right amount to
    legitimate providers for covered, reasonable and necessary services
    to eligible beneficiaries. CMS sets ambitious annual program
    integrity targets, including reducing the percentage of improper
    payments made under the Medicare fee-for-service program, as well as
    reducing the contractor error rate and improving the provider
    compliance error rate.

-   The Department\'s Office of the Inspector General (OIG) fights
    fraud, waste and abuse, and recommends policies to promote economy,
    efficiency, and effectiveness in HHS programs. Approximately 80
    percent of OIG resources are devoted to Medicare and Medicaid; the
    remaining 20 percent is dedicated to all other HHS programs. OIG
    estimates that for FY 2003, it achieved \$23 billion in savings
    resulting from implementation of its recommendations and recoveries
    or receivables from investigations and audits. This is a return on
    investment (ROI) of 117 (savings/operating costs). For FY 2005, OIG
    has set an ambitious target of increasing ROI to more than 150.

For additional information on these and other FY 2005 programs and
budget initiatives, see the HHS FY 2005 Budget in Brief, and individual
Operating Division Congressional Justifications and Annual Performance
Plans.

Following are:

-   A table which displays the Department\'s FY 2005 total discretionary
    budget request, organized by Department Strategic Goal\*; i.e., the
    total Department discretionary budget for program activities that
    support achievement of that Strategic Goal; and

-   A summary table of the 19 representative programs and 22 highlighted
    performance measures in this report.

The table below displays the Department\'s FY 2005 discretionary budget
request, organized by Strategic Goal. It was developed by associating
HHS programs, projects, and activities with each of the eight HHS
Strategic Goals. The total of these goals equals the Department\'s FY
2005 discretionary budget request.

+----------------------+----------------------+----------------------+
|                      | ####                 | **Total Goal         |
|                      | ##### Strategic Goal | Budget**             |
+----------------------+----------------------+----------------------+
|                      |                      |                      |
+----------------------+----------------------+----------------------+
| **Goal 1**           | Reduce the major     | \$6,669              |
|                      | threats to the       |                      |
|                      | health and           |                      |
|                      | well-being of        |                      |
|                      | Americans.           |                      |
+----------------------+----------------------+----------------------+
|                      |                      |                      |
+----------------------+----------------------+----------------------+
| **Goal 2**           | Enhance the ability  | \$3,377              |
|                      | of the Nation's      |                      |
|                      | health care system   |                      |
|                      | to effectively       |                      |
|                      | respond to           |                      |
|                      | bioterrorism and     |                      |
|                      | other public health  |                      |
|                      | challenges.          |                      |
+----------------------+----------------------+----------------------+
| **Goal 3**           | Increase the         | \$12,726             |
|                      | percentage of the    |                      |
|                      | Nation's children    |                      |
|                      | and adults who have  |                      |
|                      | access to health     |                      |
|                      | care services, and   |                      |
|                      | expand consumer      |                      |
|                      | choices.             |                      |
+----------------------+----------------------+----------------------+
| **Goal 4**           | Enhance the capacity | \$28,726             |
|                      | and productivity of  |                      |
|                      | the Nation's health  |                      |
|                      | science research     |                      |
|                      | enterprise.          |                      |
+----------------------+----------------------+----------------------+
| **Goal 5**           | Improve the quality  | \$222                |
|                      | of health care       |                      |
|                      | services.            |                      |
+----------------------+----------------------+----------------------+
| **Goal 6**           | Improve the economic | \$4,719              |
|                      | and social           |                      |
|                      | well-being of        |                      |
|                      | individuals,         |                      |
|                      | families, and        |                      |
|                      | communities,         |                      |
|                      | especially those     |                      |
|                      | most in need.        |                      |
+----------------------+----------------------+----------------------+
| **Goal 7**           | Improve the          | \$10,333             |
|                      | stability and        |                      |
|                      | healthy development  |                      |
|                      | of our Nation's      |                      |
|                      | children and youth.  |                      |
+----------------------+----------------------+----------------------+
|                      |                      |                      |
+----------------------+----------------------+----------------------+
| **Goal 8**           | Achieve excellence   | \$787                |
|                      | in management        |                      |
|                      | practices.           |                      |
+----------------------+----------------------+----------------------+
|                      | ## Tota              | ## \$67,558          |
|                      | l FY 2005 Discretion |                      |
|                      | ary Budget Request\* |                      |
+----------------------+----------------------+----------------------+
|                      |                      |                      |
+----------------------+----------------------+----------------------+
| \* This total        |                      |                      |
| reflects the HHS     |                      |                      |
| current law budget   |                      |                      |
| authority            |                      |                      |
+----------------------+----------------------+----------------------+
|                      |                      |                      |
+----------------------+----------------------+----------------------+

Highlighted Performance Measures in FY 2005 Annual Performance Plan

+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Strategic    |                |                |                |
| Goal 1: Reduce |                |                |                |
| the major      |                |                |                |
| threats to the |                |                |                |
| health and     |                |                |                |
| well-being of  |                |                |                |
| Americans**    |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Performance  | **Agency**\    | **Most Recent  | **PART**\      |
| Measure and**\ | **Program**    | Results**      | **Review**     |
| **FY 2005      |                |                |                |
| Targets**      |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Achieve or     | CDC            | # FY 02 t      | 2004           |
| sustain        |                | arget: 90% for |                |
| immunization   | National       |  all vaccines; |                |
| coverage of at | Immunization   |                |                |
| least 90       | Program        | #              |                |
| percent in     |                |  FY 02 results |                |
| children ages  |                | : DTap 95%; Hi |                |
| 19- to         |                | b 93%; MMR 91% |                |
| 35-months of   |                | ; Hepatitis 90 |                |
| age for 3      |                | %; Polio 90%;  |                |
| doses DtaP     |                | Varicella 81%. |                |
| vaccine,       |                |                |                |
| 3 doses Hib    |                |                |                |
| vaccine, 1     |                |                |                |
| dose MMR       |                |                |                |
| vaccine, 3     |                |                |                |
| doses          |                |                |                |
| hepatitis B    |                |                |                |
| vaccine, 3     |                |                |                |
| doses polio    |                |                |                |
| vaccine,       |                |                |                |
| 1 dose         |                |                |                |
| varicella      |                |                |                |
| vaccine, and   |                |                |                |
| 4 doses        |                |                |                |
| pneumococcal   |                |                |                |
| conjugate      |                |                |                |
| vaccine.       |                |                |                |
+----------------+----------------+----------------+----------------+
| Reduce the     | CDC            | FY 02: 2,926   | 2004           |
| number of new  |                | reported cases |                |
| HIV infections | HIV/AIDS       | (from 30       |                |
| among people   | Prevention in  | areas); 2000   |                |
| less than 25   | the U.S.       | baseline:      |                |
| years of age   |                | 2,100 cases    |                |
| from 2,100 in  |                | (from 25       |                |
| 2000 to 1,600  |                | areas). CDC    |                |
| in 2010. FY    |                | will continue  |                |
| 2005 target:   |                | to revise      |                |
| 1,800.         |                | baseline and   |                |
|                |                | targets when   |                |
| Decrease the   |                | data from more |                |
| number of      |                | States are     |                |
| perinatally    |                | available.     |                |
| acquired AIDS  |                |                |                |
| cases from the |                | 1998 baseline: |                |
| 1998 baseline  |                | 235 cases;     |                |
| of 235 cases.  |                |                |                |
|                |                | FY 02 target:  |                |
|                |                | 141 cases;     |                |
|                |                |                |                |
|                |                | FY 02 results: |                |
|                |                | 90 cases.      |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Increase the   | SAMHSA         | FY 01 target:  | 2005           |
| number of      |                | 1.64 million;  |                |
| clients        | Substance      |                |                |
| served. FY     | Abuse          | FY 01 results: |                |
| 2005 target:\  | Prevention and | 1.74 million.  |                |
| 1.96 million.  | Treatment      |                |                |
|                | Block Grant    |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Strategic    |                |                |                |
| Goal 2:        |                |                |                |
| Enhance the    |                |                |                |
| ability of the |                |                |                |
| Nation's       |                |                |                |
| health care    |                |                |                |
| system to      |                |                |                |
| effectively    |                |                |                |
| respond to     |                |                |                |
| bioterrorism   |                |                |                |
| and other      |                |                |                |
| public health  |                |                |                |
| challenges**   |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Performance  | **Agency**\    | **Most Recent  | **PARTReview** |
| Measure and**\ | **Program**    | Results**      |                |
| **FY 2005      |                |                |                |
| Targets**      |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| 100 percent of | CDC            | New measure    | 2005           |
| State public   |                | for FY 2005.   |                |
| health         | Terrorism      |                |                |
| agencies       | Preparedness   |                |                |
| improve their  | and Emergency  |                |                |
| capacity to    | Response       |                |                |
| respond to     | Program        |                |                |
| exposure to    |                |                |                |
| chemicals of   |                |                |                |
| category A     |                |                |                |
| agents by      |                |                |                |
| annually       |                |                |                |
| exercising     |                |                |                |
| scalable plans |                |                |                |
| and            |                |                |                |
| implementing   |                |                |                |
| corrective     |                |                |                |
| action plans   |                |                |                |
| to minimize    |                |                |                |
| any gaps       |                |                |                |
| identified.    |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| 100 percent of | CDC            | New measure    | N/A            |
| State public   |                | for FY 2005.   |                |
| health         | The Strategic  |                |                |
| agencies are   | National       |                |                |
| prepared to    | Stockpile      |                |                |
| use material   |                |                |                |
| contained in   |                |                |                |
| the Strategic  |                |                |                |
| National       |                |                |                |
| Stockpile as   |                |                |                |
| demonstrated   |                |                |                |
| by the         |                |                |                |
| evaluation of  |                |                |                |
| standard       |                |                |                |
| functions as   |                |                |                |
| determined by  |                |                |                |
| CDC.           |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Increase the   | HRSA           | FY 03 baseline | 2005           |
| percent of     |                | estimate: 59%. |                |
| awardees that  | Bioterrorism   |                |                |
| have developed | Hospital       |                |                |
| plans to       | Preparedness   |                |                |
| address surge  | Program        |                |                |
| capacity to    |                |                |                |
| 100 percent.   |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Perform 97,000 | FDA            | FY 03 target:  | 2005           |
| physical exams |                | 48,000;        |                |
| and conduct    | Foods Program  |                |                |
| sample         |                | FY 03 results: |                |
| analyses on    |                | 78,000.        |                |
| products with  |                |                |                |
| suspect        |                |                |                |
| histories.     |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Strategic    |                |                |                |
| Goal 3:        |                |                |                |
| Increase the   |                |                |                |
| percentage of  |                |                |                |
| the Nation's   |                |                |                |
| children and   |                |                |                |
| adults who     |                |                |                |
| have access to |                |                |                |
| health care    |                |                |                |
| services, and  |                |                |                |
| expand         |                |                |                |
| consumer       |                |                |                |
| choices**      |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Performance  | **Agency**\    | **Most Recent  | **PARTReview** |
| Measure and**\ | **Program**    | Results**      |                |
| **FY 2005      |                |                |                |
| Targets**      |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Improve        | CMS            | Indicators for | 2005           |
| satisfaction   |                | beneficiary    |                |
| of Medicare    | Medicare       | satisfaction:  |                |
| beneficiaries  |                | percentage     |                |
| with the       |                | reporting      |                |
| health care    |                | getting needed |                |
| services they  |                | care;          |                |
| receive        |                | percentage     |                |
| (Managed Care, |                | reporting      |                |
| Fee            |                | having access  |                |
| -For-Service). |                | to specialist. |                |
|                |                |                |                |
|                |                | Managed Care:  |                |
|                |                | FY 2002        |                |
|                |                | targets: 93%;  |                |
|                |                | 86%. FY 2002   |                |
|                |                | results:       |                |
|                |                | targets met.   |                |
|                |                |                |                |
|                |                | Fe             |                |
|                |                | e-for-Service: |                |
|                |                | FY 2002        |                |
|                |                | targets: 95%;  |                |
|                |                | 85%. FY 2002   |                |
|                |                | results:       |                |
|                |                | targets met.   |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Increase the   | CMS            | FY 99          | 2004           |
| number of      |                | baseline: 21.9 |                |
| children       | Medicaid and   | million.       |                |
| enrolled in    | State          |                |                |
| regular        | Children's     | FY 2002        |                |
| Medicaid and   | Health         | target:        |                |
| SCHIP. FY 2005 | Insurance      | additional 1   |                |
| target:        | Program        | million        |                |
| maintain FY    |                | children       |                |
| 2004           |                | enrolled over  |                |
| enrollment     |                | FY 2001;       |                |
| levels.        |                |                |                |
|                |                | FY 2002        |                |
| Improve health |                | results: 2.75  |                |
| care quality   |                | million more   |                |
| across         |                | children       |                |
| Medicaid and   |                | enrolled.      |                |
| SCHIP.         |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| In FY 2005     | HRSA           | FY 03 target:  | 2004           |
| broaden access |                | 180 sites;     |                |
| to health care | Health Center  |                |                |
| services for   | Program        | FY 03 results: |                |
| the uninsured  |                | 188 sites.     |                |
| and            |                |                |                |
| underserved by |                | FY 02 target:  |                |
| funding 332*   |                | 11.7 million;  |                |
| *new and       |                |                |                |
| expanded       |                | FY 02 results: |                |
| health center  |                | 11.3 million.  |                |
| sites and      |                |                |                |
| increasing to  |                | FY 02 target:  |                |
| 14.8 million   |                | 65% (7.6       |                |
| the number of  |                | million);      |                |
| uninsured and  |                |                |                |
| underserved    |                | FY 02 results: |                |
| persons served |                | 64% (7.2       |                |
| by Health      |                | million).      |                |
| Centers.       |                |                |                |
|                |                |                |                |
| Continue to    |                |                |                |
| assure access  |                |                |                |
| to preventive  |                |                |                |
| and primary    |                |                |                |
| care for       |                |                |                |
| racial/ethnic  |                |                |                |
| minority       |                |                |                |
| individuals by |                |                |                |
| serving 9.6    |                |                |                |
| million        |                |                |                |
| racial/ethnic  |                |                |                |
| minority       |                |                |                |
| persons in     |                |                |                |
| 2005 (65       |                |                |                |
| percent of     |                |                |                |
| total patients |                |                |                |
| served by      |                |                |                |
| Health         |                |                |                |
| Centers).      |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Maintain the   | IHS            | FY 02 target:  | 2004           |
| proportion of  |                | Improve from   |                |
| India          | IHS National   | FY 01.         |                |
| n/Tribal/Urban | Diabetes       |                |                |
| Native         | Program        | FY 01 results: |                |
| American       |                | 29%;           |                |
| patients with  |                |                |                |
| diagnosed      |                | FY 02 results: |                |
| diabetes that  |                | 30%.           |                |
| have           |                |                |                |
| demonstrated   |                |                |                |
| improved       |                |                |                |
| glycemic       |                |                |                |
| control (blood |                |                |                |
| sugar levels). |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Strategic    |                |                |                |
| Goal 4:        |                |                |                |
| Enhance the    |                |                |                |
| capacity and   |                |                |                |
| productivity   |                |                |                |
| of the         |                |                |                |
| Nation's       |                |                |                |
| health science |                |                |                |
| research       |                |                |                |
| enterprise **  |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Performance  | **Agency**\    | **Most Recent  | **PARTReview** |
| Measure and**\ | **Program**    | Results**      |                |
| **FY 2005      |                |                |                |
| Targets**      |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Develop a      | NIH            | FY             | N/A            |
| first-pass     |                | 2005-specific  |                |
| draft          | Map of Genetic | project        |                |
| haplotype map  | Variation      | milestone.     |                |
| containing\    | Across All     |                |                |
| 600,000 SNPs.  | Human          |                |                |
|                | Chromosomes    |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Strategic    |                |                |                |
| Goal 5:        |                |                |                |
| Improve the    |                |                |                |
| quality of     |                |                |                |
| health care    |                |                |                |
| services**     |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Expand         | FDA            | FY 2003        | 2004           |
| implementation |                | target: 180    |                |
| of the MedSun  | Medical        | facilities;    |                |
| System to a    | Devices and    |                |                |
| network of 250 | Radiological   | FY 2003        |                |
| facilities.    | Health         | results: 206   |                |
|                |                | facilities.    |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Strategic    |                |                |                |
| Goal 6:        |                |                |                |
| Improve the    |                |                |                |
| economic and   |                |                |                |
| social         |                |                |                |
| well-being of  |                |                |                |
| individuals,   |                |                |                |
| families, and  |                |                |                |
| communities,   |                |                |                |
| especially     |                |                |                |
| those most in  |                |                |                |
| need**         |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Increase       | ACF            | FY 2002        | N/A            |
| percentage of  |                | target: 65%;   |                |
| those employed | Temporary      |                |                |
| in a quarter   | Assistance for | FY 2002        |                |
| that are still | Needy Families | results: 59%.  |                |
| employed one   |                |                |                |
| and two        |                |                |                |
| quarters       |                |                |                |
| later. FY 2005 |                |                |                |
| target: 67     |                |                |                |
| percent.       |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Increase the   | AoA            | FY 2002        | 2004           |
| percentage of  |                | target: 25%;   |                |
| AoA clients    | Community      |                |                |
| who reside in  | Based Services | FY 2002        |                |
| rural areas to | Program        | results: 29%.  |                |
| 34 percent.    |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Strategic    |                |                |                |
| Goal 7:        |                |                |                |
| Improve the    |                |                |                |
| stability and  |                |                |                |
| healthy        |                |                |                |
| development of |                |                |                |
| our Nation's   |                |                |                |
| children and   |                |                |                |
| youth**        |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Performance  | **Agency**\    | **Most Recent  | **PART**\      |
| Measure and**\ | **Program**    | Results**      | **Review**     |
| **FY 2005      |                |                |                |
| Targets**      |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Increase the   | ACF            | FY 2002        | 2005           |
| Title IV-D     |                | target: 55%;   |                |
| collection     | Child Support  |                |                |
| rate           | Enforcement    | FY 2002        |                |
| (collections   |                | results: 58%.  |                |
| on current     |                |                |                |
| s              |                |                |                |
| upport/current |                |                |                |
| support owed)  |                |                |                |
| to 61 percent. |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Increase the   | ACF            | FY 2002        | 2004           |
| number of      |                | target:        |                |
| adoptions      | Child Welfare  | 55,000;        |                |
| toward         |                |                |                |
| achieving the  |                | FY 2002        |                |
| goal of        |                | results:       |                |
| finalizing     |                | 51,000.        |                |
| 327,000        |                |                |                |
| adoptions      |                |                |                |
| between FY     |                |                |                |
| 2003 - FY      |                |                |                |
| 2008.          |                |                |                |
|                |                |                |                |
| FY 2005        |                |                |                |
| target:        |                |                |                |
| 62,000.        |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| **Strategic    |                |                |                |
| Goal 8:        |                |                |                |
| Achieve        |                |                |                |
| excellence in  |                |                |                |
| management     |                |                |                |
| practices**    |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Reduce the     | CMS            | FY 2003        | 2004           |
| percentage of  |                | target: 5%;    |                |
| improper       | Medicare       |                |                |
| payments made  | Integrity      | FY 2003        |                |
| under the      | Program        | results:       |                |
| Medicare       |                | 5.8%\*         |                |
| f              |                |                |                |
| ee-for-service |                |                |                |
| program.       |                |                |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+
| Increase       | Office of the  | FY 2003        | 2004           |
| Return on      | Secretary      | target: \$114; |                |
| Investment. FY |                |                |                |
| 2005 target:   | Office of      | FY 2003        |                |
| \$154.         | Inspector      | results:       |                |
|                | General        | \$117.         |                |
+----------------+----------------+----------------+----------------+
|                |                |                |                |
+----------------+----------------+----------------+----------------+

**Strategic Goal 1: Reduce the Major Threats to the Health and
Well-Being of Americans**

HHS is taking steps to reduce health threats through the promotion of
healthy behaviors as well as through building partnerships with States,
communities, and health professionals. Reinforcing healthy behaviors in
youth, from abstinence to reducing obesity, is critical. Steps to a
Healthier US is a Secretarial initiative that emphasizes coordination
across the Department to promote healthy behaviors and choices that will
prevent and control disease, focusing in particular on asthma, diabetes,
and obesity. Steps advances President Bush\'s Healthier US Program,
which mobilizes the Federal government to alert the American people to
the vital health benefits of simple and modest improvements in physical
activity, nutrition, and behavioral choices such as eliminating tobacco
and illegal drug use.

Prevention is also a hallmark of the HHS approach to fighting HIV/AIDS,
sexually transmitted diseases, and tuberculosis. HHS is making
considerable progress slowing the transmission of HIV from pregnant
women to their children and preventing the spread of tuberculosis.
Similarly, the HHS vaccine program protects the population from a wide
variety of infectious diseases, including diphtheria, measles, polio,
and influenza.

A risk behavior affecting youth and other segments of the U.S.
population is substance abuse. Consistent with the Office of National
Drug Control Policy\'s (ONDCP) overall recommendations, the FY 2005
budget request makes a fourth installment on the President\'s Drug
Treatment Initiative, and HHS continues to work with ONDCP to implement
an effective drug strategy that will increase the number of clients
served.

The FY 2005 Annual Performance Plan highlights performance goals and
measures within the Centers for Disease Control and Prevention\'s (CDC)
National Immunization Program, CDC programs to prevent HIV infection,
and the Substance Abuse and Mental Health Administration\'s Substance
Abuse Prevention and Treatment Block Program. These representative
performance measures demonstrate the Department\'s continued commitment
to reducing the major threats to the health and well-being of Americans.

NATIONAL IMMUNIZATION PROGRAM

Centers for Disease Control and Prevention

FY 2005 Budget Request: \$644 million

FY 2005 Full Cost Budget Request: \$651 million

(Budget numbers are for the Section 317 Immunization Program and do not
include VFC)

Program Background and Context

The Centers for Disease Control and Prevention (CDC) protects the health
of children and adults from disability and death associated with
vaccine-preventable diseases by developing and implementing immunization
programs and monitoring vaccine use. The CDC National Immunization
Program (NIP) focuses on several major programmatic areas, including
childhood immunization, adult and adolescent immunization, global polio
eradication, global measles control, and vaccine safety. NIP provides
national leadership in the ongoing effort to protect America\'s children
and adults from vaccine-preventable diseases and to ensure the

safety of vaccines. Appropriate administration of safe and effective
vaccines remains one of the most successful and cost-effective public
health tools for preventing disease, disability, and death as well as
reducing economic costs resulting from vaccine-preventable diseases.

Vaccines are responsible for the control of many infectious diseases,
including diphtheria, mumps, and pertussis, that were once common in the
United States. As childhood immunization coverage continues to increase,
the incidence of vaccine-preventable diseases continues to decline. For
example, there have been no cases of polio caused by wild polio virus in
the Western Hemisphere since 1991; measles is no longer endemic in the
United States; only one child was born with congenital rubella syndrome
in 2002; and cases of Haemophilus influenzae type b (Hib) have dropped
more than 99 percent among children younger than five years since the
Hib vaccine was introduced in 1990.

Although vaccine coverage levels for children are at an all-time high,
every day in the United States, 11,000 babies are born who will need up
to 22 vaccinations before they are two years old to be protected against
12 vaccine-preventable diseases. Even though coverage levels for
preschool immunization are high in many States, approximately one
million two-year-olds in the United States have not received one or more
doses of the recommended vaccines.

The Section 317 immunization grant program helps State and local health
departments to ensure that children, adolescents, and adults receive
appropriate immunizations by working in partnership with health
providers in the public and private sectors. The program supports
infrastructure for essential activities such as immunization registries,
outreach, disease surveillance,

outbreak control, education, and service delivery. A strong immunization
infrastructure assures optimal coverage with routinely recommended
vaccines. Immunization infrastructure is crucial, especially when public
health priorities can shift rapidly in the event of a naturally
occurring outbreak of a vaccine-preventable disease, or a bioterrorism
event.

NIP works with local, State, national, and international partner
organizations to develop an immunization infrastructure that includes
increasing awareness of immunization recommendations, fostering the
development and implementation of effective immunization programs, and
achieving high immunization coverage levels. NIP has effective
partnerships with organizations such as the American Academy of
Pediatrics, the American Academy of Family Physicians, the Association
of State and Territorial Health Officials, and managed care
organizations. NIP also partners with the Centers for Medicare &
Medicaid Services, the Health Resources and Services Administration, the
Administration on Aging, the Agency for Healthcare Research and Quality,
and other Federal agencies, as well as State and local organizations.
Through these partnerships, NIP has implemented innovative and effective
intervention programs and has gained the attention of other key
audiences (e.g., corporate and community leaders and the media) to help
achieve the mission of eliminating vaccine-preventable diseases.

NIP global immunization efforts are key to sustaining low disease rates
domestically. Working with international partners, NIP has helped to
reduce the number of measles cases in the Western Hemisphere by more
than 99 percent from approximately 250,000 cases in 1990 to 104 cases in
2003 (provisional data). Additionally, NIP works with the World Health
Organization, Rotary International, the U.S. Agency for International
Development, the Task Force for Child Survival and Development, the
United Nation\'s Children\'s Fund, and international agencies to bolster
polio eradication efforts by providing scientific assistance and
financial support. Today more than 200 countries and territories are
polio-free, and the disease is now indigenous to only seven countries in
South Asia and Africa.

Program Performance Planning

The National Immunization Program has six goals and eleven performance
measures in the Centers for Disease Control and Prevention Annual
Performance Plan. The performance measures address childhood,
adolescent, adult, and global immunizations. For instance, reducing the
number of indigenous cases of vaccine preventable diseases is one of
these goals. The measures for this goal include reducing or sustaining
the number of cases of polio, rubella, measles, and Hib to zero, as well
as reducing the number of indigenous cases of mumps and pertussis.
Another goal is to increase the proportion of adults who are vaccinated
annually against influenza and ever vaccinated against pneumococcal
disease. The measures are divided by those 65 years of age and older and
those who are high-risk ages (i.e., 18 to 64 years). Global polio
eradication and reduction of the cumulative global measles-related
mortality are also NIP goals. Because vaccine safety is vital, one NIP
goal is to improve vaccine safety surveillance.

The following illustrative NIP performance measure focuses on childhood
immunization.

-   Achieve or sustain immunization coverage of at least 90 percent in
    children 19- to 35-months of age for 3 doses DTaP vaccine, 3 doses
    Hib vaccine, 1 dose MMR vaccine, 3 doses hepatitis B vaccine, 3
    doses polio vaccine, 1 dose varicella vaccine, and 4 doses
    pneumococcal conjugate vaccine

Vaccination coverage levels of 90 percent are, in general, sufficient to
prevent circulation of viruses and bacteria causing vaccine-preventable
diseases. Coverage levels are currently the highest ever recorded.
However, each new cohort of children born in the United States must be
fully vaccinated with all recommended vaccine doses because subgroups or
pockets of undervaccinated persons make the entire population vulnerable
to major outbreaks of vaccine-preventable diseases. CDC has made
progress toward fulfilling this performance measure, but must continue
its work to fully achieve the goal.

Means and Strategies

NIP will work with State and local public health partners and other
providers to achieve the performance measure by using grants,
assessments, and technical assistance, and by setting vaccine policies.

-   Vaccine Purchase Grants. Since 1963, CDC has provided grant support
    to assist State and local health departments in purchasing safe and
    effective vaccines. The Section 317 immunization grant program and
    the Vaccines for Children (VFC) program were instrumental during the
    2003-2004 influenza season in which an early onset of influenza
    outbreaks led to increased demand for the vaccine. To address these
    unusual circumstances, additional doses of federally procured
    influenza vaccine were delivered to State and local health
    departments to alleviate some of their reported spot shortages.

-   State Operations/Infrastructure Grants. NIP provides grant support
    to help State and local health departments plan, develop, and
    conduct childhood immunization programs. These immunization
    infrastructure investments are crucial to maintain immunization
    systems and ensure that high immunization levels are not
    jeopardized. In recent years, efforts have been expanded to include
    adolescents and adults by implementing proven strategies to raise
    immunization coverage, and conduct disease surveillance.

Although coverage for preschool immunization is high in almost all
States, pockets of need - areas with substantial numbers of
under-immunized children - still exist. These areas cause great concern
because of the potential for outbreaks of vaccine-preventable diseases
to occur within these communities. NIP uses several strategies to
improve immunization coverage in these areas. For example, Assessment,
Feedback, Incentives, and Exchange (AFIX) is a tool to assess
immunization coverage and provide feedback to providers-methods that
have resulted in higher coverage rates. Linkages with the U.S.
Department of Agriculture\'s Women, Infants, and Children (WIC) program
have increased coverage among low-income preschool children. Reminder
and recall systems (manually generated mail or telephone appointment
reminders) consistently improve patient compliance for scheduled health
visits. NIP also plays a critical role in developing immunization policy
by providing technical and scientific support to policy-making advisory
groups.

Budget and Policy Priorities

The National Immunization Program is developing several changes and
improvements to its program to increase performance and improve
vaccination coverage nationwide. These improvements include proposed law
changes to increase access and the development of an immunization
strategic stockpile to ensure a consistent supply. Legislation is being
proposed to improve the VFC program by expanding access to underinsured
children seeking immunization services in State and local public health
clinics. Increased VFC funds to expand the pediatric vaccine stockpile
(provided for 2003-2006) will provide for a six-month supply of all
recommended pediatric vaccines. A fully implemented, six-month stockpile
can greatly reduce the potential public health consequences associated
with supply disruptions. These improvements to the VFC Program will
reduce by \$110 million the demand for vaccines financed through the 317
immunization program. These proposed law changes are not reflected in
the budget numbers cited above; consistent with the treatment of
proposed law changes in the appropriations request.

PART Review

The National Immunization Program\'s Section 317 Immunization grant
program underwent a PART review during the FY 2004 budget process and
received an \"Adequate\" rating. As discussed earlier, the 317 grant
program gives funds to State and local health departments for vaccine
purchase, program management, vaccine management, immunization
registries, provider quality assurance, service delivery, consumer
information, surveillance, and population assessment. The FY 2004
assessment determined that the program had strong management practices
and was successful in improving vaccination coverage levels among
children. Program improvements and management initiatives that will
significantly advance the 317 grant program\'s progress toward fully
implementing performance-based budgeting principles are underway. Since
the initial assessment of the 317 grant program, CDC has made progress
implementing the PART recommendations by:

-   Undergoing an independent evaluation of program effectiveness;

-   Establishing processes and procedures to measure and/or improve
    program efficiency; and

-   Improving mechanisms that link the program\'s budget for State
    immunization program and operations activities to program
    performance.

External Factors

Challenges to meeting the illustrative performance measure include the
difficulties of implementing effective strategies in private provider
practices; the complicated schedule of vaccinations for children;
shortages of vaccines; and the difficulty of acquiring accurate and
complete immunization records. Vaccine safety is also a challenge that
must be met to attain and sustain high immunization levels. Private
providers may face financial and time constraints that limit their
ability to implement provider-based strategies such as reminder/recall
systems, and the assessment of immunization levels among patients in
their practice. As science progresses and more vaccines become
available, including combination vaccines with varying antigens, the
immunization schedule becomes more complex. Before the age of two years,
it is recommended that children receive up to 22 vaccinations for 12
vaccine-preventable diseases.

In the past several years, the United States has experienced shortages
of many vaccines in the recommended childhood immunization schedule, as
well as a recent shortage of influenza vaccine. Some of these shortages
were widespread while others were localized. Reasons for these shortages
were multi-factorial and included companies leaving the vaccine market,
manufacturing or production problems, insufficient stockpiles, and one
manufacturer-specific shortage.

Because children are often seen in multiple provider offices, and
parents typically do not have complete immunization records, it can be
difficult for providers to assess a child\'s need for specific
immunizations. Also, some children are underinsured and ineligible for
vaccine from other sources. Given the number of immunizations and the
expense of vaccine, parents may find it difficult to assure these
children are immunized at the appropriate ages. For instance, the
underinsured are only eligible for the Vaccines for VFC if seen in a
federally qualified health center (FQHC). These centers are located in
health professional shortage areas and may be inaccessible
geographically to certain underinsured children.

Public confidence in childhood vaccines is critical in obtaining high
immunization levels. Because vaccines are given to healthy people,
immunizations are subject to a higher standard of safety than other
medical interventions. No vaccine is 100 percent safe or effective. NIP
has a multifaceted strategy for addressing immunization safety issues to
maintain public confidence in immunizations, preserve high coverage
levels, prevent a resurgence of vaccine-preventable diseases, and detect
adverse events quickly. The National Immunization Program plays a vital
role in striving for vaccine safety by monitoring harmful effects;
conducting scientific research to evaluate the safety of vaccines;
communicating to the public the benefits and risks of vaccines; and
supporting development of new vaccine administration devices,
combination vaccines, and potential candidate vaccines to prevent
additional infectious diseases. Assessments of the risks and benefits of
vaccines can also influence vaccine policy and recommendations.

HIV/AIDS Prevention in the U.S.

Centers for Disease Control and Prevention

FY 2005 Budget Request: \$696 million

FY 2005 Full Cost Budget Request: \$706 million

(Budget numbers are for the Domestic HIV Programs in the

National Center for HIV, STD, and TB Prevention (NCHSTP))

Program Background and Context

Human Immunodeficiency Virus (HIV) remains a deadly infection for which
there is no cure. Over 500,000 Americans have died of acquired
immunodeficiency syndrome (AIDS) and an estimated 850,000 to 950,000 are
currently infected with the virus. The Centers for Disease Control and
Prevention (CDC) has been involved in the fight against HIV and AIDS
from the earliest days of the epidemic and remains a leader in HIV/AIDS
prevention and control. While HIV incidence has decreased substantially,
from an estimated 150,000 new infections per year in the late 1980s, new
infections remain unacceptably high at an estimated 40,000 per year. CDC
is the Federal agency charged with preventing HIV infection. CDC works
with an array of partners including other Federal agencies, State and
local health and education departments, HIV prevention
community-planning groups, academic institutions, community-based and
other not-for-profit groups and the private sector. During the past
decade, the HIV/AIDS epidemic has expanded into new populations, and CDC
has focused its efforts on those populations that are at highest-risk.

Program Performance Planning

The overarching CDC goal in HIV is to reduce by 25 percent the number of
new HIV infections in the United States, as measured by a reduction in
the number of HIV infections diagnosed each year among people less than
25 years of age, from 2,100 in 2000 to approximately 1,600 in 2010.
Under this goal are two measures, the first focusing on HIV infections
among people less than 25 years of age and the second focusing on
perinatally acquired AIDS.

-   Reduce the number of new HIV infections among people less than 25
    years of age from 2,100 in 2000 to 1,600 in 2010.

Historically, new AIDS cases (AIDS incidence) was the basis for
assessing needs for prevention and treatment programs. However, potent
new antiretroviral therapies are delaying or preventing the development
of AIDS in many HIV-infected persons, and AIDS data are no longer
sufficient to describe the epidemic. Data on HIV are now needed to
monitor the effect of the epidemic. CDC is working with States to
implement and improve HIV reporting and is studying methods to estimate
HIV incidence nationally. The number of HIV infection cases among
persons under 25 years of age diagnosed each year is the best data
currently available to monitor new HIV infections. HIV infections
occurring in those under 25 years of age are likely to have been
acquired recently and thus are a relatively accurate proxy measure of
HIV incidence. Performance data regarding reported HIV infections is
from 25 States with longstanding HIV reporting. CDC will add States as
data become available.

The other illustrative performance measure focuses on HIV transmission
from infected pregnant mothers to their infants.

-   Decrease the number of perinatally acquired AIDS cases from the 1998
    baseline of 235 cases.

During the early 1990s, an estimated 1,000 to 2,000 infants were born
with HIV infection each year. Surveillance data show sharply declining
trends in perinatal AIDS cases, and approximately 101 cases were
reported in 2001. These declines reflect the success of widespread
implementation of the Public Health Service (PHS) recommendations for
routine HIV counseling and voluntary HIV testing of pregnant women; the
use of zidovudine (AZT, also called ZDV) by infected women during
pregnancy and delivery and for treatment of the infant after birth; and
the use of combination antiretroviral therapies for the pregnant
woman\'s own care. Performance data for the perinatal AIDS measure are
consistent across all 50 States, the District of Columbia, U.S.
dependencies and possessions, and independent nations in free
association with the United States. All of these units use a uniform
surveillance case definition and case report form for reporting AIDS
cases to CDC.

Means and Strategies

CDC uses a number of strategies to prevent HIV focusing on the following
sub-goals outlined in its HIV Strategic Plan:

-   Decrease the number of persons in the United States at high risk for
    acquiring or transmitting HIV infection by delivering targeted,
    sustained and evidence-based HIV prevention interventions.

-   Increase from the proportion of HIV-infected people in the United
    States who know they are infected through voluntary counseling and
    testing.

-   Increase the proportion of HIV-infected people in the United States
    who are linked to appropriate prevention, care, and treatment
    services.

-   Strengthen the capacity nationwide to monitor the epidemic, develop
    and implement effective prevention interventions, and evaluate
    prevention programs.

These goals are supported through a core set of HIV prevention
activities including surveillance research, intervention, capacity
building, and evaluation. Priority setting for health protection
activities is based on information gathered through surveillance and
research. CDC funds intervention programs that seek to involve
communities in HIV prevention, including community planning, coordinated
through health departments, and direct funding of community-based
organizations (CBOs). Underpinning these intervention programs are
capacity-building efforts conducted directly by CDC and by State, local
and non-governmental partners. Finally, CDC works to evaluate its
programs so that the agency can monitor progress and refine its efforts.

To achieve further reductions in HIV incidence in the United States, CDC
announced a new HIV initiative in partnership with other HHS agencies
and other government and nongovernmental organizations. The new
initiative, launched on April 17, 2003, \"Advancing HIV Prevention: New
Strategies for a Changing Epidemic (AHP),\" involves four principal
strategies to further reduce HIV in the United States:

1\) Making HIV testing a routine part of medical care;

2\) Implementing new models for diagnosing HIV infections outside
medical settings;

3\) Preventing new infections by working with persons diagnosed with HIV
and their partners; and

4\) Further decreasing perinatal HIV transmission.

These strategies are designed to use new tools and knowledge to prevent
new infections and promote the health of persons with HIV.

Budget and Policy Priorities

The President\'s FY 2005 budget request for Domestic HIV at the National
Center for HIV, STD, and TB Prevention (NCHSTP) is \$695.9 million,
slightly above the FY 2004 level of \$694.9 million. The entire budgeted
amount supports Secretarial priorities to address HIV/AIDS as well as
the overarching goal of CDC of reducing new HIV infections. Much of the
budget is awarded extramurally, supporting cooperative agreements with
State and local governments and non-governmental organizations. For
instance, in 2004, CDC will award a new cycle of funding in support of
HIV prevention projects for State and local governments. The agency
anticipates spending approximately \$317 million on this program. In
addition, CDC will provide

\$49 million to support a new, consolidated cooperative agreement
program to directly fund community-based organizations and \$21 million
to support a consolidated program for capacity-building assistance. The
agency also supports other ongoing prevention efforts, and surveillance,
research and evaluation activities. This budget information only
includes Domestic HIV/AIDS Programs at NCHSTP. CDC also conducts
HIV/AIDS domestic prevention

programs through the National Center for Infectious Disease (NCID) and
the National Center for Chronic Disease Prevention and Health Promotion
(NCHSTP).

PART Review

The CDC domestic HIV/AIDS program received a PART review during the FY
2004 budget process. The analysis cited deficiencies in the area of
performance measurement. The assessment found that (1) the program had
long-term health outcome goals, but not specific targets and timeframes
that are consistent with the existing budget; (2) the program had
developed new annual performance indicators but that baseline data for
these measures was unavailable at the time of review; (3) budget and
program performance information were not aligned; (4) no measures were
in place to improve efficiency; and (5) the program had some weaknesses
in the management and oversight of grantees.

Based on these findings, CDC managers implemented various actions for
program direction and improvements, such as developing performance
indicators with measurable goals and targets consistent with current
resources; and strengthening grantee accountability and oversight in HIV
prevention efforts.

In its Annual Performance Plan, CDC has revised three of its five
domestic HIV/AIDS prevention goals. These goals contain ambitious
targets that are measurable; include specific targets and timeframes;
and are consistent with CDC current budgetary resources.

To address the PART review, CDC conducted an assessment, based on an
internal stratified random sample of CBOs, to ensure that funded
grantees follow proper fiscal procedures, have scientifically sound
programs, and comply with Content Review Guidelines. Preliminary
findings indicate that CDC needs to provide more focused technical
assistance and guidance to CBO grantees. CDC is currently providing such
technical assistance including issuance of new technical guidance to
support the new CBO program.

CDC has also worked to achieve program and administrative efficiencies.
For instance, CDC is consolidating six program announcements for the
CBOs into one announcement in FY 2004. This move will have several
benefits: it will lessen the amount of administrative work, simplify
oversight, strengthen protocols, and standardize monitoring.

To collect better performance data from grantees, CDC has strengthened
oversight procedures and put new reporting systems in place. Grantees
will be held accountable for performance, and action will be taken if
grantees fail to perform according to standards. Corrective action can
range from providing additional technical assistance to redirecting
funding. CDC is also updating its HIV/AIDS Reporting System to make it
more compatible with the data surveillance reporting systems maintained
at the local and State levels. With upgrades in software and hardware,
the Enhanced HIV/AIDS Reporting System will allow State and local
agencies to report HIV and AIDS data to the CDC more easily.

External Factors

Factors beyond CDC control may affect whether CDC is able to reach its
HIV infection reduction goal and targets. For example, if an infected
woman does not seek or receive care, an opportunity to prevent perinatal
HIV transmission may be missed. Also, an increased number of HIV
positive men and women are living longer, healthier lives because of
treatment. Over time, this situation can lead to increased opportunities
to transmit HIV. The changing trends in drug use, which are associated
with HIV transmission, are another external factor. Those external
factors pose challenges to HIV prevention. Scientists have also
speculated that those persons at risk may be suffering from \"prevention
fatigue\" and may have difficulty maintaining safer behaviors over the
years.

Substance Abuse Prevention and Treatment

BLOCK GRANT

Substance Abuse and Mental Health Services Administration

FY 2005 Budget Request: \$1,832 million

FY 2005 Full Cost Budget Request: \$1,844 million

Program Background and Context

The Substance Abuse Prevention and Treatment (SAPT) Block Grant Program
is an integral part of the President's Drug Treatment Initiative in
providing the cornerstone of State substance abuse programs. Alcohol and
drug abuse remain significant public health problems that afflict every
American community. The goal of the program is to improve the health and
well-being of the Nation by bringing effective alcohol and drug
treatment and prevention services to every community through block
grants to the States. Program effectiveness continues to be demonstrated
as the Substance Abuse and Mental Health Services Administration
(SAMHSA) works with the States in transforming the block grants into
Performance Partnership Grants in order to maximize outcomes of publicly
funded treatment and prevention services, and by exceeding performance
targets. Performance Partnership Grants (PPG) will provide improved
performance measurement and technical assistance for development of more
effective services.

Program Performance Planning

The treatment portion of the block grant program has a total of ten
measures in SAMHSA\'s Annual FY 2005 Performance Plan, and there are
additional measures provided through the prevention 20 percent
set-aside. Treatment measures include three outcome goals, one
efficiency goal, two long-term goals, two process goals and two customer
satisfaction goals. These measures are being replaced or merged with
SAMHSA\'s Performance Partnership Grant (PPG) measures determined with
the States that are under development. Over the next few years, SAMHSA
will continue to improve the availability and use of performance data as
measures are finalized and new technologies are implemented to expedite
data collection, analysis and application for performance budgeting.

It is anticipated that the number of reported measures will decrease as
SAMHSA moves to adopt an aggregated form of reporting. For each program
area, SAMHSA is focusing on a few key measures to report and monitor
performance. Performance on these key measures is used in making budget
and management decisions. One such measure is:

-   Increase the number of clients served.

Estimating the number of clients served reflects the contribution the
SAPT Block Grant make towards increasing the availability of services as
part of the President\'s Drug Treatment Initiative.

The proxy data source for the \"number of clients served\" by the SAPT
Block Grant is provided through the Treatment Episode Data Set of the
Drug and Alcohol Services Information System (TEDS/DASIS). The data
being reported represent treatment admissions data that are reported
after a two-year time lag. These data are limited, in that they report
admissions and may contain duplicated numbers of unique individuals who
may have been admitted more than once for treatment. Also, the TEDS data
reports the numbers of persons whose treatment was financed by a variety
of different public and private funds, not just SAPT Block Grant
resources. However, the SAPT Block Grant constitutes 40 percent of
public funds available for treatment, the largest public source
available, and the TEDS data provides the best current estimate of the
number of persons served.

This measure is important to key SAMHSA stakeholders as it reflects
progress in support of the President\'s Drug Treatment Initiative. Also,
tracking the numbers served is a critical component of cost-benefit
analysis and full cost accounting needed for performance budget
integration. Future targets have been set in consideration of factors
such as past performance achievement and currently available data.
Analysis of targets shows that they are aggressive from FY 2000 through
FY 2003 increasing at an average annual rate of 7.3 percent. The above
graph shows that for 2001, the target was exceeded. An estimated
1,740,000 persons received services.

Means and Strategies

SAMHSA plans to accomplish its goals for this program through several
means and strategies. These approaches flow from SAMHSA\'s draft
strategic plan, partnership with the States, as well as the needs of the
substance abuse prevention and treatment fields as evidenced by data
from TEDS, the National Survey for Drug Use and Health and other SAMHSA
surveys.

SAMHSA plans to:

-   Continue active partnerships with the States to gather and assess
    performance data on the measures that SAMHSA and the States have
    identified for Performance Partnership Grants;

-   Improve performance measure data collection, analysis and reporting
    technologies;

-   Collaborate with the States to improve the performance of block
    grant funded programs through staff training in data analysis and
    technical assistance on evidence based practices to address
    identified States\' needs;

-   Implement a new focus on cost efficiency by setting a performance
    measure to monitor the percentage of States that provide drug
    treatment services within approved cost bands by the type of
    treatment provided; and,

-   Begin implementing a national evaluation study.

Budget and Policy Priorities

Total funding for the Substance Abuse Prevention and Treatment Block
Grant in FY 2005 is \$1.83 billion, an increase of \$53 million over FY
2004. The FY 2005 budget will support admissions to drug treatment
programs to approximately 2 million individuals. The Block Grant is a
major part of the President\'s Drug Treatment Initiative. Total funding
in FY 2005 for the drug treatment programs is \$2.3 billion.

PART Review

This program received a PART review during the FY 2005 budget process.
The PART score was 43; and the rating was Ineffective. The review
assessed strengths and identified a number of areas needing improvement.
The main area identified as requiring improvement related to performance
measures that were not finalized until late in FY 2003 as part of the
PPG process. The PART also found that the SAPT Block Grant was the only
Federal program supporting statewide drug prevention and treatment
services in all States. States are heavily dependent upon the SAPT Block
Grant funding for substance abuse services that are urgently needed.

The PART review identified the need for specific management actions. For
example, in response to a PART finding, the program is expediting the
posting of disaggregated State specific descriptive data on the Internet
so that the data are fully accessible and transparent to the public.
Also, the assessment found that SAMHSA faces continuing challenges in
collecting performance data. SAMHSA proposed Performance Partnerships
will address this problem over time by implementing new measures, and
improving data collection, analysis and utilization. SAMHSA has
developed new performance measures that will be used for making future
budget decisions. SAMHSA has made significant progress with the States
in determining performance measures for the SAPT Block Grant program,
and States will begin reporting data in FY 2005. In addition, SAMHSA has
initiated funding for a national evaluation of the Block Grant. Due to
these factors, SAMHSA is requesting a 3 percent increase in the Block
Grant for FY 2005.

External Factors

There are three major external factors that could have a significant
impact on performance: (1) the status of the national economy and
related employment figures; (2) the amount of resources States and
communities allocate toward treating and preventing substance abuse and
the collection of corresponding data; and (3) fluctuations in the supply
of illegal drugs such as heroin and cocaine and possibly the
availability of new addictive drugs and substances. The improvement or
deterioration in these external factors would likely affect performance
results.

**Strategic Goal 2: Enhance the Ability of the Nation's Health Care
System to Effectively Respond to Bioterrorism and Other Public Health
Challenges**

HHS has a number of initiatives and programs directed at protecting
Americans from bioterrorist attacks and other public health challenges.
The events of September 11, 2001, and subsequent anthrax attacks have
reinforced the HHS role in protecting Americans from attacks on our
health and food supply by enhancing preparedness and response
capabilities.

The Office of the Assistant Secretary for Public Health Emergency
Preparedness (ASPHEP) was established to direct the Department\'s
efforts in preparing for, protecting against, responding to, and
recovering from all acts of bioterrorism and other public health
emergencies that could affect the civilian population. ASPHEP serves as
the focal point within HHS for these activities, directing and
coordinating the development and implementation of a comprehensive HHS
strategy.

The Centers for Disease Control and Prevention has an integral role in
strengthening State and local public health infrastructure to
effectively respond to emergencies. The Health Resources and Services
Administration works to prepare hospitals and other medical facilities
for the health consequences of bioterrorism and other mass casualty
events. The Food and Drug Administration works to provide responsive
regulatory review of new biodefense medical countermeasures and plays a
major role by inspecting high risk domestic food manufacturers and
enhancing food import inspections to protect our Nation\'s food supply
and prevent food borne illness.

The measures described in this section are representative of HHS
progress towards building the necessary infrastructure to respond to
bioterrorist and other public health challenges.

TERRORISM PREPAREDNESS AND EMERGENCY

RESPONSE PROGRAM

Centers for Disease Control and Prevention/

Agency for Toxic Substances and Disease Registry

FY 2005 Budget Request: \$1,110 million

FY 2005 Full Cost Budget Request: \$1,114 million

Program Background and Context

In 1998, the Centers for Disease Control and Prevention/Agency for Toxic
Substances and Disease Registry (CDC/ATSDR) began a program to provide
technical assistance and funding to 62 State, local, and territorial
public health departments to develop public health infrastructure,
capacity and plans to respond to events of terror. In 2002, shortly
after the September 11th and anthrax attacks, this program, with
substantial supplemental funding, grew rapidly into the agency\'s
Division of State and Local Readiness (DSLR). This program was formerly
known as the State and Local Preparedness Program (SLPP). Given the
national security interest in public health preparedness, the DSLR\'s
Cooperative Agreement with the 62 health departments has grown
significantly in importance and reflects the unique role of CDC within
the Federal government to prepare public health to address the impact of
all potential hazards that might result from natural and intentional
releases of chemical, biological, radiological, and nuclear (CBRN)
agents, outbreaks of infectious diseases, mass trauma events, and other
public health threats and emergencies.

Since its inception, the DSLR and the cooperative agreement partners
have made significant improvements in readiness and contributions
towards achieving the goals and mission of the CDC Terrorism
Preparedness and Emergency Response effort. Recent accomplishments
demonstrate the program\'s success, as well as how the grantees are
leveraging the direct and technical assistance coordinated by DSLR
Project Officers to develop public health infrastructure, capacity, and
plans to respond. One specific example is in the State of New York,
where the New York Department of Health created 38 Public Health
Response Teams (PHRTs) with staff from the State Health Department, 4
State Regional Offices, and the State\'s 57 local health departments.
Staffing is based on skills and roles/responsibilities, to respond and
report on cases of suspect BT agents. The PHRTs will be the primary
organizational structures to engage in an epidemiological response to a
bioterrorist agent.

Program Performance Planning

The Terrorism Preparedness and Response effort has nine goals and 12
performance measures in the CDC FY 2005 Annual Performance Plan. Several
of these measures were developed during the DSLR recent Program
Assessment Rating Tool (PART) review. The new measures are targeted to
demonstrate more outcome-oriented results and are based on public health
departments\' specific abilities to (1) conduct biological laboratory
proficiency testing; (2) access chemical laboratories; (3) operate under
surveillance standards; (4) conduct comprehensive response testing and
exercises with the proper results; and (5) obtain certification to
receive material from the Strategic National Stockpile.

One of the recently developed performance measures, illustrated below,
reflects the commitment of the Division of State and Local Readiness to
ensuring the cooperative agreement partners have developed complete and
scalable plans, that-when exercised-demonstrate their capacity to
respond to emergencies.

-   100 percent of State public health agencies improve their capacity
    to respond to exposure to chemicals or category A agents by annually
    exercising scalable plans and implementing corrective action plans
    to minimize any gaps identified.

This measure was selected because it is outcome-oriented and
specifically demonstrates a partner\'s capacity to respond to events of
terror or public health emergencies, which is a key indicator of the
program\'s success. This is a new performance measure with ambitious
targets established for FY 2005 - FY 2008.

Means and Strategies

The mission of the CDC/ATSDR terrorism preparedness and response effort
is to prevent death, disability, disease and injury associated with
urgent health threats by improving preparedness of the public health
system, the healthcare delivery system and the public through excellence
in science and services. In support of this mission, DSLR assists its
cooperative agreement partners in the development of capacity across the
following seven focus areas:

-   Preparedness Planning and Readiness Assessment;

-   Surveillance and Epidemiology Capacity;

-   Laboratory Capacity - Biologic Agents;

-   Laboratory Capacity - Chemical Agents;

-   Health Alert Network/Communications and Information Technology;

-   Communication of Health Risks and Health Information Dissemination;
    and

-   Education and Training.

Within each focus area, HHS has defined both critical capacities needed
for baseline levels of preparedness, as well as enhanced capacities that
represent more advanced levels of preparedness and response capability.
Working with its project officers and subject matter experts across
CDC/ATSDR, DSLR is employing several key strategies to help States
achieve both the critical and enhanced capacities in each of the defined
focus areas. These strategies include:

-   Guidance which sets forth the focus areas, capacities, and recipient
    activities which each public health department should expect to
    undertake to achieve readiness;

-   Technical project officer support to help identify solutions to
    barriers in preparedness efforts;

-   Team and matrix management of subject matter experts from
    CDC/ATSDR\'s centers, institutes, and offices to help grantees
    achieve the levels of performance associated with the new measures
    finalized from the PART process; and

-   Enhanced reporting to identify areas that challenge grantees so that
    appropriate assistance can be provided and leading practices and
    lessons learned shared to improve preparedness and planning across
    all 62 grantees.

Budget and Policy Priorities

In FY 2005, CDC is requesting \$1.1 billion in total funding. This
funding level is consistent with FY 2004, and includes programs such as
State and Local Preparedness, Upgrading CDC Capacity, Anthrax Vaccine
Research, and the new biosurveillance initiative, which will be a new
advanced approach to infectious disease /human health surveillance. The
\$130 million investment in biosurveillance is a redirection of funds of
\$105 million in the State and local capacity budget and of \$25 million
in CDC capacity and anthrax research. 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. In FY 2005, CDC has
budgeted another \$829 million. The request for CDC preparedness grants
to States reflects an effort to accelerate targeted progress in
preparedness. CDC is directing funds to develop surveillance data for
States; in the past, States developed information piecemeal and
forwarded information sometime later to CDC for national assessment.

With on-going investments in FY 2005, CDC will continue to play a
critical role in strengthening the Nation\'s public health system in
preparation for public health emergencies with respect to natural and
intentional releases of CBRN agents, outbreaks of infectious diseases,
mass trauma events, and other public health threats and emergencies.
With FY 2005 funds, CDC will build upon these efforts by:

-   Funding and providing technical assistance to States and communities
    to engage in comprehensive preparedness planning and response
    exercises;

-   Improving CDC, State and local laboratory capacity to detect
    biological and chemical agents;

-   Detecting emerging threats through an information and data
    collection system that uses existing national and local sources to
    detect and monitor and emerging infectious diseases; and

-   Ensuring health information can reach all clinicians in times of
    crisis through a comprehensive network of satellite and other
    communication capacities.

PART Review

In 2003, the Centers for Disease Control Division of State and Local
Readiness was selected to undergo the FY 2005 PART review process. This
assessment of the program cited deficiencies in the areas of:

-   Strategic planning (independent evaluations);

-   Program management (accountability-federal/grantee managers-for
    cost, schedule and performance results; sufficient oversight of
    grantee activities, and annual performance data made publicly
    available in a transparent and meaningful way); and

-   Program results (efficiency goals).

Following the PART review, DSLR developed long-term goals and measures
to emphasize a greater public health impact in the preparedness and
response capacity of grantees. The program established baselines and
developed ambitious, annual targets, for each of the new measures. CDC
awards for State and local preparedness and HRSA awards for hospital
preparedness are more performance-focused. Beginning this spring,
awardees will be asked to demonstrate how these major investments have
led to tangible improvements in preparedness. For instance, States may
be evaluated against a benchmark that their local and/or State public
health agencies have mechanisms in place to enable submission of
emergency reports involving biological agents 24 hours a day, seven days
a week.

External Factors

External factors have a great impact on the program\'s control and
ability to meet performance goals, of which the greatest factor is the
challenge of preparing for the unknown. Challenges to the achievement of
readiness across CDC/ATSDR and with cooperative agreement partners
include the following:

-   Preparing for the Unknown and Defining Readiness: The most
    significant challenge is planning to respond to the unknown. Plans
    developed by grantees must be developed to manage all hazards,
    including biological, chemical, radiological, nuclear, and mass
    trauma. The grantee might not have primary responsibility for all
    hazards, but the management of any hazard should be managed the same
    way in the State, triaging the activities to the appropriate
    governmental agency.

-   Balancing Terrorism with other Public Health Priorities: Terrorism
    preparedness and response efforts have necessitated an unprecedented
    dedication of resources (financial, human, equipment, time). At the
    same time, CDC/ATSDR must maintain its focus upon the daily public
    health problems that impact millions of Americans such as obesity,
    heart disease and asthma.

-   Working within Partners\' Constraints: The ability of State and
    local public health departments to spend cooperative agreement funds
    is always subject to the budgeting regulations of their
    jurisdictions, overlapping and shortened State fiscal calendars in
    comparison to the federal fiscal year, complications in contracting,
    and the lag in receipt of goods and services from contractors. In
    some States, such as Kansas, the State legislature must convene and
    vote upon how grant money will be spent, even after the Federal
    government has approved budgets and activities. Such regulations may
    create delays in the grantee\'s ability to expend funds within the
    timeframes set by Federal government regulations.

TERRORISM AND EMERGENCY RESPONSE PROGRAM

THE STRATEGIC NATIONAL STOCKPILE

Centers for Disease Control and Prevention/

FY 2005 Budget Request: \$400 million

FY 2005 Full Cost Budget Request: \$400 million

Program Background and Context

The Strategic National Stockpile (SNS) is a national repository of
antibiotics, chemical antidotes, antitoxins, life-support medications,
IV administration and airway maintenance supplies, and medical/surgical
items. The SNS is designed to provide States the medicines, vaccines,
and supplies to treat those affected by a bioterrorism attack, and
prevent the further spread of those pathogens.

CDC has always administered the SNS and provided scientific leadership.
Since March 1, 2003, the SNS has been owned and financed through the
Department of Homeland Security (DHS). The FY 2005 budget reflects the
Administration\'s plan to return the fiduciary management of the
Strategic National Stockpile to HHS. Both HHS and DHS will be authorized
to order deployment in an emergency. This change will 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 the 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.

The SNS is organized for flexible response. The first line of support
lies within the immediate-response, 12-hour Push Packages. Each of the
dozen 12-hour Push Packages includes pharmaceuticals, antidotes, and
medical supplies. The packages are designed to provide rapid delivery of
supplies in the early hours of a catastrophic event. They are
strategically located in secure warehouses ready for immediate
deployment to a designated site within 12 hours of the federal decision
to deploy. If the incident requires additional pharmaceuticals and/or
medical supplies, follow-up Vendor Managed Inventory (VMI) supplies are
shipped to arrive within 24 to 36 hours. If the agent responsible for
the catastrophic event is well defined, VMI can be tailored to provide
pharmaceuticals, supplies and/or products specific to the suspected or
confirmed agent(s). In this case, VMI could act as the first option for
immediate response from the SNS.

Program Performance Planning

The SNS Program measures its performance in delivering SNS assets and
technical support to the scene of a directed deployment through regular
exercises and, as in September 2001, in response to actual terrorist
events. The SNS Program thoroughly analyzes its performance following
each of those activities, assisted by outside consultants, and continues
to take actions that will strengthen its response. The program measures
performance in State-level preparedness by monitoring the development of
SNS Preparedness functions believed necessary to effectively manage and
use deployed SNS assets. Currently there are 12 SNS Preparedness
functions. Progress toward function development, as well as overall
impact on the ability of the State to perform in an SNS deployment, is
carefully measured on an ongoing basis. Following is a key performance
measure of the SNS Program:

-   100 percent of State public health agencies are prepared to use
    material contained in the Strategic National Stockpile as
    demonstrated by the evaluation of standard functions as determined
    by CDC.

Means and Strategies

The SNS Preparedness Program Plans have 12 critical functions that must
be addressed to effectively use SNS assets. CDC describes these
functions in a comprehensive planning guide and video which are
available to grantees. To enhance SNS Preparedness Program planning
efforts, the SNS Program maintains a staff of Program Services
Consultants who provide ongoing technical advice and assistance to all
62 states and large cities that receive CDC BioTerrorism grants and
provide the following services:

-   Annual technical review of applications for funding with feedback
    and recommendations

-   Annual site visits and assessments of SNS preparedness

-   Evaluations of new facilities designated to receive SNS material

-   Quarterly training courses

-   Exercise support as requested by the Project Area

Budget and Policy Priorities

In order to clarify for State and local officials a single Federal focal
point for both strategic stockpile operations and public health
emergency response, the SNS appropriation will be returned to the
Department of Health and Human Services, and administration will remain
at the CDC. This change will 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 the 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. HHS is requesting \$400 million for the Strategic National
Stockpile for FY 2005, this is an increase of \$2.4 million over FY
2004.

External Factors

The following factors external to the SNS Program affect or have
affected the program:

-   State budget decisions may affect progress toward SNS Preparedness
    Program development in a number of project areas;

-   Preparedness efforts in 2002-2003 focused heavily on planning and
    preparation for smallpox vaccination campaigns. Preparedness for the
    use of other SNS assets is not as far along.

Several vital SNS-approved pharmaceuticals are only available from a
single domestic manufacturer. When that manufacturer experiences
production or quality problems the product can suddenly be in short
supply or unavailable.

BIOTERRORISM HOSPITAL PREPAREDNESS program

Health Resources and Services Administration

FY 2005 Budget Request: \$476 million

FY 2005 Full Cost Budget Request: \$476 million

Program Background and Context

The Bioterrorism Hospital Preparedness Program, which is part of the
President\'s Homeland Security Initiative, has the goal of readying
hospitals and supporting health care systems to deliver coordinated and
effective care to victims of terrorism and other public health
emergencies. The program is designed to enable State and regional
planning among local hospitals, emergency medical services systems,
health centers, poison control centers, and other health care facilities
to improve their preparedness to work together to combat terrorist
attacks and deal with infectious disease epidemics and other public
health emergencies. Through coordination efforts on both the State and
Federal levels, the hospital preparedness plans have also been linked
with State and local public health preparedness planning funded by the
Centers for Disease Control and Prevention, and, where applicable, the
Metropolitan Medical Response Systems funded by the Department of
Homeland Security.

This program was newly established and funded in FY 2002. A major
accomplishment was the successful and expedient award of funding to 59
eligible entities in this first year in response to the national
emergency heralded by the anthrax attacks in late 2001. These funds
enabled awardees to set up hospital preparedness offices with
bioterrorism coordinators and medical advisors, begin their needs
assessments of hospital preparedness and begin development of regional
preparedness plans. In FY 2003, 62 awards were made to assist awardees
to further develop and implement regional preparedness plans. The
program has also awarded a contract to establish a national resource
center for bioterrorism hospital preparedness. This resource center will
serve as a central repository of information, tools, best practices, and
technical assistance available to awardees as they implement their work
plans.

Communication is a key factor in preparedness. Data from progress
reports indicate that all jurisdictions are putting in place mechanisms
that address gaps in the communications systems among hospital emergency
departments, outpatient facilities, EMS systems and State and local
emergency management, public health and law enforcement agencies, and
poison control centers. Preliminary data from a recent hospital
preparedness survey indicate that 95 percent of the hospitals surveyed
had a mechanism in place for rapid receipt and posting of public health
alerts.

Program Performance Planning

The Bioterrorism Hospital Preparedness Program has five performance
goals for FY 2005 that are represented by performance measures covering
the following areas: planning and implementation of plans for regional
preparedness to address surge capacity due to a terrorist attack or
other public health emergency; ability to secure and distribute
pharmaceutical resources required in such emergency events; assessment,
acquisition and provision of training related to chemical and
radiological response equipment; and demonstration of ability to
evaluate, diagnose, and treat adult and pediatric patients in a
catastrophic public health emergency. Four of the program\'s five
measures were developed during the FY 2005 PART review process. Data on
performance will be obtained from awardees\' progress reports, reports
of annual drills, and evaluation reports. Information will be validated
through site visits and other monitoring and certification procedures by
HRSA. HRSA continues to develop and refine measures to determine program
success through the PART review process and other evaluation activities.
This process will continue over the next year as HRSA integrates its
performance and budget processes.

One key performance measure for this program is:

-   Increase the percent of awardees that have developed plans to
    address surge capacity to 100% by FY 2005.

A terrorist attack or other large-scale emergency could result in a
demand for health care that could rapidly overwhelm the resources in a
specific region. Surge capacity is the ability to accommodate a large
and rapid increase in the number of persons requiring care. It is a
major issue for hospitals across the Nation, and is a key to
preparedness for biological, chemical, radiological, or explosive
incidents, as well as other public health emergencies such as epidemics
of infectious diseases or related disorders. The requirement to develop
plans to address surge capacity to deal with potential terrorist and
other threats is based on the concept that improved outcomes can be
achieved when critical components of preparedness are formalized in a
plan and organized into a system of care.

With regard to surge capacity, program grantees will address the
following issues: (1) hospital bed capacity for both adults and
children, (2) capacity for isolation and referral of patients with
communicable infections, (3) appropriate staffing, (4) antibiotic and
vaccine treatment of adult and pediatric biological exposures, (5)
antidote and prophylactic treatment for chemical and radiological
exposures, (6) personal protective equipment, (7) capacity for trauma
and burn care, (8) capacity for mental health care, (9) communications
and information technology, and (10) capacity for mass mortuary
activities.

The baseline estimate, developed from awardees\' progress reports, is
that 59 percent of awardees had developed plans in FY 2003 for a
potential epidemic involving at least 500 patients per million
population in their jurisdictions. The target for FY 2005 is that

100 percent of awardees will have developed surge capacity plans.

Means and Strategies

In FY 2003, cooperative agreements were made with 62 entities, including
50 States, the District of Columbia, Puerto Rico, three municipalities
(New York City, Chicago and Los Angeles County), the Commonwealth of the
Northern Mariana Islands, the territories of the Virgin Islands, Guam
and American Samoa, the Federated States of Micronesia, and the
Republics of Palau and the Marshall Islands. During the first year of
the program (FY 2002), the major emphasis in awardees\' plans was
assessing needs. The program\'s focus is now on helping awardees to
implement their plans to improve surge capacity based on identified
needs.

Coordination among hospitals and related service providers and the
enhancement of infrastructures are important strategies to enable the
health system to mount a collective response with a seamless interaction
of various capabilities. Coordination activities also include
coordination with the CDC Bioterrorism program in such areas as the
development of a statewide incident management system. Other means and
strategies include the requirement that awardees address the education
and training of health care professionals involved in terrorism response
and conduct terrorism preparedness exercises and drills to test the
preparedness systems that are developed.

Budget and Policy Priorities

The budget request for FY 2005 is \$475.9 million, which includes
administrative expenses. Thus, the FY 2005 full cost estimate is also
\$475.9 million. The budget request is \$39 million below FY 2004.
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. This program continues to be funded in the Public Health
and Social Services Emergency Fund, with funds transferred to HRSA.

Prior to this program, there was little public expenditure on hospital
and associated health system planning and infrastructure enhancements
for responding to mass casualty biological, chemical, radiological, and
explosive incidents. Few, if any, hospitals were equipped to handle such
events. The FY 2005 budget for the Bioterrorism Hospital Preparedness
Program will help to ensure the provision of medical and public health
services if these events occur. The requested funds will allow the
program to build upon the needs assessments and implementation plans
developed by awardees during FY 2003 and FY 2004. HRSA will continue to
review regional hospital and public health system preparedness plans and
their associated renovation and equipment expenditures, and will monitor
progress to ensure that funds are used appropriately and that goals are
met.

PART Review

A PART review of the Bioterrorism Hospital Preparedness Program was
conducted for the FY 2005 budget. The program was given a rating of
Results Not Demonstrated. The assessment found that the purpose and
importance of this effort are clear and that the effort is well
coordinated with other Federal preparedness efforts. The review also
noted that the program has not yet demonstrated results due to its
relative newness and the inherent difficulty in measuring preparedness
against an event that does not regularly occur. This program, which was
only 18 months old at the time of the review, has made significant
progress in a very short time.

One concern identified by the assessment is that the distribution
formula may not be optimal because it does not consider varying threat
levels or states of preparedness. HHS is developing a plan to review the
formula and will consider whether the current formula could be improved
by including indicators such as level of risk or preparedness. Issues
related to evaluation and dissemination of performance information will
continue to be addressed as the program moves forward. The PART scores
for program purpose, planning and management, and the recognition that
the program is too new to adequately assess results warrant the funding
investment requested in the FY 2005 budget.

External Factors

There are a variety of factors that make it complicated to develop surge
capacity at the regional level. Among the most significant of these are
the following:

-   It may be relatively easy for an individual hospital to develop
    surge capacity, but it becomes much more difficult when this is done
    on a regional basis. Hospitals need to be identified as to their
    strengths and weaknesses, and the regional system built on that
    assessment. There will need to be an effort to avoid duplication.
    Not every hospital needs every capability.

-   There is a need to link the hospital system to the public health
    infrastructure. These two communities have not always had a close
    pattern of communications and cooperation. In the event of an
    attack, the health care system will have to be able to mount a
    collective response with seamless interaction between the State and
    local health departments, hospitals and other health care entities.

-   Even though it may be possible to supplement the number of hospital
    beds, one of the most difficult issues is identifying staff that can
    provide appropriate services. There are issues of credentialing,
    licensure and the general availability of additional staff.

-   The needs for surge capacity may be quite different in a situation
    involving infectious diseases (e.g., need for isolation beds) vs. a
    situation involving a mass trauma event. Planning for surge capacity
    requires planning for a variety of scenarios.

FOODS PROGRAM

Food and Drug Administration

FY 2005 Budget Request: \$470 million

FY 2005 Full Cost Budget Budget Request: \$571 million

Program Background and Context

The Food and Drug Administration\'s (FDA) Foods Program is responsible
for ensuring a safe, nutritious, wholesome, and honestly labeled food
supply for the American public. As one facet of upholding this
responsibility, the Foods program operates an import inspection and
enforcement program through the Office of Regulatory Affairs (ORA) that
is responsible for ensuring the safety of food products that are
imported into the United States.

Imports of all FDA-regulated products have been increasing over the last
several years. By the end of 2005, it is expected that approximately
10.7 million import line entries will be received. In FY 2001 alone,
there were over 70 line entries of items including food products that
have been implicated in prior disease outbreaks; food products that
could pose a health threat if not processed and handled properly. While
FDA used risk-based criteria to identify which import lines among
millions should be examined or sampled, it also relied heavily on the
inspectors\' intuitive judgment. The lessons learned by many import
inspectors are lost to the Agency because the import systems do not
track the results of decisions in relation to the product implicated.
Consequently, when an importer or exporter shifts business from one U.S.
port to another, the Agency often must re-learn the lessons learned in
the previous port of entry. The Agency\'s existing systems are unable to
receive data that relates to the chain of supply or distribution and
shipping data of FDA imports. These weaknesses make it difficult to
implement recent amendments to FDA import inspection authority and to
facilitate the importation of products that comply with FDA law and
regulations.

Although FDA has increased the number of field examinations of food
imports from approximately 34,000 to over 78,000 over the last two
fiscal years, the actual percentage of examined foods compared to food
imports only slightly increased due to the rates of increase of FDA
regulated imports. These inspections must be better targeted toward the
greatest risk, which requires information system integration and
risk-based screening enhancements, to enable the Agency to manage the
volume of imported products.

Program Performance Planning

While the Import program at FDA is extensive, this particular goal has
only one performance measure. This performance measure is designed to
maximize imported product coverage through risk-based targeted
inspections. Data collected from the Field Data Systems enable the
Agency to determine if targets for the program are being met. The
performance measure is listed below:

-   Perform 97,000 physical exams and conduct sample analyses on
    products with suspect histories.

Note: No target was set for FY 2001

In FY 2005, FDA will focus much of its resources on examination and
follow-up on import shipments that pose the highest potential risks to
the U.S. consumer and market. By FY 2004 and FY 2005, FDA expects that
the new personnel brought on board in FY 2002 and FY 2003 will have
achieved the training and experience necessary to perform tasks
consistent with FDA\'s Import Strategic plan and domestic inspection
responsibilities. Thus levels for food import field examinations are
targeted at 97,000.

This target is ambitious because beginning in FY 2004 FDA will be
developing a more robust physical examination approach that merges the
assessment of information integrity with the safety and security of the
product. By FY 2005, FDA will have in place a new version of the import
field exam. The new exam will routinely include: verification that the
imported product is the same as that which was declared; assessment of
security concerns related to labeling and source country; and
traditional safety concerns. More importantly, these new exams will be
conducted on import entries selected using a more rigorous risk
assessment and management rubric.

Means and Strategies

Given the continuing explosion in number of import shipments, FDA cannot
keep pace with the increasing volume by simply expanding the number of
physical examinations. Rather, a significant effort will be launched to
develop the appropriate knowledge-based approaches that will assure that
FDA is, in fact, addressing the most serious risks. Some strategies for
improvement include:

-   Filer Evaluation Field Audits: The import filer transmits the
    required shipment-specific FDA data into the Automated Commercial
    System, a U.S. Customs comprehensive tracking system used for law
    enforcement. Within several minutes, the filer receives notification
    that either their shipment has been released or FDA wishes to review
    it. This system provides FDA with immediate data on imported
    products, provides information on potential problems, and maintains
    national historical data files to develop profiles on specific
    products, shippers, and manufacturers. Eventually all filers
    processing entries through Customs\' ACS will provide FDA
    information electronically. Periodically the Operational and
    Administrative System for Import Support, or OASIS, selects a filer
    to audit, to ensure the accuracy of the transmitted information.
    These audits of submitted data are done on a periodic basis
    depending on the number of entries, quality of the data and other
    factors;

-   Implementation of program with Canada and Mexico to enhance advanced
    identification of transshipped cargo. This program will give advance
    notification of cargo which will be transported through the United
    States, but will not be sold in the United States; and

-   Expanding in-bond entry evaluation including performing examinations
    of in-bond entries at port of arrival and port of entry or export.

The Import Physical Exam goal enhances and improves risk-based targeting
of FDA import inspection and enforcement activities toward imported
articles that pose the greatest risk to public health, safety and
security, and reducing regulatory burdens on importers who have
consistently demonstrated an ability to assess, mitigate, and manage
such risks.

Budget and Policy Priorities

Total funding for the FDA Foods program in FY 2005 is \$470.4 million,
an increase of \$59.7 million over FY 2004. In FY 2004, FDA will develop
a more robust import physical examination approach that merges the
assessment of information integrity with the safety and security of the
product. With the FY 2005 increase, FDA will implement a new version of
the import field exam. The new exam will routinely include: verification
that the imported product is the same as that which was declared;
assessment of security concerns related to labeling and source country;
and traditional safety concerns. More importantly, these new exams will
be conducted on import entries selected using a more rigorous risk
assessment and management rubric. The full cost of operating the imports
program is \$571.0 million in FY 2005 and \$504.2 million in FY 2004.
The FDA imports program supports the Department\'s strategic goal of
Enhancing the ability of the Nation\'s health care system to effectively
respond to bioterrorism and other public health challenges by protecting
our Nation\'s food supply from potential

terrorist attacks and threats.

PART Review

The FY 2004 PART shaped FDA FY 2005 planning and budgeting processes by
focusing on improving program performance and accountability, and by
identifying potential outcome goals and funding strategies. The
development of the long-term outcome goals continued during the
strategic planning process and culminated with several goals presented
during the FY 2005 PART review and incorporated into the initial budget
submission to HHS.

The FY 2004 PART noted insufficient Office of Regulatory Affairs effort
in a few areas, including foods and medical devices. FDA has taken steps
toward improvement and has used PART ratings to strengthen its budget
decisions.

The risk of imported products has long been a concern of FDA given the
continuing explosion in the number of import shipments to this country.
It is also an important part of the Agency\'s efforts to support the
President and Secretary\'s goal of reducing the terrorist threat to the
American public. The FY 2005 President\'s Budget reflects the increasing
priority of this goal, and FDA has taken action by increasing the number
of physical exams from 12,000 in FY 2001 to the target of 97,000 in FY
2005.

External Factors

FDA is monitoring regulated products in an environment that has become
significantly more complex over the past several years. Contributing to
this change are the growth in international trade leading to a tripling
of imports during the past 10 years; much more technologically complex
and diverse products both domestically and internationally; and
increasing use of the internet by industry to develop, distribute and
market their products.

**Strategic Goal 3: Increase the Percentage of the Nation's Children and
Adults Who Have Access to Health Care Services, and Expand Consumer
Choices**

Disparities in health care and health status within the U.S. population
are of great concern to HHS. The Department is working to expand health
care to all. In response to the need for a subsidized prescription drug
benefit, and better insurance protection, Congress passed the Medicare
Prescription Drug, Improvement, and Modernization Act (MMA). The Act
phases in the prescription drug benefit in FY 2004. The full benefit
begins in FY 2006. HHS also seeks to improve satisfaction among Medicare
beneficiaries, increase the number of children enrolled in the State
Children\'s Health Insurance Program (SCHIP) and Medicaid, and expand
the health care safety net. The FY 2005 budget request will continue to
expand access to critical health care services for the uninsured,
especially in underserved rural and urban areas.

HHS is committed to raising awareness among minority communities about
major health risks prevalent in their specific populations and providing
access to information on how to reduce these risks. This commitment also
includes efforts to promote cultural competence among practitioners,
thereby reducing communication barriers between health care providers
and their patients. HHS will continue to conduct and support research to
find underlying causes of racial and ethnic health disparities and
develop and disseminate effective strategies to reduce them.

HHS will expand access to health care services for targeted populations
with special health care needs. HHS will continue targeted efforts to
promote organ donation, disseminate Ryan White CARE Act resources to
underserved communities and uninsured people, support the development of
additional mental health services, and provide outreach to children with
special health care needs.

The measures under this goal are indicative of continuing strides HHS is
making towards increasing access to health care. Programs included for
measurement are the Medicare, Medicaid and SCHIP programs, the Health
Center Program, and the Indian Health Service National Diabetes Program.

MEDICARE

Centers For Medicare & Medicaid Services

FY 2005 Budget Request: \$324,597 million

FY 2005 Full Cost Budget Request: \$330,805 million

Program Background and Context

Medicare was enacted in 1965 to extend affordable health insurance
coverage to the Nation\'s most vulnerable population, the elderly. In
1972, Medicare was expanded to cover the disabled. The Centers for
Medicare and Medicaid Services (CMS) administers Medicare, the Nation\'s
largest health insurance program, which covers more than 41 million
Americans. For nearly four decades this program has helped pay medical
bills for millions of Americans, providing them with comprehensive
health benefits.

The CMS mission is to \"assure health care security\" for its program
beneficiaries. Medicare provides health insurance coverage to the
elderly and disabled, ensuring access to the same high quality health
care services as the under-65 population. The elderly have health care
costs four times that of the under 65 population. The disabled have high
total health care expenditures similar to the aged population. Medicare
provides a significant public subsidy to finance these health care
costs. In the absence of the Medicare program, the elderly and disabled
generally do not have sufficient resources to pay for health care.

In early FY 2004, the President signed into law the MMA, that provides
enhanced coverage for the lowest income beneficiaries and an immediate
prescription drug discount card for all beneficiaries until the full
plan is available nationwide. Beginning in 2006, Medicare beneficiaries
will have access to a standard Medicare drug benefit. Additionally, the
proposal includes savings for many State governments; increased coverage
for preventive services; and provisions for modernizing the drug
delivery infrastructure, as well as increased flexibility in the
administration of Medicare.

Program Performance Planning

The majority of the performance goals in the FY 2005 Annual Performance
Plan (APP) represent vast purview of Medicare. The APP has evolved with
the enactment of the new Medicare legislation. As a result, CMS has
added three new annual performance goals addressing the prescription
discount card, the Medicare prescription drug program, and Medicare
contracting reform.

With the enactment of the MMA, Medicare will give all Medicare
beneficiaries\' access to prescription drug coverage and the collective
buying power to reduce the amount they currently pay for drugs. The Act
provides enhanced coverage for the lowest income beneficiaries and an
immediate prescription drug discount card for all people with Medicare.
The new prescription drug card goal will monitor the progress of
implementation by tracking questions coming into the 1-800-MEDICARE call
center. Based on information received, CMS will modify the print
materials and the website as needed.

Beginning in 2006, Medicare beneficiaries will have access to a standard
prescription drug benefit. Although drug plan sponsors may change some
of the formulary specifications, the benefit offered by each plan must
at least be equal in value to the standard benefit. People with limited
savings and low income will receive a more generous benefit package.
Data collection will begin in 2006 to monitor the effectiveness of the
implementation phase.

\"Assuring health care security\" covers a wide array of activities
beginning with paying claims for Medicare-covered beneficiary services.
Medicare has three components: Hospital Insurance, Supplementary Medical
Insurance, and Medicare Advantage. Medicare processes over one billion
fee-for-service claims each year, is the Nation\'s largest purchaser of
health care, and accounts for more than 11 percent of the Federal
budget. The claims payment activity is supported by the CMS Medicare
Operations budget, which funds its contractors (carriers and fiscal
intermediaries) and the information technology needed for claims
processing.

One CMS goal is to demonstrate the fiscal integrity of its programs and
to be an accountable steward of public funds. CMS demonstrates this
ongoing commitment through its Medicare Integrity Program, which helps
ensure that Medicare claims are paid properly the first time. These
efforts are represented separately under Strategic Goal 8: Achieve
Excellence in Management Practices, featured later in this volume.

Section 911 of the MMA establishes the Medicare FFS Contracting Reform
Initiative (MCRI) that will be implemented over the next several years.
Under this provision, CMS will replace the current Medicare fiscal
intermediaries and carrier contracts, using competitive procedures, with
new Medicare Administrative Contractor (MAC) contracts by October 2011.
In accordance with the new legislation, CMS plans to transition 100
percent of the FFS claims workload to the new MACs over the course of FY
2006 through FY 2011. The new contracting reform measure will monitor
the progress of CMS efforts, including the development of a timeline and
funding strategy for all of the activities.

Through the Quality Improvement Organizations and other State and local
partners, CMS collaborates with health care providers and suppliers to
promote improved health status, including quality improvement in nursing
homes. In addition, through the Survey and Certification program, CMS
meets its responsibilities for assuring the safety and quality of
medical facilities, laboratories, providers, and suppliers by setting
standards, conducting inspections, certifying providers as eligible for
program payments, and ensuring that corrective actions are taken where
deficiencies are found.

CMS administers comprehensive outreach and education programs to keep
beneficiaries informed and aware of the benefits and choices available
to them. Through regular and continuous national surveys, CMS
continuously seeks to ensure that Medicare beneficiaries are aware of
the program and their options, and are satisfied with the care they
receive as well.

One ultimate goal of CMS is to assure satisfaction of its primary
customer---the Medicare beneficiary. CMS currently measures satisfaction
using beneficiary responses to questions regarding access to care and
specialists in both fee-for-service (FFS) and managed care (MC). This
performance measure is used to improve the already high satisfaction
rate beneficiaries have with the Medicare program.

-   Improve Satisfaction of Medicare Beneficiaries with the health care
    services they receive (managed care, fee-for-service)

CMS considers survey data on beneficiary access to care and access to a
specialist to be valid measures of satisfaction. Our targets are set for
a five-year period so that the percentage increases are large enough to
be statistically meaningful.

Means and Strategies

CMS will pursue accomplishment of this measure through a combination of
the following means and strategies:

-   Collecting and sharing annual data from the Consumer Assessment of
    Health Plans Survey (CAHPS) with health plans and Quality
    Improvement Organizations for use in better management of health
    plans.

-   Sharing the CAHPS data with Medicare beneficiaries through various
    means, including the National Medicare & You Education Program.

-   Ensuring strategies are in place for CMS to remain a responsive and
    dynamic Agency that serves the American public. There will also be
    focused attention on citizen-centered governance in FY 2005 and
    beyond.

-   Emphasizing citizen-centered governance by identifying significant
    processes and services, expanding resources in a way that enhances
    service to the public, being accountable stewards of Agency
    resources, and monitoring and evaluating effectiveness.

-   Communicating, collaborating, and cooperating with key customers,
    both public and private, to help achieve the desired outcomes.

Budget and Policy Priorities

In FY 2005, CMS requests a current law program level totaling \$2.8
billion for program management, a 4.1 percent increase over FY 2004. CMS
is also proposing two user fees that would provide \$205 million in
additional offsetting collections. If enacted, these fees will offset
the CMS appropriation request by \$205 million. Net of proposed and
current law user fee collections, the CMS FY 2005 discretionary
appropriation request totals \$2.5 billion for Medicare Operations,
Federal Administration, Medicare Survey and Certification, Research,
Demonstrations and Evaluation, and the CMS Revitalization Plan.

CMS FY 2005 budget priorities include:

-   Implementing the MMA;

-   Educating consumers;

-   Reducing the burden on our partners and focusing on poor performers;

-   Strategic management of human capital; and

-   Improving financial performance.

PART Review

During the FY 2005 PART process, the Medicare program was assessed by
OMB and received a score of 74 and a rating of \"Moderately Effective.\"
In general, the PART results indicated that CMS has set comprehensive
long-term performance goals that reflect the Medicare program\'s mission
across several dimensions including critical care and program
efficiency, with ambitious timeframes for meeting these goals. However,
OMB indicated that features of the Medicare program reflect its outdated
statutory design. OMB commented that the program contained some
deficiencies with respect to program and financial management. With
enactment of the new MMA in 2003, many of these issues have been
addressed. CMS has added three new annual performance goals addressing
the prescription discount card, the Medicare prescription drug program,
and contracting reform.

External Factors

A significant challenge for CMS is the availability of timely
performance data to inform decisions. CMS uses many data systems to
measure its performance. Relying on administrative, third-party, and
survey data presents certain difficulties. For example, there are
inherent time lags between actual data submission, data compilation, and
dates for performance reporting. For some data sources (e.g. surveys)
there may be a one to two year delay before data are compiled and
analyzed for release. This is especially true of health outcome goals,
where data are not available in \"real time.\" In these cases,
performance-based decision-making is a challenge.

Prior to the enactment of the MMA, Medicare was criticized as outdated
and in need of reform. The major provisions of the new law will include
a prescription drug benefit, an interim prescription drug discount card,
regulatory reform, contracting reform, the establishment of the Medicare
Advantage program and a significant amount of

beneficiary and provider education. CMS will be challenged over the next
several years to establish regulations, empower stakeholders (providers
and contractors), educate health care beneficiaries/consumers, and
implement the many provisions included in this new law.

MEDICAID and State Children's Health Insurance program

Centers For Medicare & Medicaid Services

FY 2005 Medicaid Budget Request: \$183,197 million

FY 2005 Medicaid Full Cost Budget Request: \$183,214 million

FY 2005 SCHIP Budget Request: \$4,082 million

FY 2005 SCHIP Full Cost Budget Request: \$4,267 million

Program Background and Context

Medicaid is a means-tested health car program for low-income Americans,
administered by CMS in partnership with the States. It is the primary
source of health care for a large population of medically vulnerable
Americans, including poor families, people with disabilities, and people
with long-term care needs. In coordination with the Medicaid Program,
the State Children\'s Health Insurance Program (SCHIP) has stimulated
enormous change in the availability of health care coverage for
children.

The Balanced Budget Act of 1997 created the State Children\'s Health
Insurance Program under title XXI of the Social Security Act. This
program is the largest single expansion of health insurance coverage for
children in more than 30 years and improves the access to health care
and quality of life for millions of vulnerable children under 19 years
of age. Under title XXI, States were given the option to expand Medicaid
(title XIX) coverage, set up a separate SCHIP program, or have a
combination of both a Medicaid expansion and a separate SCHIP program.

As of September 1999, all States, territories, and the District of
Columbia have approved SCHIP plans. CMS continues to review the States\'
SCHIP plan amendments as the States respond to the challenges of
implementing this program. CMS is working with the States to simplify
enrollment procedures and to improve outreach activities.

Program Performance Planning

CMS has developed four performance measures related to Medicaid and
SCHIP. With respect to SCHIP, in 1997, CMS set the goal of enrolling
five million children by FY 2005. To quantify this objective, CMS set
annual targets for FY 2000 through FY 2002 to enroll at least one

million new children in SCHIP and Medicaid per year. CMS changed the
target for FY 2003 to increase enrollment by five percent over the
previous year. This change was made because CMS exceeded the annual
targets for FY 2000 - FY 2002 and because States were facing fiscal
challenges that may have affected program outreach and enrollment.
Current economic conditions have made it difficult for the SCHIP program
to achieve its enrollment targets. Therefore, CMS is revising its
enrollment targets for FY 2004 and FY 2005 to maintain enrollment of
children in SCHIP and Medicaid at the previous year\'s levels. CMS
remains confident that the programs\' long-term goals and performance
targets for FY 2005 will be met. An example of the Medicaid and SCHIP
measures is listed below:

-   Increase the number of children enrolled in regular Medicaid and
    SCHIP

Means and Strategies

To assure that both Medicaid and SCHIP fulfill their potential, CMS has
worked with States, other operating divisions of HHS, other Federal
Government agencies and the private sector on a broad array of outreach
activities. These activities include providing technical assistance to
States, providing new resources to States to help them improve their
programs, and promoting the exchange of information among States,
community-based organizations, advocacy groups, Government grantees, and
private sector groups.

SCHIP has allowed States more flexibility to tailor their children\'s
health insurance programs to individual States\' needs under Medicaid.
For example:

-   Medicaid enrollment has increased, and correspondingly the number of
    uninsured children has decreased since the inception of SCHIP.

-   States are making progress in enrolling more children into Medicaid
    and SCHIP through better outreach and enrollment simplification
    efforts.

For SCHIP, the appropriated allotment for FY 2005 is \$4.1 billion, an
increase of approximately \$900 million over the FY 2004 allotment.

Budget and Policy Priorities

Under current law, the estimated Federal share of Medicaid gross
obligations is equal to \$183.2 billion in FY 2005. These obligations
are composed of \$172.7 billion for Medicaid benefits, \$9.4 billion for
Medicaid administrative costs, and \$1.2 billion for the Centers for
Disease Control Vaccines for Children program.

For FY 2005, the statute authorizes and appropriates \$4.1 billion for
SCHIP allotments to States, territories, commonwealths, and the District
of Columbia. Also in FY 2005, the Balanced Budget Refinement Act of 1999
(BBRA) authorizes and appropriates an additional \$32.4 million for
SCHIP allotments to commonwealths and territories. The total funds
available for CMS to grant to States, commonwealths, and territories for
the State Children\'s Health Insurance Program in FY 2005 will be \$4.1
billion. In addition, if any funding from the FY 2002 allotment is not
expended by the end of FY 2004, it will become available for
redistribution in FY 2005. Also, P.L. 108-74 extended the availability
of the SCHIP redistribution funding from the FY 1998, FY 1999 and FY
2000 allotments through the end of FY 2004. It also extended the
availability of the FY 2001 allotment through the end of FY 2005.

According to our projections of Medicaid enrollment in FY 2005, 15.2
percent or 43.6 million of the estimated 287.7 million U.S. residents
will be enrolled in Medicaid for the equivalent of a full year during FY
2005. The proportion of children and women in the U.S. who are enrolled
in the Medicaid program is far higher. The estimated 20.2 million
children to be served by Medicaid in FY 2005 represent more than one out
of every five children in the Nation.

PART Review

SCHIP was initially evaluated by OMB in the FY 2004 cycle and received a
PART score of 71; it was reassessed in the FY 2005 cycle with a score of
66. As a result of OMB\'s FY 2004 findings, CMS developed an SCHIP
Action Plan to address OMB concerns. CMS continues to develop with
States a core set of national performance measures to evaluate the
quality of care received by low-income children. A new annual
performance goal was established to use the information gathered from
States to establish formal collaborations that will improve health care
delivery and quality for Medicaid and SCHIP populations using reliable
and valid performance measures. In addition, CMS plans to expand the
Medicaid Payment Error Rate Measurement (PERM) Program developed to
measure and ultimately reduce Medicaid payment error rates to measure
SCHIP improper payments in FY 2005.

A PART assessment has not been done on the Medicaid program.

External Factors

In the face of recent fiscal challenges, a number of States may be
reversing some of their simplification efforts and reducing outreach to
try to maintain enrollment. States are using their flexibility to impose
waiting lists on SCHIP potential enrollees and reducing eligibility
levels while trying to maintain their programs. It is important to note,
however, that some States are increasing eligibility and other States
are reaching mature stable enrollment under SCHIP. Given the current
economic conditions and potential reductions in State programs,
increasing enrollment of children will be challenging.

HEALTH CENTER PROGRAM

Health Resources and Services Administration

FY 2005 Budget Request: \$1,836 million

FY 2005 Full Cost Budget Request: \$1,893 million

Program Background and Context

The Health Center program is a major component of America\'s health care
safety net for the nation\'s indigent populations. This program, which
is more than 35 years old, is a Presidential initiative to increase
health care access for those Americans who are most in need. Millions of
Americans are uninsured and lack access to a regular source of health
care. Health Centers

provide regular access to high quality, family oriented, and
comprehensive primary and preventive health care regardless of
patients\' ability to pay. The ultimate goal of the Health Center

program is to contribute to improvements in the health status of
underserved and vulnerable populations and to the elimination of health
disparities. Federal grants to Health Centers

provide about 25 percent of their revenues on average, leveraging three
dollars for each Federal dollar spent.

FY 2002 was the first year of the President\'s Health Center initiative
to create 1,200 new or expanded Health Center sites and increase the
number of clients served by 6.1 million over a five-year period. In the
first two years of the initiative, the program has created 490 sites
(271 new sites and 219 significantly expanded sites). To further ensure
quality of care, in FY 2003, the Health Center program increased funding
for Health Disparity Collaboratives, a quality initiative to improve
health outcomes for patients with chronic diabetes, cancer, asthma,
depression and cardiovascular disease. Nationally, more than 500 centers
participate in one or more collaboratives.

Program Performance Planning

The Health Center program currently has 15 annual performance measures
in the Annual Performance Plan that track success in reaching various
needy populations, expanding access points, operating efficiently, and
providing high quality primary and preventive services. HRSA continues
to develop and refine measures to determine program success through PART
review and other evaluation activities. This process will continue over
the next year as HRSA integrates its performance and budget processes.

The primary source of performance data is the program\'s Uniform Data
System that collects aggregate administrative, demographic, financial,
and utilization data annually from each organization receiving support.
These data are regularly validated through over 1,000 automated edit
checks and onsite performance reviews. Other data sources include
periodic surveys of representative samples of Health Center patients and
their medical records, and special performance assessment studies. The
Health Center program has recently launched a Sentinel Centers Network
comprising a representative sample of all centers. When fully
operational, the Sentinel Centers Network will routinely provide
patient-level data for timely investigation of program and policy
issues. This will reduce the need for special periodic surveys of Health
Center users and medical records. Key performance measures for the
Health Center program are:

-   In 2005, broaden access to health care services for the uninsured
    and underserved by funding 332 new and expanded health center sites
    and increasing to 14.8 million the number of uninsured and
    underserved persons served by Health Centers.

-   Continue to assure access to preventive and primary care for
    racial/ethnic minority individuals by serving 9.6 million
    racial/ethnic minority persons in 2005 (65% of total patients
    served).

Growth in the number of persons served by Health Centers is an indicator
of improved access to care for the nation\'s most vulnerable
populations. The Health Center program served 11.3 million people in
2002. The increase between 2001 and 2002 of one million additional
persons served represents the single largest annual increase in the
history of the program. With such increases, the Health Center program
is on target for meeting the 5-year growth initiative goal.

Access to health care is key to eliminating health disparities. The
number of racial/ethnic minority individuals served by the Health Center
program increased from 6.6 million in 2001 to 7.2 million in 2002,
continuing a steady growth consistent with the overall growth in program
clients. The proportion of racial/ethnic minority individuals has
remained at 64 percent of total clients, only one percentage point below
the target of 65 percent. The President\'s Health Center initiative
includes service capacity expansions for existing centers and
development of new service sites. Some of these new centers and sites
are or will be in underserved rural and frontier areas that do not have
large numbers of racial/ethnic minorities, thus impacting the program\'s
ability to maintain and increase the proportion of minority clients
served. With substantial and rapid increases in the total number of
clients served and expansions in areas with relatively small proportions
of racial/ethnic minorities, a racial/ethnic minority representation of
65 percent of the Health Center program total patient population is a
challenging performance target.

Means and Strategies

The Health Center program grants support a variety of community-based
public and private nonprofit organizations for the operation of health
centers, forming Federal, State and community partnerships to assure
access to needed care for vulnerable populations. The program has three
key overarching strategies for assuring both the viability and value of
these essential safety-net resources:

-   Expanding the network. Through the President\'s Health Center
    initiative, the program will create 1,200 new or significantly
    expanded health center sites and serve an additional 6.1 million
    persons by FY 2006.

-   Strengthening existing network of centers. While fostering growth in
    health center sites and clients, the Health Center program strives
    to maintain the base by supporting existing centers to sustain and
    enhance both the numbers of persons served and the care provided to
    them.

-   Ensuring high quality. The program engages in continuous quality
    improvement activities, exemplified by: (1) efforts to increase the
    number of centers accredited by national accrediting bodies; (2)
    aggressive risk management practices; and (3) health disparities
    collaborative that focus on developing and sharing best practices
    for the treatment and management of chronic diseases that are
    especially prevalent in the populations served.

Within this framework, the Health Center program emphasizes prevention,
early detection and timely intervention, as well as the delivery of
culturally and linguistically competent care.

Budget and Policy Priorities

The total budget request for FY 2005 is \$1.8 billion, an increase of
nearly \$219 million over FY 2004. The FY 2005 requested funding will
support the President\'s Health Center initiative by enabling the
program to create 332 sites (176 new sites and 156 significantly
expanded sites) in areas of greatest need. Total FY 2005 funding will
support service to an additional

1.6 million patients over the number served in FY 2004.

PART Review

A PART review of the Health Center program was conducted for the FY 2004
budget. The

program was rated Effective, with a score of 85, one of the highest
among all government

programs assessed that year. The assessment found that the program
purpose is clear and designed to have a unique and significant impact,
the program uses performance information to improve annual
administrative and clinical outcomes, and the program is making progress
in achieving its long-term outcome goals. This positive assessment of
the Health Center program informed decisions to continue to fund
existing centers and develop new centers and expanded sites.

In response to the PART observation that the program has struggled to
estimate liabilities to the government that arise from malpractice
coverage extended to Health Center employees under the Federal Tort
Claims Act, the Health Center program has implemented a new database
that enables the program to project liabilities related to tort claims.

External Factors

The future viability and performance of the Health Center program are
impacted by the following factors:

-   Because the Federal grant funds provide approximately 25 percent of
    the revenues of Health Centers, they rely heavily on Medicaid,
    additional patient revenue, and other State and local support for
    non-patient revenue. Given economic pressure on State budgets,
    Medicaid and other State funding can be variable, thus affecting the
    financial stability of some Health Centers.

-   The nation\'s changing demographic profile, particularly the aging
    of the population, confronts Health Centers with a growing number of
    persons with chronic diseases and comorbidities. This puts extra
    pressure on centers to maintain efficiency and productivity in the
    face of shifts in case-mix.

IHS National Diabetes Program

Indian Health Service

FY 2005 Budget Request: \$154 million

FY 2005 Full Cost Budget Request: \$154 million

Program Background and Context

The Indian Health Service (IHS) National Diabetes Program is an integral
part of the IHS Hospitals and Health Clinics program. The mission of the
IHS National Diabetes Program is to develop, document and sustain a
public health effort to prevent and control diabetes in American
Indian/Alaska Native (AI/AN) people. The program works with communities
to prevent and treat diabetes, as well as oversee the Special Diabetes
Program for Indians Grant Program (SDPI).

Development of the regional Model Diabetes Programs is a major
achievement of the IHS National Diabetes Program. The Model Diabetes
Programs are designed to expedite care and provide education to people
with diabetes, and also to translate and develop new approaches to
diabetes control that serve as models for other Indian communities
facing similar problems. In addition, Area Diabetes Consultants within
each IHS Area provide consultation and technical assistance related to
clinical activities and programmatic issues to Indian, Tribal, and Urban
(I/T/U) facilities and SDPI programs.

Moreover, the Indian Health Service has historically included diabetes
quality of care measurements within its Annual Performance Plan. The
current IHS Strategic Plan includes this performance indicator. IHS
emphasis on diabetes care within the Hospital and Health Clinics program
recognizes the role of diabetes as a major cofactor in morbidity and as
well as the major cause of mortality among AI/AN people.

Program Performance Planning

Six IHS performance goals reflect the commitment of IHS to prevention
and control of the diabetic epidemic in AI/AN communities. In FY 2004,
IHS modified the Annual Performance Plan diabetic performance indicator
to include a complementary indicator-the percentage of patients that are
in poor diabetic control. This new indicator (replacing the percentage
of diabetics in the service population) allows IHS to emphasize the
impact of improved control on costs as well as morbidity.

The IHS Diabetes Program conducts a yearly medical record review of a
random sample of over 20,000 charts in I/T/U facilities in order to
assess compliance with the IHS Standards of Care for Diabetes. These
standards are a set of clinical parameters of care and patient
management that have a recognized evidence-based correlation with
improved diabetic patient outcomes. This record review is the IHS
Diabetes Care and Outcomes Audit and uses a strict protocol to assure
statistical integrity and comparability of both process and outcome
measures over time. Each year, facility-specific values are reported for
each indicator, as well as values for each Area and IHS-wide. Trends
over time for I/T/U facilities, service units, Areas and IHS-wide are
also constructed for indicators 2-5.

In FY 2003, data for diabetes performance is based upon results from an
IHS-developed software application that queries local health information
systems (RPMS- Resource and Patient Management System) for clinical
quality results. In FY 2003, IHS queried over one million patient
charts; over 65,000 charts of diabetics were electronically reviewed to
obtain the results of the diabetic indicators.

One key measure of the IHS National Diabetes Program is:

-   Maintain the proportion of Indian, Tribal, and Urban (I/T/U)
    facilities Native American patients with diagnosed diabetes that
    have demonstrated improved glycemic control blood sugar levels).

The following chart demonstrates the targeted and actual percentages of
AI/AN patients with ideal blood sugar control from 1999 through 2005.
Data for actual percentages is reported through 2002.

IHS determined this measure to be a good reflection of diabetes care
within the AI/ AN community. Diabetic control is contingent upon access
to health care (including lab and appropriate pharmaceuticals), patient
education and understanding about the importance of blood sugar control,
as well as many patient controlled factors (diet; exercise; medication
compliance; for the adolescent diabetic, an increased interest in
health; etc). Moreover, if blood sugar is adequately controlled,
co-morbidities significantly decrease, resulting in decreased health
care costs, as well as increased quality of life.

Targets for the IHS diabetes program continue to be ambitious. Because
IHS data indicates at least a 3-4 percent increase in the number of
diabetics that receive services through the I/T/U network annually,
maintaining the percentage of diabetics in the population who are
achieving good blood sugar control reflects an increase in the actual
numbers of patients treated.

Means and Strategies

IHS met the 2002 ideal glycemic control indicator. The 2002 performance
demonstrated the improvements made compared to the FY 2001 performance
level for ideal glycemic control in patients with diagnosed diabetes.
The graph above illustrates IHS ongoing ability to improve glycemic
control in AI/AN populations, as well as improve the percentage of
patients in ideal control.

Glycemic control refers to how well the blood sugars are controlled in a
person with diabetes. It is measured with a blood test called the
Hemoglobin A1c. The IHS Diabetes Care and Outcomes Audit process divides
these levels of control into \"Ideal\" (\<7%); \"Good\" (7.0-7.9%);
\"Fair\" (8.0-9.9%); \"Poor\" (10-11.9%); and \"Very Poor\" (\>12%)
categories, based on national diabetes care standards. (The diabetic
audit of glycemic control is a reliable and consistent data source based
on the patient data management software-RPMS-lab package used by the
majority of I/T/U facilities, which is externally validated through
chart reviews.)

IHS uses several treatment and prevention strategies to achieve glycemic
control in the AI/AN population:

-   Glucose lowering medications are used to achieve glycemic control.
    Many new glucose-lowering medications have been introduced on the
    market for the past 7 years. These medications are potent and quite
    effective. Efforts to achieve this measure also include the
    negotiation of wholesale/at cost purchase of newer, more effective
    (but considerably more expensive) medications for AI/AN diabetic
    patients.

-   Increased emphasis on patient education about nutrition, diet and
    exercise; this is coupled with the IHS Health Promotion/ Disease
    Prevention Initiative.

-   Availability of \'best of practice\' guidelines on the IHS Web site
    for community and health care facility guidance.

-   In addition, IHS has developed and deployed a clinical software
    application that allows sites to track and provide timely feedback
    on the achievement of glycemic control, as well as other diabetic
    indicators.

-   The total IHS budget requested for FY 2005 will allow IHS to invest
    in more potent pharmaceutical agents for its patients with diabetes,
    increased emphasis on patient education (to include diet and
    exercise), diabetic case management, and additional electronic
    diabetic reminders.

Budget and Policy Priorities

Proposed funding levels for FY 2005 represent an estimate of the
Hospitals and Clinics budget that supports glycemic control efforts as
part of diabetes treatment services. The FY 2005 amount is a slight
increase over the FY 2004 estimate because of anticipated pay increases
for staffing costs.

The Diabetes program complements the Secretary's Steps to a Healthier
U.S. Initiative. Ongoing emphasis on health promotion and disease
prevention is inherent in this emphasis on diabetes care. In addition,
this indicator is reflective of quality of care to a minority
population; program results are consistent with those reported by other
health care plans. Providing the requested additional resources will
help ensure that IHS can keep pace with the diabetic epidemic in AI/AN
communities, and impact the diabetes racial disparity that currently
exists.

PART Review

The FY 2004 IHS PART included a review of the IHS Direct Federal
Programs. This includes the Hospital and Clinics program, which includes
diabetes care activities. PART review results have been shared with all
IHS clinical providers and health care facilities. This increased
emphasis on sharing performance, and specifically, PART results with
local I/T/U facilities has resulted in improved clinical care at this
level, which is occurring in conjunction with the targeting of resources
to address this critical area of treatment.

The PART review process has also focused attention on the continued
importance of assuring valid and reliable performance data addressing
diabetic care at all levels of Indian health (i.e., IHS, Tribal and
Urban). IHS addressed this issue in both the Urban Indian Health Program
and RPMS/IT PART reviews that were part of the FY 2005 budget process.

External Factors

Increasing rates of childhood obesity and the concurrent emergence of
Type 2 diabetes in children pose a growing public health concern for
IHS. Type 2 diabetes and obesity rates are disproportionately high for
AI/AN children: data from 1999 studies showed the prevalence of obesity
among AI/AN children to be 39 percent, versus 15 percent for all U.S.
children. Recent data indicates that this gap has increased in the past
4 years. The effects of commercial advertising, the convenience and low
cost of \"fast foods,\" and the availability of vending machines run
counter to many of the healthy lifestyle messages and activities being
promoted in American Indian/Alaska Native communities. Consequently,
efforts to address childhood obesity will directly affect diabetes
program outcomes in the long term.

**Strategic Goal 4: Enhance the Capacity and Productivity of the
Nation's Health Science Research Enterprise**

HHS recognizes the important role research plays in furthering its
overall mission of improving the Nation\'s health. As a result, many of
the strategies that HHS has identified as important components in
achieving its other strategic goals incorporate a research base. This
goal therefore focuses on creating the underlying knowledge and
strategies that improve and maintain the research infrastructure that
produces advances in health science.

HHS is committed to advancing the understanding of basic biomedical and
behavioral science and how to prevent, diagnose, and treat disability
and disease. In order to accomplish this objective, HHS will continue to
support basic, clinical and applied biomedical, behavioral and health
services research that meets stringent criteria for scientific quality
through a peer review process. Moreover, HHS has developed and is
implementing processes for setting research priorities to ensure that
research is responsive to public health needs, scientific opportunities,
and advances in technology.

HHS places a high priority on improving the coordination, communication
and application of health research results. Strategies to meet this
objective include:

-   Providing easy access by academia and industry to HHS databases and
    findings from HHS research while maintaining appropriate privacy and
    confidentiality protections;

-   Establishing partnerships with health professional associations,
    industry groups, patient representatives, community groups and
    purchasers of care to more widely disseminate research findings; and

-   Supporting translational research to determine how innovative,
    effective interventions can be applied in actual settings and
    populations, including the means to reach diverse communities. This
    research also supports the development of data-based quality of care
    and outcome measurement systems to track the adoption of
    evidence-based practices.

HHS commitment to enhancing the capacity and productivity of the
Nation\'s health science research enterprise is demonstrated by the
development of the map of the human genome. Investment in this basic
science research will provide important information for identifying
patterns of genetic variation across all human chromosomes. The
following narrative describes key performance measures for the National
Institutes of Health (NIH) HapMap Project, which will contribute to
research identifying the genetic factors underlying common diseases.

Map of Genetic Variation across all Human Chromosomes

National Institutes of Health

FY 2005 Budget Request: \$5 million

FY 2005 Full Cost Budget Request: \$5 million

Program Background and Context

The mission of the National Institutes of Health (NIH)-to uncover new
knowledge that will lead to better health for everyone\--derives from
Section 301 of the Public Health Service Act. Begun as a one-room
Laboratory of Hygiene in 1887, NIH today is one of the world\'s foremost
health research centers. NIH is composed of 27 Institutes and Centers
(ICs), whose research activities extend from basic research that
explores the fundamental workings of biological systems and behavior, to
studies that examine disease and treatments in clinical settings, to
prevention, and to population-based analyses of health status and needs.
The Office of the Director, NIH, provides leadership, oversight, and
coordination for the enterprise.

The ICs are the NIH \"visible\" to most Americans. Some of the ICs focus
on diseases (e.g., cancer, diabetes); others concentrate on organ
systems (e.g., heart, eye, kidney), whereas others focus on a stage of
life (e.g., children, the aging population). Yet, no less essential to
the Nation\'s health are NIH ICs that address overarching scientific
needs and opportunities, for example, sequencing the human genome, an
effort that generated knowledge fundamental to the research efforts
across all of NIH. In April 2003 the Human Genome Project, led by the
National Human Genome Research Institute (NHGRI) of NIH, essentially
completed the sequence of the human genome and released it into a
publicly accessible database for all to view and use. That same month,
the NHGRI published an ambitious \"Vision for the Future of Genomic
Research\" that lays out a bold agenda for the next phase of genomics.

One use of the human genome sequence has been to study the role that
genetic variation plays in health and disease. Virtually all diseases
have a genetic component. The DNA sequences of any two people are 99.9
percent identical. However, there are at least 10 million DNA sites
where people commonly differ in their DNA sequences, and some of these
variations greatly affect an individual\'s risk for disease or response
to drugs.

An important goal of genetic research is to identify genes that
contribute to disease. For single-gene disorders such as cystic fibrosis
or Huntington disease, current methods often are sufficient to find the
genes involved. Most people, however, do not have single-gene disorders.
Rather, their disorders result from complex interactions of multiple
genetic and environmental factors. Unfortunately, strategies that have
worked well to map the genes for single-gene disorders generally lack
the power to map such multigene disorders, and other approaches are
needed.

Several newer strategies should be more successful in identifying the
hereditary factors in

common diseases such as diabetes, heart disease, and cancer. Many of
these approaches depend on understanding the ways in which genetic
variations are correlated. Using this information for disease-gene
identification will result in considerable savings in time, effort, and
cost.

Sites in the genome where individuals differ in their DNA spelling by a
single letter are called single nucleotide polymorphisms (SNPs). Recent
work has shown that about 10 million SNPs are common in human
populations. SNPs are not inherited independently; rather, sets of
adjacent SNPs are inherited as blocks. The specific pattern of
particular SNP spellings in a block is called a haplotype. Although a
region of DNA may contain many SNPs, it takes only a few SNPs to
uniquely identify or \"tag\" each of the haplotypes in the region. This
presents the possibility of a major shortcut in identifying hereditary
factors in disease. Instead of testing 10 million SNPs, a rigorously
chosen subset of about 400,000 SNPs could provide most of the essential
information. These \"tag SNPs\" can be organized in a \"HapMap,\" a
catalog of the haplotype blocks and the SNPs that tag them. The HapMap
will be an important tool that researchers will use in future studies to
identify the genetic factors underlying common diseases.

Program Performance Planning

NIH is using one measure in each fiscal year to assess the performance
of the HapMap Project, an international collaboration for which NHGRI
serves as the lead agency. The measures will provide useful information
for assessing the progress of the HapMap Project. In addition to
measures included in the NIH Annual Performance Plan, the Agency has
measures of program efficiency, for example, the rate at which SNPs are
discovered.

Measurement data will come from:

-   Documented samples availability from the non-profit Coriell
    Institute of Biomedical Research, in New Jersey.

-   Publicly accessible databases of SNPs, genotypes, haplotypes, and
    haplotype maps.

The HapMap Project includes a quality assessment component that uses
several criteria to assess the quality and validity of the data. Only
data that has undergone extensive validation and quality assessment
procedures will be used to develop the HapMap.

Key performance measures for FY 2003, FY 2004, and FY 2005 respectively
are as follows:

-   Obtain additional consent for genotyping from the donors of existing
    blood samples taken from US residents of Western and Northern
    European ancestry, and begin genotyping 300,000 SNPs in those
    samples.

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-   Collect blood samples from populations in Japan, China, and Nigeria;
    prepare a complete collection of an additional 3 million SNPs and
    release them in public databases.

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-   Develop a first-pass draft haplotype map containing 600,000 SNPs.

While the measures are objective (they require reaching definitive
end-points), they are not quantitative and cannot be presented in a
graph.

Developing a first-pass draft haplotype map containing 600,000 SNPs is
an ambitious goal because it will pinpoint, for the first time, genetic
variations among individuals across all human chromosomes. Genetic
variations can then be correlated not only to diseases, but to disorders
that arise due to individual responses to medications, the environment,
and other factors. The long term benefit of understanding the influence
of genetics on health and disease is that interventions can be made more
precise and predictable and therefore lead to genuine improvements in
public health.

Performance Results

By the end of FY 2003, all of the living donors who provided the
previously existing 90 US samples specifically consented to their
samples being used for developing the HapMap. Also, a total of six
research groups have performed genotyping of 132,000 SNPs in these
samples to date.

The HapMap Project has already discovered many more SNPs and is
currently ahead of schedule in this regard. These additional SNPs will
not only speed the pace of the HapMap project\'s completion, but they
will also greatly enhance other basic biomedical research dependent on
SNP analysis.

Means and Strategies

To conduct the HapMap Project, NIH helped initiate and continues to
coordinate an international consortium of researchers in Canada, China,
Japan, Nigeria, the United Kingdom, and the United States, including
eight genotyping research groups, four sample collection groups, five
data analysis groups, and a data coordination center. NIH ICs and the
Office of the Director solicited cooperative agreement applications for
the large-scale genotyping. Also, a group of advisors was established to
develop a sampling strategy that meets both the need for high-quality
scientific research and the need for the Project to adhere to the
highest ethical standards to protect participants.

The types of activities that will be used to accomplish the goal are as
follows:

-   The consortium will identify an additional three million SNPs needed
    to fill in areas where the current density of SNPs in public
    databases is not sufficient.

-   The consortium will collect consents and samples from a total of 270
    individuals who come from one of four populations (US residents with
    ancestry from Western and Northern Europe and individuals from
    Japanese, Han Chinese, or Yoruba (Nigeria) populations).

-   The consortium will develop scientific strategies to choose which
    SNPs to study, assess the quality of the data, and derive haplotypes
    from the SNP data.

-   The genotyping research groups will test the samples for up to one
    million SNPs to discover the pattern of variation among the samples.

-   These genotype data will be analyzed to derive haplotypes, develop
    the HapMap, and then choose the SNPs that contain the most
    information on the patterns of genetic variation to make the HapMap
    most useful for later studies relating genetic variation to health
    and disease.

Budget and Policy Priorities

The NIH budget request for FY 2005 of \$28.6 billion will include \$4.6
million needed for accomplishing the performance goals of the HapMap
Project. This is a decrease of \$4.2 million from the FY 2004 funding
level of \$8.8 million. The difference between FY 2005 and FY 2004
funding levels is because most of the funds were for upfront investment
for sample collection, SNP discovery, and genotyping will have been
awarded in FY 2003 and FY 2004. While most of this work will be
conducted during FY 2003 and FY 2004, some genotyping, analysis, and
continued interaction with the communities will be conducted in FY 2005.
The estimated full cost of operating this activity for FY 2005 is \$4.8
million, which is fully funded for the FY 2005 Budget. Research Project
Grants (RPG\'s) are the funding mechanism in FY 2005. This funding level
will allow the U.S. to fulfill its commitments in the international
consortium for HapMap construction.

The HapMap program is an example of the President\'s support of
innovative research that has the potential for far-reaching results.
Scientists will expand upon the knowledge that arose from the success of
the human genome sequencing project with the HapMap, as they will be
able to use it to investigate what variations in the genome sequence are
associated with a hereditary disease or disease risk. In turn, this
information will provide biomedical researchers a more rational basis
for the development of new therapies and prevention strategies.
Additionally, these innovations will offer clinicians an improved means
for diagnosing disease and a clearer rationale for treatment. Such
advancements directly relate to the HHS goal of advancing science and
medical research to prevent, diagnose, and treat disease and disability.
The budget requested for this program is based on the anticipated
results of developing a first-pass haplotype map containing 600,000 SNPs
by 2005. This map will provide the next generation tool to enhance the
understanding of hereditary factors that contribute to health and
disease. Finally, the HapMap effort illustrates how basic science and
medical research can be integrated to enhance the capacity and
productivity of the Nation\'s health science research enterprise

PART Review

This program has not been subjected to PART review.

External Factors

An international consortium of researchers is developing the HapMap.
This partnership is vital for undertaking the Project, but could affect
the time it takes to complete it. The NIH is supporting analysis of 30
percent of the genome; changes in support of science in the other
countries could accelerate or decelerate their efforts and thus the time
it takes to finish the entire Project. There are many challenges in
collecting blood samples in Japan, China, and Nigeria, so these sample
collections could be delayed or even cancelled. The HapMap is based on
pilot data showing how genetic variation is organized in parts of the
genome; it is possible that the entire genome will turn out to have
different patterns than seen initially, so more or fewer SNPs may be
needed to develop the HapMap than currently thought. Finally, the study
of additional populations from other geographic areas, currently being
collected as part of a pilot project, may indicate that additional DNA
samples from other parts of the world need to be included in the HapMap
to make this powerful research tool applicable to all human population
groups.

**Strategic Goal 5: Improve the Quality of Health Care Services**

Improving the quality of life and health in the United States involves
improving the quality of the health care services that people receive.
This strategic goal aims to improve the quality of health care services
by reducing medical errors, improving consumer and patient protection,
and accelerating the development and use of electronic health
information. To achieve this goal, HHS will focus on implementing a
variety of strategies designed to improve the delivery of health care
services including the development and dissemination of evidence based
practices, information systems and new technologies for the home and
clinical setting, and improved reporting systems for medical errors and
adverse events including those related to medical devices and drugs.

Health quality improvement at HHS also means translating new knowledge
of effective health services into strategies, educational tools, and
information to help clinicians and health care policy makers improve
health care quality. HHS will work to expand provider networks to
disseminate health care quality information. This health care quality
information will also be more widely available through several new
channels to promote awareness of consumer and patient protections and
choices.

HHS will provide leadership to promote the development of a national
health infrastructure that takes advantage of the most current
technology available. This will involve attention to the secure and
confidential treatment of health information, adoption of national data
standards, and research on the applications of a national health
information infrastructure that serves consumers, patients,
professionals, and other decision makers alike.

Illustrative of HHS commitment to reducing medical errors is the Food
and Drug Administration (FDA) Medical Product Surveillance Network
System. When fully implemented this system will reduce device-related
medical errors, serve as an advanced warning system, and create a
two-way communication channel between FDA and the user-facility
community.

MEDICAL DEVICES & RADIOLOGICAL HEALTH

Food and Drug Administration

FY 2005 Budget Request: \$252 million

FY 2005 Full Cost Budget Request: \$305 million

Program Background and Context

The Food and Drug Administration (FDA) Medical Devices and Radiological
Health Program is responsible for ensuring the safety and effectiveness
of medical devices and eliminating unnecessary human exposure to manmade
radiation from medical, occupational, and consumer products.

A key element in the FDA program to regulate medical devices is the post
market reporting system through which the Agency receives reports of
serious adverse events. Such reporting forms the basis for corrective
actions by the Agency, which include warnings to users and product
recalls. This is especially true as FDA moves toward less direct
involvement in the premarket review of lower-risk devices. The Medical
Product Surveillance Network (MedSun) is a surveillance system composed
of a network of user facilities that report adverse events associated
with medical devices. When fully implemented, MedSun will reduce
device-related medical errors; serve as an advanced warning system;
create a two-way communication channel between FDA and the user-facility
community; and act as a laboratory to investigate questions about the
use of medical devices.

Once national representation is achieved among the network of user
facilities, MedSun will work to obtain reports about problems with
medical devices that constitute a representative profile of user
reports. MedSun provides FDA with the health information it needs to
identify patient safety concerns. The network is based on the premise
that a select group of highly trained reporting facilities can provide
high quality, informative reports that can be representative of user
facility device problems in general.

An example of the how MedSun can improve the quality of health care
services comes from a March 2003 report citing potentially serious
problems encountered with amniotic fluid used in amniocentesis. Through
FDA investigations into the issue, it was found that a rubber stopper
used in two widely used brands of syringes contained toxic elements,
creating serious health risks to women undergoing this procedure. FDA
worked with the syringe manufacturers to draft a letter to customers
about this potential problem and consulted with the American College of
Genetics. The College sent an alert about rubber toxicity problems to
its membership. Because of the problem that was identified by MedSun,
the syringe manufactures are taking steps to improve the product by
making changes in the processing of the rubber stoppers.

Program Performance Planning

MedSun has a goal to implement a comprehensive program to regulate
marketed medical devices using a post market reporting system through
which FDA receives reports of problems with medical devices. In addition
to its program specific purpose, MedSun is also the FDA pilot for
establishing a network of user facilities that will require user
reporting for only a subset of facilities. During FY 2001, FDA began
feasibility testing with 25 hospitals and worked on software changes
needed for website health data security. In FY 2002, FDA adjusted the
performance goal downward from 125 facilities to 80 facilities. FDA had
to delay recruitment efforts at that time to address various policy
issues within the Agency, and to make major software changes needed to
respond to new information technology security demands. By the end of
2003, FDA was able to recruit 180 facilities. For 2004, with increased
funding, FDA will be able to expand the enrollment to 240 facilities.

The following is the FDA MedSun performance measure for FY 2005:

-   Expand implementation of the MedSun System to a network of 250
    facilities.

Data collected from Adverse Events Reports allows the Agency to
determine if targets for the program are being met.

The performance measure is designed to achieve and maintain a desired
capacity of reporting systems. MedSun is one part of the FDA long-term
outcome goal for increasing the patient population covered by active
surveillance.

Means and Strategies

MedSun and linkages with other health care systems form the FDA first
line of defense against medical errors. While MedSun was primarily
designed to track and analyze adverse events due to medical devices,
plans are in place to expand the network to include a study to evaluate
procedures for collecting data on problems with laboratory tests
(pathology and in-vitro diagnostic tests) and to evaluate the
feasibility of including hospital laboratory staff. The following MedSun
activities planned for FY 2005 support achievement of the performance
measure and support the Department\'s initiative to improve the quality
of health care services:

-   Increase the FY 2005 enrollment to 250 facilities in the MedSun. FDA
    will reach this level by recruiting a few new facilities and
    replacing those facilities that choose to rotate out of the system.
    FDA will use these facilities to determine the effectiveness of
    various incentives, as laboratories to obtain specific medical
    product information, and to pilot various types of feedback to
    encourage facility reporting;

-   Expand the lab-reporting project to target surveillance, initially
    piloted in FY 2003 and FY 2004 into all agreeable MedSun sites.
    Expansion of the lab-reporting project will allow FDA to evaluate
    procedures for collecting data on problems with laboratory tests and
    the feasibility of including hospital laboratory staff.

As funding becomes available from the Center for Devices and
Radiological Health (CDRH), MedSun contractors will coordinate with the
Center for Drug Evaluation and Research (CDER) to continue
implementation of drug MedSun. MedSun is designed to train hospital
personnel to accurately identify and report injuries and deaths
associated with medical products. The MedSun model, currently designed
to track and analyze adverse events due to medical devices, will be
expanded to include drug products. Initial work included a feasibility
and acceptability assessment of a small regional group of hospital
pharmacists about incorporating MedSun and to integrate risk manager
reporting on devices with the reporting of adverse drug events and
medication errors by hospital pharmacists or other personnel.

Budget and Policy Priorities

Total funding for the Medical Devices and Radiological Health program in
FY 2005 is \$251.8 million, an increase of \$27.1 million over the FY
2004 level. The full cost for operating the Medical Devices and
Radiological Health program is \$304.7 million in FY 2005 and \$272.5
million for FY 2004. The FY 2005 funding increase in the Medical Device
and Radiological Health program is provided primarily for pre-market
review of medical devices, not increased funding for MedSun. However,
within existing resources, MedSun will continue to refine the program
and will recruit another 10 facilities into the system for a total of
250 facilities in FY 2005. Implementation of MedSun will result in an
enhanced adverse events data system and will provide linkages with other
health care systems as the first line of defense against medical errors.
MedSun is also the primary surveillance system that supports the
Agency\'s long term outcome goal to increase by 50 percent the patient
population covered by active surveillance of medical product safety by
2008. This goal supports the HHS strategic goal of Improve the Quality
of Health Care Services by identifying adverse events earlier,

thereby reducing risks to public health and ensuring the safety of
available medical devices.

PART Review

The FY 2004 PART shaped FDA FY 2005 planning and budgeting processes by
focusing on improving program performance and accountability, and by
identifying potential outcome goals and funding strategies. The FY 2004
PART review and strategic planning process also fashioned the FY 2005
budget request by encouraging Agency management to propose user fees to
supplement areas that needed more resources to improve program
performance and accountability. The development of the long-term outcome
goals continued during the strategic planning process and culminated
with several goals presented during the FY 2005 PART review and
incorporated into the initial budget submission to HHS.

External Factors

The success of MedSun will continue to be dependent on upon continued
participation and the willingness of health care facilities to
participate in the program. Although FDA is responsible for the
implementation of MedSun, the Agency cannot force facilities to
participate in MedSun. FDA will work with the health care community to
gain greater participation in MedSun.

**Strategic Goal 6: Improve the Economic and Social Well-Being of
Individuals, Families, And Communities, Especially Those Most in Need**

HHS promotes and supports interventions that help disadvantaged and
distressed individuals, families, and communities improve their economic
and social well-being. The Department targets interventions toward
low-income families, including those receiving Temporary Assistance to
Needy Families (TANF), children, the elderly, persons with disabilities,
and distressed communities.

To achieve this strategic goal, HHS will continue to support efforts to
increase the independence of low-income families, TANF recipients, the
disabled, older Americans, Native Americans and refugees. Also, the
Department will support community and faith-based organizations that are
providing services to individuals transitioning from welfare to
self-sufficiency. The Department continues to focus on increasing the
proportion of older Americans who stay active, healthy and independent
and provide assistance to families who are the mainstay of long-term
care for elderly persons.

Representative performance measures discussed in this section include
the number of TANF recipients who become newly employed and remain
employed and targeting services supported by Administration on Aging
programs to elderly residents of rural areas.

Temporary Assistance for Needy Families

Administration for Children and Families

FY 2005 Budget Request: \$17,149 million

FY 2005 Full Cost Budget Request: \$17,173 million

Program Background and Context

The purpose of the Administration for Children and Families (ACF)
Temporary Assistance for Needy Families (TANF) program is to provide
time-limited assistance to needy families; reduce dependency by
promoting job readiness, work and marriage; prevent out-of-wedlock
pregnancies; and encourage the formation and maintenance of two-parent
families. Under Title IV-A of the Social Security Act, as amended by the
Personal Responsibility and Work Opportunity Reconciliation Act of 1996
(PRWORA), States and Territories receive a block grant allocation and
are required to operate their own programs; Tribes have the option to
run their own programs. States and Tribes determine eligibility and
benefit levels and services offered. ACF provides leadership to help
States, Territories and Tribes as they design and implement their
programs and move families from welfare to work, while protecting the
well-being of children through child care and other services.

Since the enactment of TANF in 1996, millions of families have avoided
dependence on welfare in favor of greater independence through work.
Employment among low-income single mothers (earning below 200 percent of
poverty), reported in the U.S. Census Bureau Current Population Survey
(CPS) has increased significantly since 1996. Although it declined
slightly in 2002, it is still eight percentage points higher than in
1996 - a remarkable achievement, particularly since it remained high
through the brief recession in 2001. Among single mothers with children
under age six---a group particularly vulnerable to welfare
dependency---employment rates are 13 percentage points higher than in
1996.

In addition to more low-income single mothers entering the work force,
employment data specifically for welfare recipients, which is used to
rank States competing for the TANF High Performance Bonus, reflected
strong job retention and earnings - 36 percent of unemployed adult
welfare recipients entered the work force in FY 2002 and 59 percent of
those who started work were still employed six months after getting a
job. Average quarterly earnings increased 33 percent for current and
former welfare recipients, from \$1,935 in the first quarter of
employment to \$2,578 in the third quarter.

There were 2,032,157 families receiving TANF cash benefits in June 2003,
the most recent month for which data are available. The total represents
a five percent decrease from January 2001 and a 54 percent decrease from
August 1996, when TANF was enacted. A total of 4,955,479 individuals
were receiving TANF benefits in June 2003, 9.2 percent fewer than in
January 2001 and 60 percent fewer than in August 1996.

Program Performance Planning

The primary goal of the TANF program is to move recipients from welfare
to work and self-sufficiency. ACF tracks a number of measures on
employment achievement and family formation in support of this goal.
TANF shares a common goal with a number of Federal agencies working to
improve participants\' employment and earnings. In coordination with the
Office of Management and Budget, these agencies (ACF/HHS, and the
Departments of Labor, Education, Housing and Urban Development,
Interior, and Veterans Affairs) developed a common set of four measures
for job training and employment. Data for these measures will be based
on State Employment Security agency (SESA) wage records and
administrative records. (The wage record data are subject to SESA
screening and editing procedures, as well as the ACF matching protocol
that eliminates duplicate and outlier wage records.) One of these
measures, listed below, reflects the TANF core goal to move individuals
from welfare to work and self-sufficiency:

-   Increase the percentage of those employed in a quarter that are
    still employed one and two quarters later. In FY 2005, the target is
    67 percent.

Means and Strategies

ACF will employ various tools and strategies to enhance TANF program
performance.

-   PRWORA established work participation standards and created a High
    Performance Bonus incentive system for FY 1999 - FY 2003. State and
    Territories receive financial rewards for high performance and
    significant improvement as well as penalties for not meeting the
    work participation targets on this measure and others. The
    President\'s Reauthorization proposal restructures these bonuses to
    focus on employment achievement. ACF has been operating on
    continuing resolutions and stand-alone bills that have extended TANF
    based on current law.

-   ACF provides leadership to States, Territories, and Tribes as they
    design and implement their programs. Efforts include technical
    assistance and outreach including the use of a Peer Technical
    Assistance Network.

-   The Welfare Peer Technical Assistance (TA) Network provides
    peer-to-peer technical assistance to public agencies and private
    organizations operating the TANF program. The Web site also
    highlights policy relevant research, innovative programs, related
    links and upcoming events. The objective of the Peer TA Network is
    to facilitate the sharing of information between and among States
    and to establish linkages between organizations serving the needs of
    welfare recipients.

Examples of technical assistance activities in FY 2003 included:

-   The Healthy Marriage Academy - focused on providing general
    information and sharing specific information on promising
    initiatives that promote healthy marriages,

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-   The Delta EITC Initiative - focused on increasing the uptake of the
    Earned Income Tax Credit among low-income families in the
    Mississippi Delta region. The goal is to move more families in the
    Mississippi Delta region to work and onto self-sufficiency, and

-   The Urban Partnership - directed toward developing strategies to
    assist the special needs of ten large urban cities. At the same
    time, the Partnership provides the opportunity for city leaders to
    share ideas and discuss issues.

-   ACF also sponsored several targeted technical assistance events
    across the country on topics requested by States to help them
    enhance their services for TANF families. Those topics included:
    children with incarcerated parents, healthy marriages, substance
    abuse, strengthening Tribal/State collaboration, TANF and Child
    Welfare Service integration, grandparent housing facilities,
    strategies to address the child-only caseload, and mental health.

ACF continues to work closely with States and Tribes as it plans further
technical assistance activities.

Budget and Policy Priorities

The Department is requesting \$17.1 billion for the TANF program for FY
2005. Building on the success of the 1996 welfare reform program, the FY
2005 budget follows the framework originally proposed in the
President\'s FY 2003 TANF Reauthorization Proposal. The Proposal
continues the current block grant funding mechanism and maintains
current program funding levels for the following: Family Assistance
Grants to States, Tribes, and Territories; Matching Grants to
Territories; and Tribal Work Programs. In addition, the Proposal
reinstates authority for both the Contingency Fund and Supplemental
Grants for Population Increases. While the proposal eliminates the Bonus
to Reward Decrease in Illegitimacy and restructures the High Performance
Bonus to focus on employment achievement, it creates two new initiatives
to support marriage and healthy family development - a matching grant to
States and a fund for research, demonstrations, and technical assistance
activities. Each of these initiatives would be funded at \$120 million
annually, beginning in FY 2005. In addition to the above figure, there
is also \$6 million in Social Service Research and Demonstration funding
which supports a child welfare study under TANF.

External Factors

Performance on the highlighted measure and in the TANF program broadly
will be significantly affected by a number of factors which may help or
hinder achievement including: 1) the national economy; 2) wage and
employment rates; 3) social and demographic trends such as divorce and
non-marital birth rates; and 4) increasing proportion of clients with
barriers to employment such as lack of fluency in English, mental health
problems, substance abuse, disability, or domestic violence.

Community Based Services Program

Administration on Aging

FY 2005 Budget Request: \$1,260 million

FY 2005 Full Cost Budget Request: \$1,313 million

Program Background and Context

The Administration on Aging (AoA) Community Based Services Program
(CBSP) provides grants to States to provide comprehensive social and
supportive services to vulnerable elderly individuals and their family
caregivers. CBSP supports a key element of the AoA mission by helping to
keep vulnerable elderly individuals in the community, which is where
they prefer to live. CBSP supports some of life\'s most fundamental
functions for elderly individuals at risk of institutionalization,
including: 1) food for the undernourished; 2) critical transportation
for the immobile; 3) respite and support for caregivers; and 4) personal
care to those who need assistance with daily functions around the home
(e.g., getting in and out of bed).

AoA carries out CBSP through a national aging network that includes 56
state units on aging, 655 area agencies on aging, 243 Indian Tribal
organizations and over 29,000 public, private and voluntary direct
service providers. The achievement of this community-centered network of
providers is reflected in key indicators observed in AoA surveys of
elderly clients and caregivers conducted in FY 2002. These surveys found
that:

-   86 percent of family caregivers interviewed reported that CBSP
    services helped them care longer for elders than they could without
    them.

-   30 percent of elderly CBSP clients are nursing-home eligible due to
    disabling conditions but are able to remain in the community.

Program Performance Planning

For the CBSP program, AoA has defined three key measures to track
critical program performance:

-   A program efficiency measure which helps AoA to pursue improvements
    in the number of individuals served per million dollars of AoA
    funding;

-   A consumer outcome measure which tracks the effects of CBSP services
    on elderly individuals and caregivers; and

-   A targeting measure designed to ensure that CBSP services are
    provided to vulnerable elders who need them most, including
    disabled, poor, rural and minority elders.

These measures allow program managers to focus on program outcomes that
help to ensure effective program results. The performance indicator
representing the AoA targeting measure for FY 2005 is:

-   Increase the percentage of AoA clients who reside in rural areas to
    34 percent of all clients.

This indicator seeks to ensure that critical services are targeted to
elderly individuals in rural areas for whom access to care is a
challenge. The targeting indicator supports the Older Americans Act
specific requirement that States and providers ensure services are
provided in rural areas, as well as Secretary Thompson\'s commitment to
addressing the challenge of serving those in areas that are difficult to
reach. Data regarding this indicator is gathered from annual State
program reports.

AoA pursuit of a significant increase in the percentage of CBSP clients
who reside in rural areas is an aggressive performance objective in
light of the data above that indicates that this percentage has declined
in recent years. This decline in the percentage of clients who live in
rural areas should not be viewed with alarm in that it is consistent
with Census data, which show a similar trend for all elders in the
Nation. Nevertheless, because it is important to target services where
access is more difficult, AoA intends to reverse the trend and
accomplish this performance goal.

Means and Strategies

AoA intends to accomplish the goal through targeted program integration
strategies and the rebalancing of long-term care financing across the
country. Targeting services to vulnerable individuals in areas where
access is more difficult can be more costly than serving those who live
in areas where services are more readily available. AoA has observed
that the State and local entities that have had the most success in
efficiently integrating multiple funding streams and service
infrastructure, and those that provide a higher percentage of long-term
care funding to community-based programs, have been better able to
devote resources toward serving those in areas where access is a
challenge.

AoA integration and rebalancing strategies seek to make such resources
available across the network. The strategies reflect the identification
and replication of best practices related to the efficient and effective
deployment of long-term care resources. Where such resources are
efficiently used, higher percentages of vulnerable populations,
including those in rural areas, are served.

Budget and Policy Priorities

The budget request for FY 2005 is \$1.3 billion. This is a slight
increase over the FY 2004 President\'s Budget. The FY 2005 budget also
requests additional funding for discretionary projects that will
demonstrate how existing resources can be utilized more effectively to
generate better results, while keeping costs down, including:

-   An expansion of resource centers that will assist States and
    communities better integrate program services and funding sources
    and allocate more resources to difficult to serve populations

-   Investments in services integration will help providers to integrate
    community level service delivery and will enable seniors and
    caregivers to learn about and access an integrated array of health
    and social supports

-   Health promotion projects that foster implementation of
    evidenced-based methods.

PART Review

A PART review was conducted on the Community Based Services Program
(CBSP) for both the FY 2004 and FY 2005 budgets. The FY 2005 PART rated
the CBSP Moderately Effective with a PART score of 81. The PART review
found that AoA and its partners are directly impacting the most
significant element of their mission: keeping elders in the community.
The FY 2005 assessment also notes that AoA improved strategic planning
and results management with expanded outcome and efficiency measures.
AoA has developed new performance measures that will be used for making
future budget decisions, and will allow AoA to better track the success
of the innovation activities, which the Agency believes will contribute
significantly to improved efficiencies across AoA programs.

External Factors

While it is essential to reach out to elders with critical services,
economic factors such as State fiscal pressures and high fuel costs,
which can affect the level of transportation services provided, and
demographic factors, such as continued declines in rural residence among
elders, may influence performance related to this objective.

**Strategic Goal 7: Improve the Stability and Healthy Development of Our
Nation's Children and Youth**

HHS is engaged in a number of efforts to improve the stability and
development of our Nation\'s children and youth. These efforts include
promoting family formation and healthy marriages and instituting
creative and innovative ways to improve the learning readiness of
preschool children. Additionally, the Department aims to increase the
involvement and financial support of non-custodial parents in the lives
of their children and increase the percentage of children and youth
living in a permanent, safe environment.

The Administration for Children and Families (ACF) will continue to
promote the availability of childcare services as one of many key
strategies to help families achieve economic independence. Research on
ways to improve child development and school readiness will continue.

The Child Support Enforcement program assures that support is available
to children by locating parents, and establishing paternity and support
obligations. It is an integral part of the Department\'s effort to
increase parental responsibility by promoting fathers\' involvement in
the lives of their children.

The mission of ACF Child Welfare programs, such as Foster Care and
Adoption Incentives, is to provide safe and stable environments for
those children who cannot remain safely in their own homes. In addition,
the programs provide support, such as educational vouchers, to youth
transitioning from foster care to independence.

ACF Child Support Enforcement and Child Welfare programs in this section
and their representative performance measures illustrate HHS commitment
to improving the stability and development of our Nation\'s children and
youth.

Child Support Enforcement

Administration for Children and Families

FY 2005 Budget Request: \$4,086 million

FY 2005 Full Cost Budget Request: \$4,128 million

Program Background and Context

The mission of the ACF Office of Child Support Enforcement (OCSE), as
established in

Title IV-D of the Social Security Act, is to assure that assistance in
obtaining support is available to children by locating parents,
establishing paternity and support obligations, and modifying and
enforcing those obligations. OCSE works in cooperation with State
agencies to implement the program and to achieve performance goals. In
addition, OCSE is an integral part of the Department\'s effort to
increase parental responsibility by promoting fathers\' involvement in
the lives of their children.

The program achievements for FY 2002 of the child support program are as
follows:

-   Increased collections to \$20.1 billion, a 40 percent increase from
    FY 1998.

-   Over 1.5 million paternities were established or acknowledged.

-   Established 1.2 million support orders, an increase of 6 percent
    from FY 1998.

-   46 percent of the caseload is families who formerly received public
    assistance.

-   89 percent of collections went to families.

Program Performance Planning

The program has five performance measures based on paternity
establishment, support order establishment, current support collection,
past-due cases paying, and cost-effectiveness. These measures are
consistent with the performance-based incentive formula mandated by
Title IV-D of the Social Security Act, which rewards States for
achieving performance targets. The information is provided through
administrative data collected by OCSE. Federal auditors conduct data
reliability audits of performance data to ensure that States uphold data
reliability standards.

The following measure illustrates the program\'s commitment to assessing
program outcomes and improving program performance:

-   Increase the Title IV-D collection rate (collections on current
    support / current support owed) to 61 percent in FY 2005.

This measure is significant because collections on current support
provide a regular and timely source of funds for our clients for their
daily living. The target is developed by evaluating historical data to
determine an ambitious but reachable percentage. To improve the
collection of support for children, ACF is simplifying the payment
process, reducing barriers to non-custodial parents providing support
payments, increasing the number of cases handled using automated
systems, improving interstate case processing, and increasing
coordination and integration of services with other agencies.

Means and Strategies

ACF will accomplish its performance measures for Child Support
Enforcement through a combination of proven means and strategies.

-   Incentive funding to States for performance on five measures, which
    is mandated by Title IV-D of the Social Security Act. In FY 2003 and
    FY 2004, OCSE will award States \$461 million and \$454 million,
    respectively in incentive payments. Performance and data reliability
    are clearly improving as a result of fiscal incentives. The new
    incentive system was phased in over a three year period beginning in
    FY 2000. In FY 2002, OCSE awarded \$450 million in incentive
    payments.

-   The five performance measures are paternity establishment, support
    order establishment, current support collections, arrears
    collections, and cost-effectiveness.

-   The Federal Parent Locator Service (FPLS), including the National
    Directory of New Hires and the Federal Case Registry, helps to
    locate non-custodial parents especially across State lines, as well
    as their employers and wages. This information also helps States
    establish more reasonable child support orders, thus increasing the
    chances for collection and the overall collection rate.

-   Federal funds are targeted so that services will reach intended
    beneficiaries. Collection outcomes are weighted in the incentive
    program so that States receive more credit for working with
    low-income public assistance and former public assistance cases, not
    just potentially high-collection child support cases.

-   Investment in program automation, like the Expanded FPLS, enhances
    the cost-effectiveness of the program by increasing collections.
    States must meet specific performance and cost effectiveness
    standards for their automation projects, preventing and/or
    recovering federal reimbursement for ineffective projects.

-   To increase collection of current support, the most effective tool
    of CSE is wage assignment.

-   CSE uses tools, like the passport denial program, State Disbursement
    Units, Financial Institution Data Matches, the National Directory of
    New Hires, and the Federal Case Registry, to improve performance on
    the rate of collection of past-due support.

-   OCSE uses liens and the Federal tax refund/Administrative offset
    program to improve collection in past due collections.

Budget and Policy Priorities

The FY 2005 budget includes an additional \$2 million for an annual
total of \$12 million for access and visitation grants, an estimated 19
additional Tribal child support programs, and \$446 million for Federal
incentive payments to States. The estimated Federal share of State
administrative costs is \$3.9 billion.

For FY 2005, ACF is proposing two legislative changes for the Child
Support Enforcement program to improve the collection of medical child
support by increasing the number of children who receive and maintain
medical support coverage. The first proposal assures that IV-D

agencies receive notice of a child\'s loss of health insurance coverage.
The second proposal seeks health insurance from either parent, so that
more children will have access to continuous health coverage, which will
result in healthier children and families.

The FY 2005 President\'s Budget includes FY 2003 and FY 2004 budget
proposals. FY 2004 budget proposals include: new legislative authority
to seize funds from bank accounts of

delinquent child support obligors in direct response to State
difficulties making such seizures in interstate cases; the intercept of
gaming proceeds; garnishment of long shore and harbor worker\'s
compensation benefits; FPLS access to insurance settlement databases;
increased funding for access and visitation State grant program; and
direct access for Indian Tribes to the Federal income tax offset program
and the Federal FPLS.

FY 2003 budget proposals include: optional pass-through and disregard;
optional simplified

distribution; a reduced threshold for passport denial; review and
adjustment for child support orders; Social Security Administration
benefit match; and a user fee.

PART Review

This program is one of five ACF programs that received PART reviews for
the FY 2005 budget. Child Support Enforcement received a rating of
Effective with a score of 90 and is the highest rated block/formula
grant among all programs reviewed governmentwide. The high score is
attributed to its strong mission, established performance measurement
and incentive program, demonstrated results, partnerships with State and
local government, and integrated budget and performance systems. The
above proposals, which seek to enhance medical support for children and
improve collection techniques, further strengthen Child Support
Enforcement and address PART findings.

External Factors

The following factors may help or hinder the performance of the Child
Support Enforcement program: 1) demographic and social trends, such as
divorce and non-marital birth rates; 2) wage and employment rates; 3)
the national economy; and 4) the five year time limit on TANF benefits,
and other State TANF program policies, which make child support critical
to family self-sufficiency.

Child Welfare

Administration for Children and Families

FY 2005 Budget Request: \$7,897 million

FY 2005 Full Cost Budget Request: \$7,898 million

(Budget numbers include mandatory and discretionary program dollars)

Program Background and Context

The purpose of the Administration for Children and Families (ACF) Child
Welfare programs is to prevent maltreatment of children in troubled
families, protect children from abuse, and find permanent placements for
those who cannot safely return to their homes. Through the Child Abuse
State Grant and the Community-Based Child Abuse Prevention programs,
States receive funds to develop services that prevent the need for a
child\'s removal from the home. Programs such as Foster Care, Adoption
Assistance, and Independent Living provide stable environments for those
children who cannot remain safely in their homes, assuring the child\'s
safety and well-being while their parents attempt to resolve the
problems that led to the out-of-home placement. When the family cannot
be reunified, foster care provides a stable environment until the child
can be placed permanently with an adoptive family or in a guardianship
arrangement. Adoption Assistance funds are available for a one-time
payment for the costs of adopting a child as well as for monthly
subsidies to adoptive families for care of the child.

Program Performance Planning

The ACF primary mechanism for performance measurement is the Child and
Family Services Reviews (CFSR), which focus on outcomes for children and
families in the areas of safety,

permanency, and child and family well-being; and systemic factors that
directly impact a State\'s capacity to deliver services leading to
improved outcomes. Compliance with statutory requirements and outcome
achievement is assessed through qualitative and quantitative
case-specific and aggregate data specifically related to the performance
measures established for the child welfare programs. In FY 2005, at
least one CFSR will have been completed in each State and, where
applicable, States will be implementing their Program Improvement Plans.

The Child Welfare program has six performance measures to represent the
full spectrum of child welfare from decreasing maltreatment to ensuring
permanency and stability. In FY 2002, the most recent year for which
data are available, four of the six targets were either met or exceeded.
Using State performance related to performance measures, the results of
the CFSR, and findings of the PART assessment, ACF has also established
two long-term strategic goals on State program improvement and adoption.

Because of the complexity involved, the number of adoptions becomes a
measure of how the State system is functioning and its persistence in
achieving permanency for children in foster care. It is, therefore, an
appropriate goal to highlight.

-   Increase the number of adoptions toward achieving the goal of
    finalizing 327,000 adoptions between FY 2003-FY 2008. The target for
    FY 2005 is 62,000 adoptions.

In following a typical path to adoption, a State must remove a child
from his/her home after assessing that the level of risk of harm to the
child warrants such action, engage the family in services to ameliorate
the level of risk to the child, determine that the family is unable to
make the changes needed to reunite the child with his/her family, build
and win a case to terminate parental rights, match the child with an
appropriate pre-adoptive family, and provide services and supports to
that new family unit until the adoption is finalized and
post-finalization as warranted.

ACF developed adoption targets by calculating the linear trend in the
number of children in

foster care on the last day of each fiscal year for FY 2003 through FY
2008. As the graph demonstrates, the number of adoptions has remained
constant from 2000 through 2002 at approximately 50,000 adoptions. In
these years, the number of children in foster care has been declining
while the adoption rate (number of adoptions divided by the number of
children in care at the end of the prior year) has been increasing. The
FY 2005 target of 62,000 adoptions is a very ambitious target because
the rate of adoptions must continue to increase while the number of
children in foster care decreases.

Means and Strategies

ACF is employing a number of strategies to improve program performance
and facilitate meeting these targets:

-   The Adoption Incentive Program, created through the Adoption and
    Safe Families Act (ASFA) of 1997, authorizes the payment of adoption
    incentive funds to States that are successful in increasing the
    number of children who are adopted from the public foster care
    system. Recently reauthorized through the Adoption Promotion Act of
    2003, the program now emphasizes adopting older children. Analysis
    of data from AFCARS shows that once a child waiting for adoption
    reaches nine years old, the child is more likely to continue to wait
    in foster care than to be adopted. A State will continue to receive
    \$4,000 per adopted child over its baseline for all adoptions out of
    the public child welfare system and \$2,000 per special needs
    adoption over that baseline. A State will now also receive a \$4,000
    bonus for each child over the age of nine that is adopted over the
    State\'s baseline for older children.

-   Under the Child Welfare Program Option proposal, described below,
    States would be able to use program option funds to facilitate
    systemic reform in child welfare, increasing the likelihood of
    meeting the targets for all performance measures.

-   ACF will continue to provide States technical assistance as they
    complete program improvement plans resulting from the CFSR. After
    the Program Improvement period ends, States will undergo a second
    review, and will continue this process until they come into
    compliance with all 14 areas.

-   HHS is committed to continuing to seek innovative ways to promote
    the adoption of children from foster care. The Department has
    launched an important new tool to promote adoptions called
    AdoptUSKids, an Internet adoption photolisting. AdoptUSKids was
    developed through an impressive public/private partnership between
    the HHS, the National Adoption Center, corporate partners, States,
    and adoptive families. In its first year, the site featured pictures
    and descriptions of at least 6,500 children in foster care who need
    permanent adoptive homes. In addition to featuring waiting children,
    the secure site maintains a data base of approved adoptive families,
    raises public awareness and recruits families for waiting children,
    provides information and referral services to prospective adoptive
    families, and provides training and technical assistance to States
    and adoption exchanges. Built into the system are management tools
    for adoption workers to quickly respond to inquiries from
    prospective families. In December of 2003, the 2000th child was
    adopted from the AdoptUSKids site.

Budget and Policy Priorities

The FY 2005 budget request for the ACF programs included in this
performance program area is \$7.9 billion - an increase of \$139 million
(+1.8 percent) over the FY 2004 level. The most significant increase in
the Child Welfare area is in the Child Abuse State Grant and the
Community-Based Child Abuse Prevention programs where the request is
\$107 million, a 95 percent increase over FY 2004. Providing an increase
in funding to the State Grant and CBCAB programs will assist States as
they implement the prevention-related requirements of the Keeping
Children and Families Safe Act of 2003. Increased funding in this area
is consistent with the Departmental emphasis on prevention - dedicating
resources to prevent the need for intervention services. In FY 2005, ACF
also is proposing to amend the Social Security Act to clarify that a
child\'s Title IV-E foster care maintenance payment eligibility is
linked inextricably to the custodial relative\'s home from which the
child is removed and is based on whether the child would have been
eligible for AFDC in that home as it was in effect on July 16, 1996. ACF
proposes to amend the statute so that the statute and the Department\'s
long-standing interpretation are in full accord.

The Administration continues to support its proposal for the Child
Welfare Program Option, which is a plan to improve program performance
in child welfare. The proposed program option for Foster Care will
provide foster care funds in the form of flexible grants for States
choosing to participate. The flexible grants will serve as an incentive
to create innovative child welfare programs with an emphasis on
providing services that prevent children from being placed in foster
care and on strengthening families. States may use these funds for any
purposes allowed under Title IV-E Foster Care or Title IV-B (Child
Welfare Services and Promoting Safe and Stable Families).

PART Review

The Foster Care program received a PART review for the FY 2004 and 2005
budgets. Preliminary results of the FY 2005 assessment indicate that the
overall program score improved from 37 in FY 2004 to 52 in FY 2005. In
response to PART findings, the Children\'s Bureau has proposed a
requirement with requisite funding to evaluate States on overall program
effectiveness. Additionally, efforts are underway to improve annual
achievement of targets and long-term strategic goals. As recommended in
the FY 2004 PART review, ACF intends to develop a national error rate
for Foster Care and proposes to create a flexible funding program option
through which States will have flexibility to implement system reform.

External Factors

Performance will be affected by external factors including: 1) the
economy, including employment and wage rates; 2) the success of
employment programs implemented under TANF; 3) the success of
initiatives which promote healthy marriages and enhanced involvement of
fathers in children\'s lives; 4) the availability of low-cost housing;
5) the availability of substance abuse treatment; and 6) social and
demographic trends such as divorce and non-marital births.

**Strategic Goal 8: Achieve Excellence in Management Practices**

HHS is committed to improving the efficiency and effectiveness of the
Department\'s programs by creating an organization that is
citizen-centered and results-oriented. As part of our overall commitment
to effective management, HHS is dedicated to successfully meeting the
challenges identified in the President\'s Management Agenda. HHS is
committed to improving management of our financial resources; using
competition to obtain the best price for the services acquired;
improving the management of our human capital and tying human capital
goals to

program performance goals; using technology wisely and in a cost
effective manner; and achieving budget and performance integration.

In implementing the President\'s Management Agenda HHS is seeking to
achieve a variety of reforms. These include:

1\) implementing an ambitious restructuring plan aimed at consolidating
and automating administrative functions such as human resources
management;

2\) de-layering organizations and reducing the number of management
layers in order to create efficiencies and speed decision-making;

3\) implementing a Unified Financial Management System to consolidate
multiple systems, eliminate duplication, and improve the management of
the Department\'s financial resources, and implementing initiatives to
reduce improper payments in the Department\'s programs

4\) consolidating information technology systems to achieve efficiencies
and improve interoperability of the Department\'s multiple systems;

5\) and achieving integration of budget and performance so that funding
decisions are results driven.

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 to the Department\'s

mission through performance contracts that link directly to HHS
strategic priorities. The Department is also developing a plan to
consolidate the Equal Employment Opportunity

function department-wide in an effort to achieve efficiencies and
improve service deliveries.

The Department continues to make steady progress in improving financial
performance, including developing the Unified Financial Management
System, and developing and implementing initiatives to estimate payment
error rates in Head Start, Child Care, Foster Care, and other HHS
programs. HHS has begun work to engage a contractor to provide
recovery-auditing services for its contract payments. For FY 2003, the
Department earned its fifth consecutive clean and timely audit opinion
under a pilot effort by November 15, 2003, 45 days after the end of FY
2003, and one year earlier than the OMB-mandated due date of November
15, 2004.

The Department has also undertaken a major initiative to consolidate
information technology systems to achieve efficiencies and improve
interoperability of the Department\'s multiple

systems. HHS will also continue to support E-Gov efforts, in concert
with the HHS Strategic Plan and the HHS IT 5-Year Strategic Plan. As
applicable, HHS will participate in and contribute resources to PMA
E-Gov initiatives, serving as the managing partner for Grants.gov
(formerly E-Grants), Consolidated Health Informatics (CHI) and Federal
Health Architecture (FHA).

The Department has made strides toward achieving integration of budget
and performance so that funding decisions are results driven. HHS has
completed its FY 2005 Annual Performance Plan, which highlights key
programs and performance measures and presents the total HHS

discretionary budget organized by Department Strategic Goal. The
Department also has reported the full cost of achieving all performance
goals, and used Program Assessment Rating Tool (PART) evaluations to
inform budget decisions, program improvements, legislative proposals,
and management actions.

The Annual Performance Plan highlights two initiatives to reduce
improper payments in HHS programs: the Centers for Medicare & Medicaid
Services Medicare Integrity Program and the HHS Office of Inspector
General's efforts in this area.

MEDICARE INTEGRITY PROGRAM

Centers for Medicare & Medicaid Services

FY 2005 Budget Request: \$720 million

FY 2005 Full Cost Budget Request: \$720 million

Program Background and Context

CMS program integrity efforts ensure the Medicare program pays the right
amount to legitimate providers for covered, reasonable and necessary
services that are provided to eligible beneficiaries. These activities
are primarily funded through the Hospital Insurance Trust Fund by the
Medicare Integrity Program (MIP), established by the Health Insurance
Portability and Accountability Act (HIPAA) of 1996. The MIP includes
medical review and benefit integrity activities, provider education and
training, Medicare secondary payer activities, and provider audits. CMS
overall program integrity efforts are supplemented by funding from the
CMS Program Management account and other funds made available from the
Health Care Fraud and Abuse Control account (HCFAC).

Program Performance Planning

CMS started measuring the percentage of improper payments made under the
Medicare program in 1996 and created a goal to reduce this percentage.
CMS now has five goals representing MIP. These include reducing the
contractor error rate and improving the provider compliance error rate.
For FY 2003 and beyond, the Comprehensive Error Rate Testing (CERT)

program is being used to develop the national Medicare claims payment
error rate. The CERT program is monitored for compliance by CMS through
monthly reports from the contractor.

The following measure illustrates one key programmatic activity of MIP:

-   Reduce the Percentage of Improper Payments Made Under the Medicare
    Fee-for-Service Program

One major CMS goal is to pay claims properly the first time. Paying
right the first time saves resources and ensures the proper expenditure
of limited Medicare trust fund dollars. During the PART review process,
CMS worked with OMB to set ambitious annual targets for its program
integrity goals for FY 2004 and beyond. CMS is confident that by
addressing specific high-risk areas, it will achieve success in reaching
these aggressive annual targets.

Means and Strategies

The complexity of Medicare payment systems and policies and the number
of contractors, providers, and insurers involved in the Medicare
fee-for-service program create vulnerabilities. CMS has implemented an
error rate reduction plan designed to minimize these vulnerabilities and
reduce the Medicare claims payment error rate. Other efforts designed to
reduce Medicare\'s improper payment rate include improving customer
service, clarifying documentation guidelines, strengthening enrollment,
and improving industry compliance.

In addition to the national error rate, CERT outcomes include
contractor-specific error rates, as well as a Medicare provider
compliance error rate. These rates will allow CMS to quickly identify
emerging trends in managing Medicare contractor performance.

CMS medical review activities will emphasize appropriate corrective
actions for identified claims payment errors. In addition, CMS will
stress a quality improvement program, to ensure that the decisions made
by medical review staff are accurate and consistent, and provide a

thorough and efficient medical review process. This approach will enable
CMS to reduce the claims payment error rate and assure providers and
beneficiaries that it is operating the program in a responsible manner.

In provider education and training, CMS will emphasize educational
activities that communicate appropriate billing practices in compliance
with Medicare rules, regulations, and manual instructions. Sharing data
analysis with local medical societies, professional associations, and
other provider organizations will be used to effectively target CMS
efforts.

In support of MIP activities, improved provider enrollment will ensure
that CMS enrolls only legitimate providers. Plans are being developed or
are already underway to: provide stricter standards and stronger
conditions of participation, conduct onsite visits to verify legitimacy
and compliance with standards, increase the frequency of reenrollment,
and collect better ownership and financial solvency information.

Budget and Policy Priorities

For FY 2005, the Health Insurance Portability and Accountability Act of
1996 (HIPAA)

provides \$720 million for MIP. The following figures indicate the costs
for each of the MIP activities for FY 2004 and FY 2005.

FY 2004 FY 2005

Medical Review \$163 million \$163 million

Benefit Integrity \$127 million \$127 million

Audit \$204 million \$204 million

HMO Audits \$ 9 million \$ 9 million

Medicare Secondary Payer \$147 million \$147 million

Provider Education and Training \$ 70 million \$ 70 million

PART Review

The FY 2004 Medicare Integrity Program PART assessment found that the
program has a clear purpose, is managed well overall and relies on
performance measures that are directly relevant to the program purpose.
This is reflected in the reduction of the Medicare error rate, which has
declined from 14 percent of fee-for-service payments in 1996 to 5.8\*
percent in FY 2003. MIP received one of the highest scores (85) of all
programs reviewed by OMB.

The assessment noted that CMS is developing sub-national performance
measures to produce contractor, provider and benefit-specific error
rates, and developing provider compliance rates to identify providers
who need assistance with accurate billing. The assessment also noted
that, although CMS has an effective national performance measure, it did
not require Medicare fiscal intermediaries and carriers to commit to
specific error rates. CMS contracts with fiscal

intermediaries and carriers on a cost basis and budgets most MIP funds
based on activity level. As a result, very few of these contracts relate
pay to performance. New Medicare contracting reform changes enacted in
the Medicare Prescription Drug, Improvement, and Modernization Act (MMA)
will allow CMS to competitively bid for these contracts that were
previously cost-based contracts.

CMS intends to further reduce the Medicare fee-for-service error rate to
four percent by FY 2008. Furthermore, CMS committed to the following two
new program integrity goals in the FY 2004 Annual Performance Plan:

-   Reduce the Medicare Contractor Error Rate (MIP9-04): By FY 2008, all
    Medicare contractors will have an error rate less than or equal to
    the previous year's actual unadjusted national paid claims error
    rate.

-   Decrease the Medicare Provider Compliance Error Rate (MIP10-04): By
    FY 2008, CMS will significantly improve the Medicare provider
    compliance error rate.

For the FY 2005 PART assessment, MIP maintained the same score.

External Factors

The ability of MIP to leverage private sector entities through its
contracting authority has proven to be effective. Additionally, new
Medicare contractor reform legislation will further enhance MIP
effectiveness. On December 8, 2003, Congress enacted the MMA. Section
911 of the Act establishes the Medicare fee-for-service Contracting
Reform Initiative (MCRI) that will be implemented over the next several
years. Under this provision, CMS will replace the current Medicare
fiscal intermediary and carrier contracts, using competitive procedures,
with new MAC contracts by October 2011. The new Medicare Administrative
Contractor (MAC) contracts may be renewed annually based on performance
for a period of five years, but they must be re-competed every five
years.

Office of Inspector General

Office of the Secretary

FY 2005 Budget Request, Mandatory Portion: \$160 million\*

FY 2005 Mandatory Full Cost Budget Request: \$160 million

FY 2005 Budget Request, Discretionary Account: \$40 million

FY 2005 Discretionary Full Cost Budget Request: \$40 million

Program Background and Context

The purpose of the Office of Inspector General (OIG) is to detect fraud,
waste, and abuse, and recommend policies designed to promote economy,
efficiency, and effectiveness in Department of Health and Human Services
(HHS) programs. It accomplishes its purpose by conducting and
supervising audits, inspections, and investigations, and providing
guidance to the health care industry. Approximately 80 percent of OIG
resources are devoted to Medicare and Medicaid under the Health Care
Fraud and Abuse Control Program (HCFAC), which was mandated in 1996 by
the health care fraud and abuse provisions of the Health Insurance
Portability and Accountability Act (HIPAA). The HCFAC Program is a joint
responsibility of HHS and the Department of Justice. Its purpose is to
coordinate Federal, State, and local law enforcement activities with
respect to health care fraud and abuse, including the conduct of
investigations, audits, evaluations, and inspections relating to the
delivery of and payment for health care in the United States. The
program came about in response to the need to intensify pursuit of the
large and growing level of health care fraud and abuse, and to take
aggressive action to reduce the risk of insolvency of the Medicare Trust
Fund.

The remaining nearly 20 percent of the OIG operating budget is dedicated
to fighting fraud, waste, and abuse in all other HHS programs;
specifically, all public health, human services, and research programs,
as well as general Departmental oversight.

For FY 2003, the OIG reported savings of over \$23 billion, comprised of
nearly \$21.7 billion in implemented recommendations and other actions
to put funds to better use, and nearly \$1.4 billion in investigative
receivables, and recoveries or receivables attributable to audits.
Viewed as a ratio of savings to operating costs (return on investment),
the OIG saved 117 times its operating cost in FY 2003, thus continuing a
long established pattern of effectiveness and efficiency in carrying out
its mission.

Program Performance Planning

The OIG uses return on investment (ROI) as its key performance measure.
ROI is an outcome-oriented measure of OIG efficiency. Savings, its
numerator, is a measure of outcome, and by relating it to the cost of
operating the OIG, it is a measure of efficiency and cost-effectiveness.

The savings that are used to calculate ROI consist of expected
recoveries of funds resulting from successful prosecutions in the courts
and out of court settlements, and savings from funds not expended as a
result of OIG audits, investigations, and inspections, as determined by
the Congressional Budget Office. ROI provides a clear focus on results
for OIG managers as they direct the program and allocate its resources.

Because of the unique and innovative nature of the HCFAC Program, which
started in 1997, the ROI target was initially conservative. After
several years of exceeding its targets, the OIG strove to make them more
challenging. The OIG adopted a three-year moving average to recognize
the multi-year characteristic of the work that lends itself to that
approach, and set goals that exceeded the levels already achieved. The
target is to increase by 10 percent expected recoveries, and achieve a
fixed dollar increase in saving resulting from the implementation of OIG
legislative and administrative recommendations.

-   Achieve Return on Investment (Expected Recoveries and Savings from
    Funds Not Expended per Dollar Invested in the OIG) in FY 2005 of
    \$154.

Means and Strategies

The work of the OIG consists primarily of conducting and supervising
audits; investigating allegations of fraud and abuse; performing
evaluations/inspections; assisting U.S. Attorneys, and others, in case
development; providing guidance to the health care industry; and
championing its cost saving and management improvement recommendations.
All of these means and strategies are labor intensive, therefore, it is
essential for the OIG to develop, retain, and, where necessary, fill
vacancies with talented staff; target resources by careful work planning
to achieve the most impact on high priority problems; and use modern
technology in ways that increase the organization\'s efficiency and
effectiveness.

Budget and Policy Priorities

The mandatory portion of the budget request (the HCFAC budget account)
for FY 2005 will be determined beginning in mid-September of 2004 and
the discretionary FY 2005 request for the discretionary account is
\$40.3 million. The HCFAC request is \$160 million, the maximum amount
allowed by HIPAA since FY 2003.

While the OIG is actively engaged in support of all Presidential and
Secretarial initiatives as part of its Department-wide oversight
mission, it is most prominent in its work in support of achievement of
excellence in HHS management practices. It is under the latter HHS
strategic goal that all its work to uncover fraud, waste, and abuse, and
contribute to improved efficiency and effectiveness of HHS programs
resides.

PART Review

The HCFAC Program was reviewed as part of the FY 2004 budget. OMB
concluded that return on investment was not sufficient to demonstrate
performance of this program, and recommended that additional measures,
using an objective baseline are necessary, which can be used to make
resource allocation decisions. The OIG expects to conclude its
performance measure review by the end of June 2004.

External Factors

OIG work in any given year, and therefore the budget for that year,
cannot be associated with the results reported for that year. The
reasons for this are the multi-year periods usually needed to complete
legal actions and commence collection efforts, and the time needed for
OIG legislative and administrative recommendations to be implemented.
Obviously, the level of performance reported in any given year, though
the result of work that spans several years, is linked to the levels of
funding over the relevant preceding years.

It is also important to emphasize that OIG returns are highly dependent
on the success of the U.S. Attorneys and other components of the
Department of Justice, the States, Congress, and HHS Operating Divisions
to prosecute criminal cases successfully, arrive at civil settlements,
enact necessary legislation, recover misspent funds, or implement
recommendations for program improvements.