Department of Health and Human Services

FY 2004 Budget in Brief

LETTER FROM THE SECRETARY

I am pleased to share with you the President\'s FY 2004 Budget for the
United States Department of Health and Human Services (HHS). The
proposed budget reflects the Administration\'s commitment to securing
our Nation\'s safety needs, and the health and well-being of our
citizens. The \$539 billion proposed by the President will enable the
Department to continue its important work with our partners in State and
local governments and in the private and volunteer sectors to secure our
commitment to protecting our Nation, expanding access to health care,
and opening the doors of opportunity to all Americans.

It has been over a year since the tragic events of September 11th
occurred, and we continue our vigorous commitment to protecting our
Nation. Many of our programs at HHS provide the necessary services that
contribute to the war on terrorism and protect us against biologic and
other threats. In this area, we are focusing on preparedness at the
local level, ensuring the safety of food products, and research and
development on vaccines and other therapies to counter potential
bioterrorist attacks. As we look to the future, we must continue to
expand research, develop anti-bioterrorism strategies and encourage the
use of new and emerging technologies. With the President\'s FY 2004
Budget, the Department of Health and Human Services will uphold its
commitment to making our Nation safe.

While we prepare our Nation against today\'s threats, we must also
prepare our programs to serve Americans even better in the future. This
budget includes bold proposals to strengthen our largest programs. We
need to modernize Medicare, preparing for the growth of the program and
bringing its benefits up-to-date, including prescription drugs. In
Medicaid, we need to build on the successful innovations of recent
years, giving States more flexibility to serve more Americans in ways
that meet today\'s needs. And, in welfare reform, we must take the next
steps to ensure that opportunity and self-sufficiency are made available
to all. This budget offers new approaches in each of these areas, as
well as offering other steps to help ensure access to health care for
the uninsured, provide critical support for America\'s children, and
expand our support for treatment of substance abuse.

Consistent with the President\'s HealthierUS effort, HHS also proposes a
coordinated, Department-wide effort to promote a healthier lifestyle
emphasizing prevention of obesity, diabetes, asthma and youth risk
behavior. In FY 2004 alone, the combined strength of all relevant HHS
programs would prevent 75,000 to 100,000 Americans from developing
diabetes, prevent 100,000 to 150,000 Americans from developing obesity,
and prevent as many as 50,000 Americans from hospitalization due to
asthma.

The President\'s FY 2004 Budget confronts external threats and domestic
challenges. It offers a blueprint for improving the health, safety, and
well-being of our Nation. It is innovative, responsive to the Nation's
needs, and responsible to our taxpayers. I look forward to working with
the Congress to ensure that our programs continue to provide health and
human services that are second to none.

Sincerely,

Tommy G. ThompsonTABLE OF CONTENTS

Overview 1

Food and Drug Administration 10

Health Resources and Services Administration 14

Indian Health Service 20

Centers for Disease Control and Prevention 24

National Institutes of Health 30

Substance Abuse and Mental Health Services Administration 38

Agency for Healthcare Research and Quality 42

Centers for Medicare & Medicaid Services 45

Medicare 47

Medicaid 52

State Children's Health Insurance Program 58

Program Management 64

Administration for Children and Families

ACF Discretionary Spending 72

ACF Entitlement Spending 77

Child Support Enforcement Overview: Costs and Collections 81

ACF Proposed Entitlement Legislation 82

Administration on Aging 84

Departmental Management 88

Office for Civil Rights 95

Office of Inspector General 97

Program Support Center 98

Retirement Pay and Medical Benefits for Commissioned Officers 100

**IMPROVING THE HEALTH AND SAFETY OF OUR NATION**

The fiscal year (FY) 2004 budget for the Department of Health and Human
Services (HHS) builds on President Bush\'s commitment to protect the
health and well being of our nation. The budget plan embraces the
challenges of today by seeking new and innovative approaches for
delivering services. The plan also recognizes the important role of our
partners at State and local governments, community and faith-based
organizations, and the newly created Department of Homeland Security in
preserving the safety of our nation and health care for all Americans.

The HHS budget funds critical needs to modernize Medicare, Medicaid,
State Children\'s Health Insurance Program (SCHIP) and welfare; prevent
the spread of disease and illness; protect our homeland from biological
attack; strengthen our health care systems; improve research; and
provide for the economic and social well being of children, youth,
families and the elderly. Our budget provides resources for:

Modernizing and Strengthening Medicare, Medicaid, SCHIP and Welfare

The FY 2004 budget dedicates \$400 billion over ten years for targeted
improvements and

modernization of Medicare, Medicaid, SCHIP, and Welfare programs.

Medicare Modernization: Medicare Improvements will expand

beneficiaries' access to the same kind of health plan options and
benefits that Federal employees and other Americans enjoy by:

-   providing access to subsidized prescription drug coverage that would
    protect beneficiaries against high drug expenses and provide low
    income beneficiaries with additional assistance;

-   linking Medicare +Choice plan payments to the rising cost of
    providing health care services;

-   modernizing traditional fee-for-service coverage to protect
    beneficiaries against high out-of-pocket costs caused by serious
    illnesses;

-   providing public information on the quality of care delivered in
    hospitals and nursing homes to help consumers make informed
    decisions about their health care needs.

Medicaid and SCHIP: The FY 2004 budget introduces a new Medicaid and
SCHIP program option, under which States may take their Medicaid and
SCHIP funding in a single Federal payment. This option provides States
with great flexibility and the opportunity to design the most efficient
and beneficial health coverage for their particular uninsured
populations.

The budget also includes these proposals for States:

-   A five year, \$2.7 billion extension and simplification of
    Transitional Medical Assistance (TMA). Under this option, States may
    choose to continue Medicaid for welfare recipients returning to work
    for up to 12 months.

-   An extension of FY 2000 SCHIP for an additional year, through FY
    2004 at a cost of \$565 million over 10 years.

-   An improved and strengthened Medicaid drug rebate that will save the
    Federal government about \$13.2 billion over the next ten years and
    save States a similar amount.

New Freedom Initiative: The President\'s Budget continues support of the
New Freedom Initiative, an effort focused on promoting independence and
reducing barriers to Americans with disabilities. Highlights include:

-   Money Follows the Individual Demonstration -- \$1.75 billion over
    five years. Under this demo, the Federal government will pay the
    full cost of Medicaid services for individuals who transition from
    institutions to the community. After the first year, States pay
    their usual share.

-   Three New Freedom Demonstrations from the FY 2003 budget will again
    be supported at \$778 million over ten years. These projects will
    promote at-home care as an alternative to institutionalization;
    provide respite services to the care givers of disabled adults and
    severely disabled children; make home and community based services
    available to children residing in psychiatric residential treatment
    facilities; and address the shortage of community direct care
    workers.

-   State option to continue Medicaid eligibility for spouses of
    disabled individuals returning to work -- \$238 million over ten
    years. This proposal would extend, to his or her spouse, the same
    Medicaid coverage offered to the disabled worker.

Advancing Welfare Reform: The budget again proposes to continue
Temporary Assistance to Needy Families (TANF) at current levels while
strengthening work requirements and support for healthy families. The
budget includes an extensive package of proposals to strengthen the
Child Support Enforcement program by passing on more of the child
support collections to families and by toughening enforcement measures.
The budget also introduces a new program option for States to receive
foster care funding in an annual payment in order to more flexibly
design innovative services with a strong emphasis on prevention, safety,
and family support.

Fighting Bioterrorism

The HHS budget provides funds to keep our Nation's citizens safe from
the realities of terrorism. HHS\'s \$3.6 billion bioterrorism budget
substantially expands ongoing medical research, maintains State and
local preparedness funding, and includes targeted investments to protect
our food supply. While this total does not repeat FY 2003 one-time
funding for security improvements, laboratory construction, and vaccine
procurement, the budget includes considerable increases in bioterrorism
spending.

The budget significantly expands the research funding needed to develop
vaccines and medicines that will make these biologic agents much less
effective as weapons. In addition to the substantial increase for this
research, the Administration will propose legislation that enables the
National Institutes of Health (NIH) to start and complete this work more
quickly and efficiently. HHS will work closely with the new Department
of Homeland Security to ensure that its pharmaceutical stockpiles
include proper amounts of effective drugs, vaccines, and other
biologics.

Supporting the President\'s Disease Prevention Initiative

The FY 2004 budget includes \$125 million, with \$100 million in new
investments for Steps to a HealthierUS. This targeted disease prevention
initiative combats diabetes, reduces rates of obesity, decreases
asthma-related complications as well as promotes positive youth
development. Steps to a HealthierUS is led by the Centers for Disease
Control and Prevention (CDC) with full participation of the Health
Resources and Services Administration (HRSA), the Administration for
Children and Families (ACF), the Administration on Aging (AoA), and the
Agency for Healthcare Research and Quality (AHRQ). The program would
prevent 50,000 asthma-related hospitalizations, prevent over 75,000
Americans from developing diabetes, and prevent over 100,000 Americans
from becoming obese in FY 2004.

Improving the Nation\'s Health

The FY 2004 budget takes the following steps to expand access and
improve health.

Health Centers: The FY 2004 budget continues the President\'s initiative
to expand access to critical health care services for the uninsured,
especially in underserved rural and urban areas. With an increase of
\$169 million, HHS will be able to expand access to nearly 14 million
individuals by 2004, and ensure that Health Centers\' tort

liability costs are covered.

National Health Service Corps: In connection with the Health Center
initiative, the FY 2004 budget continues to support the National Health
Service Corps (NHSC). HHS proposes to improve the placement of NHSC
clinicians providing care to rural and underserved areas. Currently, 100
percent of NHSC clinicians provide services in underserved areas and
nearly half work in Health Centers. Further, the FY 2004 budget proposes
to retain 79 percent of the clinicians currently in the Corps.

Breast and Cervical Cancer Screening: The FY 2004 budget provides an
increase of \$10 million for the breast and cervical cancer program. The
Centers for Disease Control and Prevention\'s breast and cervical cancer
program supports screening services for low-income, underinsured, or
uninsured women.

Ryan White ADAP: The FY 2004 budget proposes an increase of \$100
million or 16 percent for the Ryan White AIDS Drug Assistance Program
(ADAP). This highly successful program helps purchase drugs used in the
treatment of those living with HIV/AIDS. The FY 2004 budget will
increase the number of people receiving HIV/AIDS medications through the
AIDS Drug Assistance Program.

Hospital Information Technology: The FY 2004 budget provides AHRQ with
an increase of \$24 million to help health networks implement and
evaluate hospital-based information technology investments designed to
enhance patient safety. In total, AHRQ will dedicate \$50 million to
this initiative in FY 2004, with an emphasis on small community and
rural hospitals. In helping to create a business case for the adoption
of proven technologies, AHRQ will use these demonstrations to
disseminate broadly these types of technologies across the health care
system.

Indian Health Service: The FY 2004 budget provides funding to the Indian
Health Service (IHS) to improve the health status of American Indians
and Alaska Natives by assuring access to high quality comprehensive
personal and public health services. The FY 2004 budget will also
increase funding to provide sanitation to over 22,000 American Indian
homes, improve the health of those diagnosed with diabetes, and bring
specialty health care, not available through IHS or tribal providers, to
expand the number of outpatient services

provided.

Generic and Over the Counter Drugs: The FY 2004 budget also provides the
Food and Drug Administration (FDA) an increase of \$13 million to
improve consumers\' access to generic and over the counter drugs. This
investment will reduce medical costs by accelerating FDA\'s review of
drug applications, will fund research necessary to expand the types of
drugs available in generic form, and will improve information available
to consumers.

Childhood Immunization: The FY 2004 budget includes three major
improvements in the financing of childhood vaccines. A total of \$707
million will be used between FY 2003 and FY 2006 to develop stockpiles
of childhood vaccines to help avert future shortages. Legislation will
be proposed to improve access for many children already entitled to free
vaccines from the Vaccines for Children (VFC) program, and restore
tetanus and diphtheria vaccine to the VFC program. This legislation will
increase vaccine purchases by \$55 million in FY 2004.

Pandemic influenza: The budget also includes \$100 million to improve
our Nation\'s preparedness for an influenza pandemic. The funds will be
used to spur the development of the manufacturing capacity that would be
needed to make sufficient vaccine for the Nation quickly, regardless of
the time of year the pandemic was detected.

Maintaining our Investment in Biomedical Research

Funding for NIH research will total \$27.9 billion, an increase of \$549
million. NIH will also redirect an additional \$1.4 billion of base
funding into research; these funds are allocated for facilities
construction and anthrax vaccine procurement in FY 2003. As a result,
the net increase in NIH\'s research budget totals \$1.9 billion. This
funding is critical to maintain scientific progress in areas such as
biodefense, cancer, HIV/AIDS, Parkinson\'s, Alzheimer\'s, diabetes, and
others.

Faith Based and Community Initiatives

In support of the President\'s Faith Based and Community Initiative, the
HHS FY 2004 budget supports programs that promote positive
relationships, including mentorships, through collaboration linking
faith and community based organizations, State and local governments,
and Federal partners to develop a shared picture for positive youth
development.

Innovative Approaches to Drug Treatment and Recovery: The budget
proposes to establish a new \$200 million drug treatment program. For
the first time, medical professionals in emergency rooms, health
clinics, the criminal justice system, schools and private practice will
be able to determine an individual\'s need for treatment and provide a
voucher for those services at the same time.

Mentoring Children of Prisoners: The request doubles funding available,
for a total of \$50 million, to public and private organizations for
programs that provide mentoring for children of incarcerated parents and
those recently released from prison. Programs will provide supportive
relationships to these children who are more likely to succumb to
substance abuse, gangs, early childbearing and delinquency.

Additional programs that support the Faith Based Initiative at the grass
roots level include: the Compassion Capital Fund which provides funds to
public and private partnerships to support charitable organizations;
promoting responsible fatherhood and marriage; and maternity group homes
which provide an alternative to violent environments.

Supporting Children and Families

The FY 2004 budget provides funding to promote the economic and social
well-being of children and families. The budget includes an investment
in low-income children and their families through the Head Start
program. The Head Start focus for FY 2004 will continue with the theme
of school readiness and improved quality of Head Start programs.

The FY 2004 budget also funds programs that support the elderly. These
programs encourage the ability of the elderly to stay active, healthy,
and independent, with a particular focus on those living in rural,
hard-to-reach areas. The FY 2004 budget transfers the Department of
Agriculture\'s Nutrition Services Incentive Program to the HHS
Administration on Aging.

Fighting the Transmission of Global AIDS

The FY 2004 budget contains funds to combat the spread of HIV/AIDS
worldwide. The FY 2004 budget supports the President\'s Mother and Child
HIV/AIDS prevention initiative that will target one million women and
aims to reduce HIV/AIDS transmission to their children by 40 percent.
CDC, in partnership with the United States. Agency for International
Development (USAID), will use therapeutic interventions, such as
replacing breast-feeding with infant formula, in 14 targeted countries.
Together, in FY 2003 and FY 2004, HHS and USAID will meet the
President\'s commitment of \$500 million in support of this program.

Supporting the President\'s Management Agenda

The FY 2004 budget supports the President\'s Management Agenda and
includes cost savings from consolidating administrative functions;
organizational delayering to speed decision making processes;
competitive sourcing; implementation of effective workforce planning and
human capital management strategies; and adoption of other economies and
efficiencies in administrative operations.

Our FY 2004 budget includes savings from ongoing information technolgoy
(IT) consolidations and ensures that funds are invested in the highest
priority IT projects.

Conclusion

The FY 2004 HHS budget supports progressive initiatives aimed at
protecting the health and well--being of our Nation. It begins by
modernizing Medicare, Medicaid, and Welfare. It also supports the
President\'s Disease Prevention Initiative, and provides funding to
improve our Nation\'s health. It increases support for the development
of our Nation\'s children, especially those at risk. And, it maintains
our goal of improving management and performance of HHS programs.

The FY 2004 budget supports the President\'s goal of improving the
health and safety of our Nation.

+-------------+-------------+-------------+-------------+-------------+
|             | **[2002]{.u | **[2003]{.u | **[2004]{.u | **2004**    |
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|             |             |             |             | **[+/-      |
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| inistration |             |             |             |             |
| for         |             |             |             |             |
| Children &  |             |             |             |             |
| Families:   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Budget      | 47,292      | 47,394      | 46,990      | -404        |
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+-------------+-------------+-------------+-------------+-------------+
| Adm         |             |             |             |             |
| inistration |             |             |             |             |
| on Aging:   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Budget      | 1,349       | 1,341       | 1,344       | +3          |
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| Outlays     | 1,255       | 1,438       | 1,341       | -97         |
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+-------------+-------------+-------------+-------------+-------------+
| D           |             |             |             |             |
| epartmental |             |             |             |             |
| Manag       |             |             |             |             |
| ement/Civil |             |             |             |             |
| Rights/     |             |             |             |             |
|             |             |             |             |             |
| \*PHSSEF:   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Budget      | 1,863       | 2,185       | 2,287       | +102        |
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+-------------+-------------+-------------+-------------+-------------+
| Outlays     | 811         | 1,742       | 2,244       | +502        |
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| Office of   |             |             |             |             |
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| General:    |             |             |             |             |
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| Budget      | 35          | 39          | 39          | 0           |
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| Outlays     | 36          | 36          | 39          | +3          |
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Program     |             |             |             |             |
| Support     |             |             |             |             |
| Center:     |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Budget      | 386         | 393         | 424         | +31         |
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| Outlays     | 322         | 359         | 410         | +51         |
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+-------------+-------------+-------------+-------------+-------------+
| Proprietary |             |             |             |             |
| Receipts:   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Budget      | -1,295      | -1,177      | -1,211      | -34         |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
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| Total,      |             |             |             |             |
| Health &    |             |             |             |             |
| Human       |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
| Budget      | \$478,957   | \$507,835   | \$537,680   | +\$29,845   |
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| Outlays     | \$466,050   | \$502,156   | \$539,009   | +\$36,853   |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Full-Time   | 63,506      | 65,508      | 65,525      | +17         |
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| *C          | *1,131*     | *1,281*     | *1,281*     | * 0 *       |
| ommissioned |             |             |             |             |
| Corps       |             |             |             |             |
| Detailed    |             |             |             |             |
| Outside HHS |             |             |             |             |
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| \* Public   |             |             |             |             |
| Health and  |             |             |             |             |
| Social      |             |             |             |             |
| Services    |             |             |             |             |
| Emergency   |             |             |             |             |
| Fund        |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

HHS Budget by Composition

+----------+----------+----------+----------+----------+----------+
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|          |          |          |          |          | 3]{.unde |
|          |          |          |          |          | rline}** |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| M        |          |          |          |          |          |
| andatory |          |          |          |          |          |
| Programs |          |          |          |          |          |
| (O       |          |          |          |          |          |
| utlays): |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Medicare |          | \        | \        | \        | +        |
| \...\... |          | $228,720 | $242,201 | $256,336 | \$14,135 |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| M        |          | 147,512  | 162,541  | 182,543  | +20,002  |
| edicaid\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| T        |          | 18,749   | 19,209   | 18,713   | -496     |
| emporary |          |          |          |          |          |
| As       |          |          |          |          |          |
| sistance |          |          |          |          |          |
| for      |          |          |          |          |          |
| Needy    |          |          |          |          |          |
| Families |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Foster   |          | 5,885    | 6,297    | 6,718    | +421     |
| Care &   |          |          |          |          |          |
| Adoption |          |          |          |          |          |
| Assista  |          |          |          |          |          |
| nce\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| State    |          | 3,682    | 4,751    | 2,657    | -2,094   |
| Chi      |          |          |          |          |          |
| ldren\'s |          |          |          |          |          |
| Health   |          |          |          |          |          |
| In       |          |          |          |          |          |
| surance\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Child    |          | 3,998    | 4,174    | 4,291    | +117     |
| Support  |          |          |          |          |          |
| E        |          |          |          |          |          |
| nforceme |          |          |          |          |          |
| nt\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Child    |          | 2,365    | 2,690    | 2,813    | +123     |
| Ca       |          |          |          |          |          |
| re\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Social   |          | 1,780    | 1,792    | 1,790    | -2       |
| Services |          |          |          |          |          |
| Block    |          |          |          |          |          |
| G        |          |          |          |          |          |
| rant\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Other    |          | 1,035    | 1,074    | 1,203    | +129     |
| M        |          |          |          |          |          |
| andatory |          |          |          |          |          |
| Progr    |          |          |          |          |          |
| ams\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Pro      |          | [-1,     | [-1,     | [-1,     | [-34     |
| prietary |          | 295]{.un | 177]{.un | 211]{.un | ]{.un    |
| Re       |          | derline} | derline} | derline} | derline} |
| ceipts\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| **S      |          | **\$4    | **\$4    | **\$4    | **+      |
| ubtotal, |          | 12,431** | 43,552** | 75,853** | \$32,301 |
| M        |          |          |          |          | **       |
| andatory |          |          |          |          |          |
| (Outlay  |          |          |          |          |          |
| s)\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| **       |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Discr    |          |          |          |          |          |
| etionary |          |          |          |          |          |
| Programs |          |          |          |          |          |
| (BA):    |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Food &   |          | \$1,368  | \$1,384  | \$1,406  | +\$22    |
| Drug     |          |          |          |          |          |
| Administ |          |          |          |          |          |
| ration\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Health   |          | 6,072    | 5,356    | 5,672    | +316     |
| R        |          |          |          |          |          |
| esources |          |          |          |          |          |
| &        |          |          |          |          |          |
| Services |          |          |          |          |          |
| Administ |          |          |          |          |          |
| ration\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Indian   |          | 2,758    | 2,816    | 2,890    | +74      |
| Health   |          |          |          |          |          |
| Service\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Centers  |          | 4,450    | 4,264    | 4,231    | -33      |
| for      |          |          |          |          |          |
| Disease  |          |          |          |          |          |
| Control  |          |          |          |          |          |
| and      |          |          |          |          |          |
| Prevent  |          |          |          |          |          |
| ion\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| National |          | 23,454   | 27,243   | 27,743   | +500     |
| In       |          |          |          |          |          |
| stitutes |          |          |          |          |          |
| of       |          |          |          |          |          |
| He       |          |          |          |          |          |
| alth\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| S        |          | 3,136    | 3,195    | 3,393    | +198     |
| ubstance |          |          |          |          |          |
| Abuse &  |          |          |          |          |          |
| Mental   |          |          |          |          |          |
| Health   |          |          |          |          |          |
| Serv     |          |          |          |          |          |
| ices\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Agency   |          | 3        | 0        | 0        | 0        |
| for      |          |          |          |          |          |
| He       |          |          |          |          |          |
| althcare |          |          |          |          |          |
| Research |          |          |          |          |          |
| &        |          |          |          |          |          |
| Qual     |          |          |          |          |          |
| ity\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| *AHRQ    |          | *299*    | *250*    | *279*    | *+29 *   |
| Program  |          |          |          |          |          |
| Level    |          |          |          |          |          |
| (No      |          |          |          |          |          |
| n-Add)\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| *        |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Centers  |          | 2,506    | 2,457    | 2,533    | +76      |
| for      |          |          |          |          |          |
| Medicare |          |          |          |          |          |
| &        |          |          |          |          |          |
| Medicaid |          |          |          |          |          |
| Servic   |          |          |          |          |          |
| es\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Admini   |          | 13,057   | 13,080   | 13,449   | +369     |
| stration |          |          |          |          |          |
| for      |          |          |          |          |          |
| Children |          |          |          |          |          |
| &        |          |          |          |          |          |
| Families |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Admini   |          | 1,349    | 1,341    | 1,344    | +3       |
| stration |          |          |          |          |          |
| on       |          |          |          |          |          |
| A        |          |          |          |          |          |
| ging\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Office   |          | 411      | 418      | 430      | +12      |
| of the   |          |          |          |          |          |
| Secret   |          |          |          |          |          |
| ary\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| PHSS     |          | 1,487    | 1,806    | 1,896    | +90      |
| EF\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Program  |          | [0]{.un  | [0]{.un  | [13]{.un | [+13     |
| Support  |          | derline} | derline} | derline} | ]{.un    |
| Cen      |          |          |          |          | derline} |
| ter/Comm |          |          |          |          |          |
| issioned |          |          |          |          |          |
| Co       |          |          |          |          |          |
| rps\.... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| **S      |          | **\$     | **\$     | **\$     | **       |
| ubtotal, |          | 60,051** | 63,360** | 65,000** | +\$1,640 |
| Discr    |          |          |          |          | **       |
| etionary |          |          |          |          |          |
| (BA)\.   |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
| **       |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| **S      |          | **\$     | **\$     | **\$     | **       |
| ubtotal, |          | 53,619** | 58,604** | 63,156** | +\$4,552 |
| Discr    |          |          |          |          | **       |
| etionary |          |          |          |          |          |
| (O       |          |          |          |          |          |
| utlays)\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
| **       |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| **Total, |          | **\$4    | **\$5    | **\$5    | **+      |
| HHS      |          | 66,050** | 02,156** | 39,009** | \$36,853 |
| Outl     |          |          |          |          | **       |
| ays\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\...\ |          |          |          |          |          |
| ...\.... |          |          |          |          |          |
| **       |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          | **[200   | **[200   | **[200   | **2004** |          |
|          | 2]{.unde | 3]{.unde | 4]{.unde |          |          |
|          | rline}** | rline}** | rline}** | **[+/-   |          |
|          |          |          |          | 200      |          |
|          |          |          |          | 3]{.unde |          |
|          |          |          |          | rline}** |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Food &   |          |          |          |          |          |
| Drug     |          |          |          |          |          |
| Adminis  |          |          |          |          |          |
| tration: |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Program  | \$1,551  | \$1,655  | \$1,713  | +\$58    |          |
| L        |          |          |          |          |          |
| evel\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Budget   | 1,368    | 1,384    | 1,406    | +22      |          |
| A        |          |          |          |          |          |
| uthority |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| O        | 1,126    | 1,373    | 1,400    | +27      |          |
| utlays\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Health   |          |          |          |          |          |
| R        |          |          |          |          |          |
| esources |          |          |          |          |          |
| &        |          |          |          |          |          |
| Services |          |          |          |          |          |
| Adminis  |          |          |          |          |          |
| tration: |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Budget   | 6,209    | 5,498    | 5,810    | +312     |          |
| A        |          |          |          |          |          |
| uthority |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| O        | 5,705    | 5,848    | 5,921    | +73      |          |
| utlays\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Indian   |          |          |          |          |          |
| Health   |          |          |          |          |          |
| Service: |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Budget   | 2,858    | 2,916    | 3,040    | +124     |          |
| A        |          |          |          |          |          |
| uthority |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| O        | 2,811    | 2,846    | 3,023    | +177     |          |
| utlays\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Centers  |          |          |          |          |          |
| for      |          |          |          |          |          |
| Disease  |          |          |          |          |          |
| Control  |          |          |          |          |          |
| &        |          |          |          |          |          |
| Pre      |          |          |          |          |          |
| vention: |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Budget   | 4,450    | 4,264    | 4,231    | -33      |          |
| A        |          |          |          |          |          |
| uthority |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| O        | 3,672    | 4,214    | 4,210    | -4       |          |
| utlays\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| National |          |          |          |          |          |
| In       |          |          |          |          |          |
| stitutes |          |          |          |          |          |
| of       |          |          |          |          |          |
| Health:  |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Budget   | 23,554   | 27,343   | 27,893   | +550     |          |
| A        |          |          |          |          |          |
| uthority |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| O        | 20,709   | 23,228   | 26,484   | +3,256   |          |
| utlays\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| S        |          |          |          |          |          |
| ubstance |          |          |          |          |          |
| Abuse &  |          |          |          |          |          |
| Mental   |          |          |          |          |          |
| Health   |          |          |          |          |          |
| S        |          |          |          |          |          |
| ervices: |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Budget   | 3,136    | 3,195    | 3,393    | +198     |          |
| A        |          |          |          |          |          |
| uthority |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| O        | 2,885    | 3,055    | 3,274    | +219     |          |
| utlays\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Agency   |          |          |          |          |          |
| for      |          |          |          |          |          |
| He       |          |          |          |          |          |
| althcare |          |          |          |          |          |
| Research |          |          |          |          |          |
| &        |          |          |          |          |          |
| Quality: |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Program  | 299      | 250      | 279      | +29      |          |
| L        |          |          |          |          |          |
| evel\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Budget   | 3        | 0        | 0        | 0        |          |
| A        |          |          |          |          |          |
| uthority |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| O        | -66      | 0        | 0        | 0        |          |
| utlays\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Centers  |          |          |          |          |          |
| for      |          |          |          |          |          |
| Medicare |          |          |          |          |          |
| &        |          |          |          |          |          |
| Medicaid |          |          |          |          |          |
| S        |          |          |          |          |          |
| ervices: |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| Budget   | 387,749  | 413,060  | 442,034  | +28,974  |          |
| A        |          |          |          |          |          |
| uthority |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
| \...\... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
| O        | 382,430  | 411,987  | 444,134  | +32,147  |          |
| utlays\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\...\. |          |          |          |          |          |
| ..\..... |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+
|          |          |          |          |          |          |
+----------+----------+----------+----------+----------+----------+

**Food and Drug Administration**

  ---------------------------------------------------------------------------------------------------------------------------------- -------------------------- -------------------------- -------------------------- ----------------------------
                                                                                                                                                                                                                      **2004**
                                                                                                                                                                                                                      
                                                                                                                                     **[2002]{.underline}**     **[2003]{.underline}**     **[2004]{.underline}**     **[+/- 2003]{.underline}**
                                                                                                                                                                                                                      
  **Salaries and Expenses:**                                                                                                                                                                                          
                                                                                                                                                                                                                      
  Foods\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...              \$402                      \$409                      \$413                      +4
  Drugs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....             398                        458                        486                        +28
  Biologics\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                 142                        166                        170                        +4
  Animal Drugs and Feeds\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                        86                         88                         90                         +2
  Medical Devices\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                            196                        220                        217                        -3
  National Center for Toxicological Research\...\...\...\...\...\.....                                                               43                         41                         40                         -1
  Other Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                          96                         113                        116                        +3
  Non-GSA Rent & Rent Related Activities\...\...\...\...\...\...\.....                                                               43                         37                         43                         +6
  GSA Rental Payments\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                    [105 ]{.underline}         [108 ]{.underline}         [120 ]{.underline}         [+12 ]{.underline}
  **Subtotal, S&E\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... **                        **\$1,511 **               **\$1,640 **               **\$1,695 **               **+\$55 **
  Buildings and Facilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                       34                         8                          12                         +4
  Export/Certification Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                          [6 ]{.underline}           [6 ]{.underline}           [6 ]{.underline}           [ 0 ]{.underline}
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
  **Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... **                                      **\$1,551 **               **\$1,654 **               **\$1,713 **               **+\$59 **
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
  **Less User Fees:**                                                                                                                                                                                                 
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
  Prescription Drug User Fee Act (PDUFA)\...\...\...\...\...\...\....                                                                \$162                      \$223                      \$250                      +\$27
  Medical Device User Fees (MDUFMA)\...\...\...\...\...\...\...\.....                                                                0                          25                         29                         +4
  Mammography Quality Standards Act (MQSA)\...\...\...\...                                                                           15                         16                         17                         +1
  Export/Certification Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                      6                          6                          6                          0
  Proposed Law, Animal Drugs User Fee Act (ADUFA)                                                                                    [ 0 ]{.underline}          [ 0 ]{.underline}          [5 ]{.underline}           [+5 ]{.underline}
  **Subtotal, User Fees\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... **                              **[\$183 ]{.underline}**   **[\$270 ]{.underline}**   **[\$307 ]{.underline}**   **[+\$37 ]{.underline}**
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
  **Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\..... **                                             **\$1,368 **               **\$1,384 **               **\$1,406 **               **+\$22 **
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
  **Biodefense (non-add):**                                                                                                                                                                                           
  * Food Safety \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... *                   *\$98 *                    *\$98 *                    *\$116 *                   *+\$19 *
  * Vaccines/Drug Therapies/Diagnostics\...\...\...\...\...\...\...\..... *                                                          *47 *                      *54 *                      *53 *                      *-1 *
  * Security\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... *             *[13 ]{.underline}*        *[7 ]{.underline}*         *[7 ]{.underline}*         *[ 0 ]{.underline}*
  *Subtotal, Biodefense (non-add)\...\...\...\...\...\...\...\...\...\...\.... *                                                     *\$158 *                   *\$159 *                   *\$176 *                   *+\$18 *
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
                                                                                                                                                                                                                      
  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....   10,042                     10,479                     10,841                     +362
                                                                                                                                                                                                                      
  ---------------------------------------------------------------------------------------------------------------------------------- -------------------------- -------------------------- -------------------------- ----------------------------

The FY 2004 budget request for the FDA is \$1.7 billion, a net program
level increase of \$59 million over the FY 2003 President\'s Budget.
Within this total, there are program increases of \$115 million,
partially offset by \$56 million in management savings. Of the funds
requested, \$307 million will be derived from industry-specific user
fees. Program increases are focused on biodefense activities that ensure
a safe food supply, accelerating the availability of generic and
over-the-counter drugs; improving information on safety and efficacy of
drugs for children; providing quick access to new, safe and effective
drugs and medical technologies; and improving patient safety.

The budget seeks to enable the FDA to meet the challenges of food and
drug regulation in the 21st century. FDA protects the public health by
preventing injury or illness due to unsafe or ineffective products -
foods, drugs, biologics, medical devices, etc., and by assuring consumer
product information is truthful and clear. FDA actively identifies
health problems associated with FDA-regulated products and assesses the
origin and impact of these health problems. FDA is working to ensure its
regulatory efforts are dynamic and responsive -- preventing the public
from being exposed to hazards, and monitoring the marketplace to ensure
compliance with laws, regulations, and good manufacturing practices.

Foods

FDA regulates over 60,000 U.S. food processors and warehouses and 6
million food imports in FY 2004. Products regulated by FDA account for
about two-thirds of consumer spending on food, with an annual retail
value of about \$430 billion. The budget includes \$413 million for
foods, a net increase of \$3 million. Within the amount requested, an
additional \$20.5 million over the FY 2003 President\'s Budget will be
directed towards activities that implement the Public Health Security
and Bioterrorism Preparedness and Response Act of 2002 (PHSBPRA) and
other biodefense activities needed to ensure the nation\'s food
security.

The request directs \$5 million toward improving laboratory
preparedness. These funds will enable FDA to expand federal, State and
local involvement in the Electronic Laboratory Exchange Network
(eLEXNET) that enables State and federal laboratories to exchange
information on pathogens in food. These food laboratory improvements
will be closely coordinated with CDC\'s investments in public health
laboratories participating in the Laboratory Response Network.

FDA will improve the quality of food monitoring and inspections through
State contracts and grants, as required by Section 311 of PHSBPRA. The
budget directs \$5 million to be used for this. FDA requests \$10.5
million to implement a registration system for domestic and foreign food
production, handling and storing facilities, as well as a prior notice
system for imported food shipments.

FDA is also actively implementing other components of the PHSBPRA.
Regulations are being developed that govern the detention of food if
evidence is found indicating a serious threat to humans or animals; and
to establish the collection and maintenance of records for tracking the
immediate source and recipient of foods.

Human Drugs and Biologics

FDA evaluates all new drugs for safety and efficacy before entering the
market and monitors more than 10,000 drugs already on the market to be
sure they continue to meet the highest standards of safety and efficacy.
FDA is also responsible for ensuring that biological products, including
whole blood and blood products; vaccines; and therapeutic products,
including cells, gene therapies, and tissues, are safe and effective.
FDA also works closely with other Federal agencies and industry to
promote the development and availability of biodefense countermeasures.
To carry out this work, FDA seeks a total of \$656 million, an increase
of \$32 million. Of this amount, \$227 million is in industry-specific
user fees.

Generic Drugs: The budget includes an increase of \$13 million for
reviewing and ensuring the safety of generic drugs. Rapid review of
these applications is essential to maximize the availability of high
quality, lower cost prescription drugs. With this increase, FDA will
complete its review, on average, about two months faster. FDA will also
initiate targeted research that is necessary to establish more standards
of bioequivalence, and broaden the types of drugs for which generics are
available. This investment will be complemented by regulatory reforms
under which FDA will limit the number of automatic delays in the review
process related to patent filings and make sure approved generic drugs
are used safely.

Over-the-Counter (OTC) Drugs: OTC drugs provide an effective means to
reduce consumer prescription costs for specified ailments. The increase
of \$1 million for OTC drugs will be used to provide consumers faster
access to safe and effective products that may have been previously
marketed by prescription or available OTC in other nations.

Best Pharmaceuticals for Children Act (BPCA): The budget expands the
joint FDA and NIH effort, begun in 2003, to ensure that medicines have
been properly evaluated for use in pediatric populations and improve the
information physicians have to use when prescribing medicines to
children. An additional \$30 million is requested -- \$5 million in FDA
and \$25 million in NIH -- to dedicate towards this work. FDA will use a
portion of the funds to expand its work with industry to develop
pediatric specific information for on-patent drugs. FDA will also work
with NIH to determine the specific research that is needed for
frequently used off-patent drugs, and NIH will carry out the research.
Total funding for BPCA efforts will be up to \$61.5 million in FY 2004,
including \$11.5 million in FDA and up to \$50 million in NIH.

Patient Safety: FDA will expand its efforts to reduce drug-related
adverse events. FDA will also improve its analysis and follow-up of
adverse event reports. Over 300,000 confidential adverse event reports
are received each year. Reviews are conducted to detect potential
patterns that may warrant follow-up investigations. The most common
outcome is improved information for medical providers on the safe use of
regulated products. This information is also used to determine when
unanticipated side effects or usage errors are sufficiently severe for a
product to be removed from the market.

User Fees: The budget includes \$249 million from the Prescription Drug
User Fee Act (PDUFA) fees, of which \$220 million is available for the
Human Drugs and Biologics programs and the remaining \$29 million for
rent and other costs related to the management and operations of the
program. The PDUFA program has been highly successful in reducing the
time needed to review applications for new drugs and biologics, while
maintaining the safety standards essential to the public\'s health.
These fees have also enabled the provision of substantially more
technical assistance, advice, and rapid responses to special inquiries
during the drug development and testing period. As a result, industry
has been able to significantly shorten the time needed for drug
development and testing. Similarly, the new MDUFMA fees are expected to
accelerate the availability of tissue-based medical devices overseen by
the Biologics program.

Medical Devices

New and increasingly complex medical devices are making exciting medical
advances possible, in both diagnosis and treatment. These advances are
reflected in the increase in the number of domestic and international
medical device firms from 9,061 in FY 1997 to approximately 14,250 in FY
2002. To meet this challenge, FDA requests \$217 million. Of this
amount, \$32 million is derived from industry-specific user fees related
to medical devices and mammography quality standards.

FY 2004 will be the first full year of implementation of the Medical
Device User Fee and Modernization Act of 2002 (MDUFMA). These new fees
will enable FDA to make the information technology and human resource
investments needed to both accelerate reviews and improve their quality.
The budget includes \$29 million from MDUFMA fees. \$16 million of this
total is requested in the Medical Devices budget activity, with \$7
million supporting tissue-based device review in the Biologics program,
and \$6 million paying legal support, space costs for new staff, and
central management oversight.

The Medical Devices program will continue implementing the Medical
Device Product Surveillance Network (MeDSuN) that is essential to
meeting FDA\'s patient safety goals. This network will provide FDA with
statistically reliable information on adverse events, and partnerships
that will facilitate efforts to improve patient safety. Having active
surveillance information will improve FDA\'s ability to target adverse
event follow-up and reduction efforts. The number of participating
hospitals and other providers will increase from 180 in FY 2003 to 240
by the end of FY 2004.

Animal Drugs

The Animal Drugs and Feeds Program protects the health and safety of all
food producing, companion or other non-food animals; and, assures that
food from animals is safe for human consumption. FDA is proposing a new
animal drug pre-market review user fee in FY 2004. FDA\'s budget
includes \$5 million from the fees to be paid by animal drug applicants,
sponsors, and manufacturers. These funds will allow FDA to provide
quality pre-market reviews in a cost-efficient and timely manner. FDA
also conducts post-market inspections, investigations, and sample
collections and analyses.

Facilities

The request includes \$12 million for buildings and facilities, and \$43
million for rent and rent-related costs. This includes \$4 million
increase to complete the Arkansas Regional Laboratory and \$6 million
for telecommunications cabling and related costs for the new Center for
Drug Evaluation and Research facility that the General Services
Administration is constructing at White Oak, in suburban Maryland.

President\'s Management Agenda

FDA\'s FY 2004 budget request supports the President\'s Management
Agenda and includes cost savings from consolidating administrative
functions such as personnel, and implementing a new Shared Services
approach for internal administrative support functions. This will
include customer advocated, service level agreements, governance boards,
etc., to ensure the quality as well as the cost-effectiveness of these
services. FDA will also continue its efforts to achieve savings through
competitive outsourcing of additional services such as graphics,
property management, etc. These efforts will achieve \$26 million in
savings throughout the Agency. A second example of these management
improvements is the decision to consolidate review of drugs and
drug-like products. Review of products used like drugs for therapeutic
purposes, currently overseen by the Center for Biologics Evaluation and
Research, will be consolidated into the Center for Drug Evaluation and
Research.

FDA is expanding its efforts to consolidate information technology
systems. FDA worked closely with industry to develop improvements in the
agency\'s electronic interchange with those it regulates. FDA is also
consolidating information technology activities outside the
user-fee-funded areas and anticipates \$30 million savings from these
efforts.

**Health Resources and Services Administration**

+-------------+-------------+-------------+-------------+-------------+
|             | **2002**    | **2003**    | **2004**    | **2004**    |
|             |             |             |             |             |
|             |             |             |             | **[         |
|             |             |             |             | +/-2003]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Community   | \$1,343     | \$1,458     | \$1,627     | +\$169      |
| Health      |             |             |             |             |
| Centers\..  |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| * Health    | *15 *       | *25 *       | *45 *       | *+20 *      |
| Centers     |             |             |             |             |
| Tort Claims |             |             |             |             |
| Fund        |             |             |             |             |
| (non-ad     |             |             |             |             |
| d)\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| *           |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| National    | 145         | 189         | 213         | +24         |
| Health      |             |             |             |             |
| Service     |             |             |             |             |
| Cor         |             |             |             |             |
| ps\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Ryan White  | 1,910       | 1,911       | 2,010       | +99         |
| HIV/AIDS    |             |             |             |             |
| A           |             |             |             |             |
| ctivities\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| * AIDS Drug | *639*       | *639*       | *739 *      | *+100 *     |
| Assistance  |             |             |             |             |
| Program     |             |             |             |             |
| (non-add)   |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| *           |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| B           | 135         | 518         | 518         | 0           |
| ioterrorism |             |             |             |             |
| Hospital    |             |             |             |             |
| Preparedne  |             |             |             |             |
| ss\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| B           | 0           | 60          | 60          | 0           |
| ioterrorism |             |             |             |             |
| Medical     |             |             |             |             |
| School      |             |             |             |             |
| Curriculum  |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Poison      | 40          | 40          | 40          | 0           |
| Control/EMS |             |             |             |             |
| for         |             |             |             |             |
| Children\.  |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Hospital    | 140         | 0           | 0           | 0           |
| Emergency   |             |             |             |             |
| Relief\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Nurse       | 93          | 98          | 98          | 0           |
| Training    |             |             |             |             |
| Progra      |             |             |             |             |
| ms\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Health      | 295         | 11          | 11          | 0           |
| Professions |             |             |             |             |
| Training    |             |             |             |             |
| P           |             |             |             |             |
| rograms\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Children\'s | 285         | 200         | 199         | -1          |
| Hospitals   |             |             |             |             |
| Graduate    |             |             |             |             |
| Medical     |             |             |             |             |
| Educ        |             |             |             |             |
| ation\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Rural       | 127         | 75          | 80          | +5          |
| Health\     |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Denali      | 20          | 0           | 0           | 0           |
| Commissio   |             |             |             |             |
| n\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Maternal    | 731         | 732         | 751         | +19         |
| and Child   |             |             |             |             |
| Health      |             |             |             |             |
| Block       |             |             |             |             |
| Grant\      |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Healthy     | 99          | 99          | 99          | 0           |
| Start       |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Abstinence  | 90          | 123         | 123         | 0           |
| Ed          |             |             |             |             |
| ucation\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Organ       | 20          | 25          | 25          | 0           |
| Transp      |             |             |             |             |
| lantation\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Family      | 265         | 265         | 265         | 0           |
| P           |             |             |             |             |
| lanning\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Bone        | 56          | 56          | 55          | -1          |
| M           |             |             |             |             |
| arrow/Black |             |             |             |             |
| Lun         |             |             |             |             |
| g/Hansen\'s |             |             |             |             |
| Diseas      |             |             |             |             |
| e/TBI\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Radiation   | 4           | 4           | 4           | 0           |
| Exposure    |             |             |             |             |
| C           |             |             |             |             |
| ompensation |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Tele        | 37          | 6           | 6           | 0           |
| health\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Health Care | 315         | 0           | 0           | 0           |
| Facil       |             |             |             |             |
| ities\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Community   | 120         | 0           | 0           | 0           |
| Access      |             |             |             |             |
| Pr          |             |             |             |             |
| ogram/State |             |             |             |             |
| Planning    |             |             |             |             |
| Grant       |             |             |             |             |
| s\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Universal   | 14          | 0           | 0           | 0           |
| Newborn     |             |             |             |             |
| Hearing     |             |             |             |             |
| Scre        |             |             |             |             |
| ening/Traum |             |             |             |             |
| a\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Program     | 156         | 154         | 157         | +3          |
| Ma          |             |             |             |             |
| nagement\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| National    | 16          | 17          | 17          | 0           |
| P           |             |             |             |             |
| ractitioner |             |             |             |             |
| Databank    |             |             |             |             |
| (User       |             |             |             |             |
| Fees)\...   |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Health      | [5          | [5          | [4          | [-1         |
| Integrity & | ]{          | ]{          | ]{          | ]{          |
| Protection  | .underline} | .underline} | .underline} | .underline} |
| Databank    |             |             |             |             |
| (User       |             |             |             |             |
| Fe          |             |             |             |             |
| es)\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total,    | **\$6,461   | **\$6,045   | **\$6,361   | **+\$316 ** |
| HRSA        | **          | **          | **          |             |
| Program     |             |             |             |             |
| Level\      |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Less Funds |             |             |             |             |
| Allocated   |             |             |             |             |
| From Other  |             |             |             |             |
| Sources:]{  |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Mandatory   | \$50        | \$50        | \$50        | \$0         |
| Abstinence  |             |             |             |             |
| Education   |             |             |             |             |
| Grants to   |             |             |             |             |
| State       |             |             |             |             |
| s\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Items       | 319         | 618         | 618         | 0           |
| Financed    |             |             |             |             |
| from PHSSEF |             |             |             |             |
| (           |             |             |             |             |
| Bioterroris |             |             |             |             |
| m/Recovery) |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| User        | [21         | [22         | [21         | [-1         |
| Fees\...\   | ]{          | ]{          | ]{          | ]{          |
| ...\...\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Subtotal,   | [\$390      | [\$690      | [\$689      | [-\$1       |
| Funds From  | ]{          | ]{          | ]{          | ]{          |
| Other       | .underline} | .underline} | .underline} | .underline} |
| Sources\..  |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total,    | **\$6,071   | **\$5,355   | **\$5,672   | **+\$317 ** |
| HRSA        | **          | **          | **          |             |
| Di          |             |             |             |             |
| scretionary |             |             |             |             |
| B.          |             |             |             |             |
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| **          |             |             |             |             |
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| FTE\...\..  | 1,844       | 1,937       | 1,912       | -25         |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

The FY 2004 budget requests \$6.4 billion for HRSA, a net increase of
\$316 million above the FY 2003 President\'s Budget. FY 2004 continues
the President\'s multi-year initiative to increase access to health care
for the uninsured and underserved by enhancing and strengthening the
Health Centers program. The National Health Service Corps will provide
additional health professionals to underserved and minority communities,
especially in Health Centers. HRSA will expand services for people
living with HIV/AIDS. The Agency will maintain its significant
investment in preparing our nation\'s hospitals and health professions
workforce for a bioterrorism event. In order to address the national
nursing shortage through enhanced recruitment and retention, HRSA will
direct more resources towards basic nurse education, loan repayments,
and scholarships. The budget increases funding for rural health
programs, to help meet the unique challenges facing rural America, and
for important maternal and child health programs.

Providing Quality Health Care in Underserved Areas

Today there are an estimated 41 million uninsured people. Many of our
Nation\'s uninsured live in rural communities where there are few or no
physicians or health care services. Rates of uninsured are higher among
minority populations. The uninsured are hospitalized at least 50 percent
more often than the insured for \"avoidable hospital conditions.\"
Through the continued expansion of the health center network and
investment in programs that direct health professionals to underserved
areas, the Department will help meet the challenge of providing high
quality health care for all Americans.

Health Centers: The FY 2004 budget provides funding for the third year
of the Health Centers Presidential initiative. A net increase of \$169
million, for a total of \$1.6 billion, for the Health Center program is
requested, to expand services to an additional 1.2 million individuals
in approximately 120 new sites and 110 expanded existing sites.

This initiative is intended to create 1,200 new or expanded health
center sites and serve an additional 6 million people by 2006. By FY
2004, this Presidential initiative will have increased the total number
of health center sites to over 3,650 and will provide nearly 14 million
Americans with quality health care, an increase of over 3 million in
three years.

These centers deliver comprehensive preventive and primary care services
to low income and uninsured populations. Nearly 40 percent of the
patients treated at health centers have no insurance coverage, and many
others have inadequate coverage.

Through \"Health Disparities Collaboratives\", health centers focus on
preventing specific diseases by developing interdisciplinary teams that
have changed practices and improved health outcomes for patients living
with diabetes, cardiovascular disease, asthma, and depression.
Nationally, approximately 400 health centers have participated in these
successful collaboratives. The Health Center program also participates
in the joint effort called the Initiative to End Chronic Homelessness,
administered by the Departments of Housing and Urban Development,
Veterans Affairs and Health and Human Services.

Health centers employ approximately 4,000 full time physicians and
22,500 other health care clinicians including nurse practitioners, nurse
midwives, and dentists. In 2004, these providers will serve nearly 14
million patients through as many as 50 million encounters. The FY 2004
budget request also includes \$45 million, an increase of \$20 million,
for the Health Centers Federal Tort Claims Program, which provides
medical malpractice coverage for the increasing number of health center
employees.

National Health Service Corps: Geographic maldistribution of health
professionals remains a major problem for many inner city and isolated
rural communities. Over the National Health Service Corps\' (NHSC) 30
year history, more than 22,000 health professionals have committed to
service in underserved areas across the country. The FY 2004 budget
continues the expansion of the NHSC with a net increase of \$24 million,
for a total of \$213 million. Within this total, \$168 million will be
used to recruit clinicians by offering loan repayments and scholarships
and \$45 million will be used for NHSC field costs. The NHSC will
prioritize the recruitment of clinicians from disadvantaged backgrounds,
including under-represented minorities, by providing loan repayments and
scholarships to health care providers who agree to serve in the neediest
communities across the country. By increasing efforts to target
providers to the neediest communities, the program will better serve
minority and other disadvantaged populations. This increase funding
total will support an estimated 2,400 loan repayments and scholarships,
and a total field strength of 4,300 clinicians. The NHSC will continue
to work with Health Centers to help meet their provider needs, since
half of NHSC clinicians serve in Health Centers.

Expanding Services for People Living with HIV/AIDS

The FY 2004 budget includes \$2 billion for the Ryan White HIV/AIDS
program, a net increase of \$99 million over the FY 2003 President\'s
Budget. The Ryan White program will continue to improve services to an
estimated 530,000 individuals living with HIV/AIDS.

The \$100 million increase for the AIDS Drug Assistance Program (ADAP)
will support purchasing medications for over 9,000 additional persons
living with HIV/AIDS, for a total of 159,000 individuals over the course
of a year. Funding will also allow States to expand on the recent
improvements that have been made in providing medications to underserved
populations. These improvements include increasing the number of States
with 26 or more drugs on their formulary from 17 to 23; increasing the
number of States that required only an HIV positive diagnosis for
eligibility from 41 to 46; and increasing the number of States that set
the financial eligibility above the 200 percent Federal Poverty Level
from 18 to 23.

Funds will continue to provide a full spectrum of outpatient medical
care through 51 Eligible Metropolitan Areas. Through the Early
Intervention Services program, 337 community based grantees will provide
comprehensive primary care services to 158,000 clients. The request will
also sustain primary health care and social support services to over
40,000 women, infants, children and youth living with HIV/AIDS.

HRSA also assists international AIDS efforts in the development of
training programs and materials for health care professionals, which
through a partnership with CDC, are shared with foreign countries
significantly impacted by the virus.

Preparing for Bioterrorism

As part of the Department\'s efforts to prepare our Nation\'s health
system to provide medical and public health services in the event of a
bioterrorist attack or other public health emergency, HRSA will continue
to improve the capacity of local hospitals and front line health care
professionals to better respond during an emergency.

Hospital Preparedness: The Hospital Preparedness program was initiated
in the past year to help States, territories, and municipalities develop
and implement biological and chemical preparedness plans focused on
hospitals. Funds are being used to set up hospital preparedness offices
with bioterrorism coordinators and medical advisors, complete needs
assessments, develop and implement regional hospital plans to manage a
large scale epidemic, and to focus on four first priority areas:
medication and vaccine distribution, isolation and decontamination,
communication, and biological disaster drills. Through coordinated
efforts on both the State and Federal levels, the hospital preparedness
plans have been linked with State and local public health preparedness
planning funded by CDC, and, where applicable, the Metropolitan Medical
Response Systems.

The FY 2003 budget and authorizing legislation expanded the program to
further upgrade the capacity of hospitals, outpatient facilities,
emergency medical services systems and poison control centers to care
for victims of bioterrorism and other public health emergencies. The new
authorization allowed States to use funds for infrastructure
improvements and expansions so that hospitals have adequate laboratory
capacity; improved capabilities to control infection; to purchase
personal protective equipment, infection control facilities and other
equipment; and to forward high-risk specimens to higher level
laboratories. In FY 2004, the Department will maintain this increased
investment, at a total of \$518 million.

Bioterrorism

Health Professional Schools Curriculum Development and Training: This
Nation\'s health professions workforce must be prepared to recognize
indications of a terrorist event in their patients, treat patients in a
safe and appropriate manner, and rapidly and effectively alert the
public health system. This budget includes \$60 million to maintain the
Educational Incentives for Curriculum Development and Training Program,
for which funds were first requested in FY 2003. This program provides
incentives for curricular reform in health professions schools, to
ensure future health care providers are adequately trained, as well as
funds for continuing education for community and hospital based
healthcare professionals already in practice.

Poison Control Centers: The budget also provides \$21 million for Poison
Control Centers, the same as the FY 2003 President\'s Budget. The
Centers are an integral part of the health system and part of the
continuum of necessary emergency services. The majority of these funds
directly support Poison Control Centers, which provide expert advice to
the public 24 hours a day, seven days a week, regarding exposure or
potential exposure to poisons. Stabilization and enhancement grants are
awarded to approximately 80 Centers each year. Funding is also provided
for a national toll-free number which is accessible throughout the
United States.

Emergency Medical Services for Children: The budget includes \$19
million for Emergency Medical Services for Children, the same as the FY
2003 President\'s Budget. EMS providers are some of the first to come
into contact with children in need of emergency health care. Each year
over 31 million children and adolescents are seen in emergency
departments, however, many States do not have pediatric guidelines to
assure that children get to the right hospital in a timely manner. This
program will provide 44 grant awards to assist States and territories in
improving care and making systems enhancements, and 44 additional awards
to academic health centers, to ensure that health care professionals are
prepared to meet the unique needs of children in the event of a
bioterrorism attack.

Addressing the National Nursing Shortage

The Nation continues to face a nursing shortage. In 2000, the estimated
national demand for registered nurses was over 100,000, or 6 percent,
more than the supply. Demand for nurses is rapidly increasing as a
result of a growing and aging population that needs more health care, as
well as continued medical advances that heighten the need for nurses.
The nursing supply is not keeping pace with demand due to a decline in
nursing school graduates and an aging of the workforce.

The budget provides \$98 million for HRSA nursing programs, including
\$7 million to implement a newly authorized scholarship program that
will reduce the financial barrier to nursing education for all levels of
professional nursing students, thus increasing the number of students in
the pipeline. Scholarship recipients must fulfill a service commitment
of providing nursing care for a minimum of two years in a facility with
a critical shortage of nurses. With this \$7 million, an estimated 140
additional nursing students will be supported with scholarships
averaging up to \$25,000 per year for two years.

Based on recommendations from an independent expert panel, nursing
program funds are also being redistributed among existing nursing
programs. The expert panel identified factors considered important to
nursing workforce development and funding distribution (e.g. trends in
supply/demand, demographics, science and technology, etc). Priority in
FY 2004 is being placed on supporting basic education and retention and
workforce diversity activities. In FY 2004, the budget allocates \$72
million for basic workforce development and \$26 million for advanced
nursing education.

To ensure a continuing source of scholarships focused on increasing
diversity in the health professions and nursing workforce, the budget
maintains a \$10 million investment in the Scholarships for
Disadvantaged Students program. The FY 2004 budget continues the policy
of not funding more general training efforts -- primary care,
interdisciplinary community projects, training for diversity, and public
health. The budget requests \$199 million to support health professions
training in free-standing children\'s hospitals through the Children\'s
Hospitals Graduate Medical Education program.

Ensuring Access to Health Care in Rural America

There are 65 million Americans who live in rural areas. Rural residents
are less likely to have health insurance and more likely to be poor. In
general, rural areas have a higher proportion of elderly residents.
Geography and transportation play important roles in limiting rural
residents access to health care. The Department will continue, and
expand, efforts to meet the unique challenges facing rural America and
ensure access to quality health care.

Rural Health Programs: The FY 2004 budget includes \$80 million for
rural health programs, an increase of \$5 million over the FY 2003
President\'s Budget. Additional funds will expand the Rural Hospital
Flexibility Grant program, for a total of \$30 million, to provide
grants to implement new hospital technologies in isolated rural areas.
The budget also maintains support for Rural Health Outreach and Network
Development grants, which enable community partnerships to implement
creative strategies to meet their unique health needs; State Offices of
Rural Health; policy research studies and dissemination of information
on rural health issues; and access to life-saving emergency devices.

The Department will also continue to help rural communities experiencing
a shortage of health care providers by serving as the interested
government agency that reviews J-1 Visa waiver applications. The waivers
allow foreign doctors who trained in the U.S. to remain in the country
and serve in rural, underserved communities. Each year, approximately
1,000 physicians are serving rural communities through J-1 Visa waivers.
The FY 2004 budget also includes \$2.5 million to support the
administration and increased oversight of this program, and to ensure
that these physicians are able to continue serving rural communities.

Improving Maternal and Child Health

The Department works towards improved health outcomes for all American
women and children. The FY 2004 budget continues support for the
programs that contribute to recently observed positive health trends,
such as reduced infant mortality, increases in breastfeeding, and higher
rates of abstinence.

Maternal and Child Health Block Grant: The FY 2004 budget request
includes a net increase of \$19 million, a total of \$751 million, for
the Maternal and Child Health (MCH) Block Grant. The Block Grant
supports Federal and State partnerships that provide critical services
to 27 million women and children. These services include direct health
care services for children with special health care needs, the promotion
of health and safety in child care settings, and enabling services such
as home visiting and nutrition counseling. The MCH Block Grant also
provides support for newborn screening, trauma care, lead poisoning, and
injury prevention. The Block Grant continues to play a valuable,
complementary role to SCHIP and Medicaid programs by reaching out and
enrolling eligible women and children in these and other programs. HRSA
regularly collects timely performance data for this program, using a
model approach, and uses this information to review each State\'s
performance and assess their progress in comparison with other States.

Healthy Start: The budget proposes \$99 million for the Healthy Start
program, maintaining the current level. Healthy Start funding supports
community-driven programs to reduce the incidence of risk factors that
contribute to infant mortality in targeted high risk communities. While
low birth weight (LBW) has been steadily increasing at the national
level, Healthy Start projects reduced LBW in their high risk communities
from an average of 12.1 percent in 1998 to 10.5 percent in 2000. At this
funding level, 114 communities will receive Healthy Start funds in FY
2004, increasing the total number of communities that have been
supported by this program to 118.

Abstinence Education: The budget maintains a substantial investment in
abstinence education, a total of \$123 million in HRSA, the same as the
FY 2003 President\'s Budget. The Community-Based Abstinence Education
program, funded at \$73 million, provides support to public and private
entities for the development and implementation of abstinence-only
education programs for adolescents, ages 12 through 18, in communities
across the country. This program, which began in FY 2001, is unique in
that funded projects focus entirely on educating young people and
creating a positive environment within communities that supports teen
decisions to postpone sexual activity until marriage. Within three
years, 112 communities have received funding, and up to 80 more will be
funded in FY 2004.

The budget proposes to continue the \$50 million in mandatory funding
for Abstinence Education Grants to States. This program provides grants
to 59 States and territories to provide mentoring, counseling, and adult
supervision to promote abstinence with a focus on those groups which are
most likely to bear children out-of-wedlock.

In addition to the HRSA activities, the Adolescent Family Life
Program\'s budget includes \$13 million for abstinence activities.
Combined with the HRSA activities, the FY 2004 budget maintains the
President\'s goal of supporting abstinence education at \$136 million.

Encouraging Organ Donation

Nearly 80,000 people are on the national organ transplantation waiting
list. During 2001, nearly 24,000 human organs were transplanted,
assisting less than one-third of the people waiting for a transplant.
The Secretary\'s Gift of Life Donation Initiative, a collaboration with
companies and employee groups to make information on organ, tissue,
marrow and blood donation available, has grown to include over 3,000
members, representing roughly 60 million employees.

Since 1999, HRSA has awarded grants to evaluate strategies for
increasing consent to donation and intent to donate coupled with family
notification. HRSA also continues to refine methods for identifying
those patients with the greatest medical need for transplantation. The
FY 2004 budget includes \$25 million, the same as the FY 2003
President\'s Budget, to continue support for these programs, as well as
the network that manages the distribution of organs throughout the
United States.

Family Planning

The Family Planning program supports a network of more than 4,500
clinics nationwide serving 4.8 million people. These clinics provide
access to a wide array of reproductive health care and preventive
services. Of the patients served, approximately 90 percent have incomes
below 200 percent of Federal poverty level, and approximately two thirds
are over age 20. Funds are also used to support 15 demonstration
projects focused on developing and implementing approaches for
delivering family planning services to men. Counseling and education
regarding abstinence are required for all adolescent clients through
this program. The FY 2004 budget request includes \$265 million,
maintaining the FY 2003 President\'s Budget\'s level.

Other HRSA Programs

The budget proposes \$65 million for the remaining HRSA programs
including Telehealth, Bone Marrow, Hansen\'s Disease, Black Lung,
Radiation Exposure Compensation, and Traumatic Brain Injury, essentially
maintaining FY 2003 President\'s Budget levels.

Program Management

The budget requests \$157 million for HRSA\'s program management, a net
increase of \$3 million over the FY 2003 President\'s Budget. This
includes \$2.5 million to oversee the J-1 Visa program. HRSA will be
able to fund Federal pay cost increases as well as the HHS Unified
Financial Management System within this funding level.

Accomplishing the President\'s Management Agenda

In order to accomplish the President\'s Management Agenda, HRSA will
reduce FTE by eliminating redundant positions, and will achieve
additional administrative cost reductions by consolidating contractual
services. These efforts will result in a total decrease of \$5 million.
HRSA will also achieve cost reductions by targeting projects deemed by
Information Technology experts to be poorly performing or obsolete, such
as systems developed to provide interim solutions to Y2K problems. In
addition, savings will result from HRSA\'s participation in Departmental
consolidation of information technology infrastructure services. A total
reduction of \$5 million will be achieved within HRSA\'s information
technology systems.

**Indian Health Service**

  --------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ----------------------------
                                                                                                                                                                                             **2004**
                                                                                                                                                                                             
  \`                                                                                                              **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**   **[+/- 2003]{.underline}**
                                                                                                                                                                                             
  Indian Health Service:                                                                                                                                                                     
  Clinical Services\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                      \$2,421                  \$2,501                  \$2,550                  +\$49
  *Contract Health Services (Non-Add)\...\...\...\..... *                                                         *461 *                   *468 *                   *493 *                   *+25 *
  Preventive Health\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                         100                      103                      108                      +5
  Contract Support Costs\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                  268                      271                      271                      0
  Tribal Management/Self-Governance\...\...\...\...\...\....                                                      12                       12                       12                       0
  Urban Health\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                   31                       32                       32                       0
  Indian Health Professions\...\...\...\...\...\...\...\...\...\...\...\.....                                     31                       35                       35                       0
  Direct Operations\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                         55                       55                       56                       +1
  Diabetes Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                       [100 ]{.underline}       [100 ]{.underline}       [150 ]{.underline}       [+50 ]{.underline}
                                                                                                                                                                                             
  **Subtotal, Services Program Level\...\...\...\...\...\...\... **                                               **\$3,018 **             **\$3,109 **             **\$3,214 **             **+\$105 **
                                                                                                                                                                                             
  Indian Health Facilities:                                                                                                                                                                  
  Health Care Facilities Construction\...\...\...\...\...\...\.....                                               \$86                     \$72                     \$70                     -\$2
  Sanitation Construction\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                 94                       94                       114                      +20
  Facilities & Environmental Health Support\...\...\....                                                          127                      133                      140                      +7
  Maintenance & Improvement\...\...\...\...\...\...\...\...\...\.....                                             52                       53                       53                       0
  Medical Equipment\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                             [16 ]{.underline}        [16 ]{.underline}        [16 ]{.underline}        [ 0 ]{.underline}
                                                                                                                                                                                             
  **Subtotal, Facilities Program Level\...\...\...\...\...\.... **                                                **\$375 **               **\$368 **               **\$393 **               **+\$25 **
                                                                                                                                                                                             
  **Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\.... **                              **\$3,393 **             **\$3,477 **             **\$3,607 **             **+\$130 **
                                                                                                                                                                                             
  Less Funds Allocated From Other Sources:                                                                                                                                                   
  Health Insurance Collections\...\...\...\...\...\...\...\...\...\...\...                                        -\$529                   -\$554                   -\$561                   -\$7
  Rental of Staff Quarters\...\...\...\...\...\...\...\...\...\...\...\...\...\....                               -6                       -6                       -6                       0
  Diabetes Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                       [-100 ]{.underline}      [-100 ]{.underline}      [-150 ]{.underline}      [-50 ]{.underline}
  **Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\..... **                                  **\$2,758 **             **\$2,817 **             **\$2,890 **             **+\$73 **
                                                                                                                                                                                             
                                                                                                                                                                                             
  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   14,899                   14,961                   15,021                   +60
                                                                                                                                                                                             
  --------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ----------------------------

The IHS FY 2004 budget request is \$3.6 billion, a net increase of \$130
million over the FY 2003 President\'s Budget. Additional funds will be
used to invest in disease prevention for diabetes and the provision of
safe water and sewage disposal to Indian communities and to ensure
continued access to health care by eligible Indian people.

The IHS will receive an estimated \$561 million in health insurance
reimbursements in FY 2004, primarily from Medicare and Medicaid.

Agency Description

The IHS provides care to approximately 1.6 million American Indians and
Alaska Natives who are members of more than 560 Federally recognized
tribes. Inpatient and outpatient care is provided directly in 49
hospitals and over 500 outpatient clinics and smaller facilities located
primarily in Alaska, along the Pacific Coast, the Southwest, Oklahoma,
and the Northern Plains. The IHS also purchases medical care from
private sector hospitals and health professionals. In addition to
medical care, the IHS engages in substantial health promotion and
disease prevention activities including construction of water and waste
disposal systems to serve Indian homes, diabetes prevention and
treatment, injury prevention and health education. The IHS also provides
mental health and alcohol/substance abuse treatment and funds 34 urban
Indian programs.

Preventive Health Investments

To raise the health status of Indian people to the highest possible
level, the IHS has long invested a substantial portion of its budget in
preventive health activities. The budget request makes significant
preventive health investments in sanitation construction and diabetes
prevention and treatment.

Sanitation Construction: The budget includes \$114 million for
sanitation construction, an increase of \$20 million over the FY 2003
President\'s Budget. This 21 percent increase would be the largest
increase provided for sanitation construction in more than a decade. The
budget supports provision of safe water and waste disposal to an
estimated 22,000 homes, an increase of 2,600 over the number of homes
served in 2003.

The IHS credits its sanitation construction program with playing a key
role in the long term reductions it has achieved in infant mortality and
deaths from gastrointestinal disease. Over the last thirty years, the
percent of Indian homes with a safe in--home water supply has grown from
58 percent to 92 percent. During this same period, the infant mortality
rate has fallen by 60 percent and the mortality rate for
gastrointestinal disease has fallen by 69 percent. With this additional
funding, we expect continued improvement.

Currently, about eight percent of Indian homes lack a safe indoor water
supply compared to one percent of all U.S. homes. The percentage of
Indian homes lacking safe indoor water is much higher in certain areas
(e.g., 35 percent in Alaska and 17 percent on the Navajo reservation).

Diabetes: The budget includes \$150 million for diabetes
prevention/treatment grants, an increase of \$50 million over FY 2003.
These funds were made available by P.L. 107--360. The IHS awards grants
to 318 tribes and Indian organizations. Grantees will use these
additional funds to: improve their diabetes wellness centers, provide
better physical activity facilities and purchase newer medications which
are effective in preventing Type II diabetes. Diabetes rates are
significantly higher among American Indians and Alaska Natives (AI/ANs)
than in the general population as is the incidence of diabetes related
blindness, amputations, and End Stage Renal Disease.

The IHS has improved the blood sugar control of its patients with
diabetes. Since 1994, there has been a 58 percent improvement in
attaining the target goal for blood sugar control. The efficacy of such
improvement has been demonstrated by large clinical trials. This
investment will lead to significant reductions in kidney failure,
amputations, heart attacks, strokes and diabetes related deaths.

Continued Access to Health Services

The number of people eligible for IHS services is estimated to be 1.6
million, and continues to increase annually. Like any health care
provider, the IHS experiences increases in the cost of providing
services.

Contract Health Services (CHS): The budget includes \$493 million, an
additional \$25 million or 5 percent increase, for CHS. The IHS
supplements the care provided in its own facilities by purchasing
medical care from other hospitals and health providers. CHS funds pay
for specialty care, including most types of surgery, and are used to
purchase all medical care for Tribes that do not have an IHS facility
nearby.

The budget supports the purchase of 511,000 outpatient visits, an
increase of 18,000 compared to the FY 2003 President\'s Budget.

Opening New Facilities: An additional \$25 million is included to add
staff at two new hospitals, serving the Navajo Tribe in Arizona and the
Winnebago and Omaha Tribes in Nebraska, and at the Pawnee Outpatient
Center, serving seven tribes in Oklahoma. While existing IHS facilities
serve these tribes, the opening of these modern health facilities will
significantly improve both the quality and quantity of health care
provided. When these three facilities are fully operational, they will
increase the number of visits to health professionals that can be
accommodated annually by 23 percent at these sites, and make new medical
services available (e.g., the new Pawnee Outpatient Facility will
provide ultra sound and physical therapy for the first time).

Contract Support Costs (CSC): The budget includes \$271 million, the
same as the FY 2003 President\'s Budget, to support tribal efforts to
develop the administrative infrastructure critical to their ability to
successfully operate IHS programs. In FY 2002, the IHS entered into
self-determination contracts for the managements of two hospitals and
six outpatient facilities serving nearly 60,000 Indian people on the
Navajo reservation (Arizona and Utah) and the Eastern Cherokee
reservation (North Carolina).

Health Facility Construction: The budget includes a total of \$70
million for construction of new health facilities allowing IHS to
replace its priority health care facility needs with modern health
facilities and to significantly expand capacity at its most overcrowded
sites. The request will complete outpatient facilities at Pinon (Navajo
Reservation, Arizona) and Metlakatla (Annette Island, Alaska); continue
construction of the Red Mesa Outpatient Facility (Navajo Reservation,
Arizona) and begin construction of a new outpatient facility to replace
the Sisseton hospital (Sisseton-- Wahpeton Sioux Tribe, South Dakota).
When the Sisseton hospital is closed, IHS will purchase inpatient and
emergency care from non--IHS facilities such as the nearby Coteau Des
Prairies hospital.

Pay Costs: The budget includes an additional \$35 million to cover
increased pay costs for IHS\'s 15,021 FTEs and to allow tribally run
health programs to provide comparable pay raises to their own staffs.

Increasing IHS Health Insurance Reimbursements: In FY 2004, IHS will
receive an estimated \$561 million in health insurance
reimbursements--primarily from Medicare and Medicaid. The 2003 IHS
Medicare and Medicaid rates will be published shortly in the Federal
Register and are expected to increase reimbursement in FY 2003 and FY
2004. IHS and the Centers for Medicare and Medicaid Services have worked
cooperatively to develop a cost-based reimbursement methodology to
better reflect the full cost of providing services. This methodology,
together with better efforts to enroll eligible Indian people and
legislative changes expanding the scope of covered services, has led to
an increase in health insurance reimbursements of 176 percent since FY
1995.

Supporting Indian Self-Determination

The Department continues to provide Tribes with input into policy
changes that affect them. In November 2002, the Secretary reactivated
the Intradepartmental Council on Native American Affairs to provide
greater access and quality services for American Indians, Alaska Natives
and Native Americans and to promote the Tribal/Federal
government--to--government relationship.

The number of tribally managed IHS programs continues to increase, both
in dollar terms and as a percentage of the whole IHS budget. Tribes will
control an estimated \$1.6 billion of IHS programs in FY 2004,
representing 53 percent of the IHS\'s total budget request.

Management Savings

The budget includes savings of \$31 million from administrative
reductions and better management of information technology. The IHS will
achieve these savings primarily by reducing the use of Federal staff.
IHS will also reduce costs associated with administrative travel,
overtime, copying and the purchase of administrative equipment and
supplies. In particular, efficiencies will be achieved in the
development, modernization and enhancement of IHS information systems.
Tribes, and urban health programs, will be responsible for achieving
savings in the programs which they administer.

**Centers for Disease Control and Prevention**

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| HIV/AIDS,   | 1,157       | 1,235       | 1,281       | +46         |
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| Preventive  | 135         | 135         | 135         | 0           |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Public      | 148         | 117         | 114         | -3          |
| Health      |             |             |             |             |
| Improvemen  |             |             |             |             |
| t\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Infectious  | 348         | 335         | 332         | -3          |
| Disease     |             |             |             |             |
| Control\    |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| O           | 276         | 247         | 246         | -1          |
| ccupational |             |             |             |             |
| Safety &    |             |             |             |             |
| Health      |             |             |             |             |
| \.          |             |             |             |             |
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| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| ATSDR       | 78          | 77          | 73          | -4          |
| (VA/HUD     |             |             |             |             |
| App         |             |             |             |             |
| ropriation) |             |             |             |             |
| \...        |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Emergency   | 12          | 0           | 0           | 0           |
| Recovery    |             |             |             |             |
| \.          |             |             |             |             |
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| ...\...\... |             |             |             |             |
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| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| User Fees   | [2          | [2          | [2          | [ 0         |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Subtotal, | **\$6,566   | **\$6,485   | **\$6,491   | **+\$6 **   |
| Program     | **          | **          | **          |             |
| Level       |             |             |             |             |
| (current    |             |             |             |             |
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| **          |             |             |             |             |
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| **Subtotal, | **\$6,566   | **\$6,485   | **\$6,546   | **+\$61 **  |
| Program     | **          | **          | **          |             |
| Level       |             |             |             |             |
| (proposed   |             |             |             |             |
| law         |             |             |             |             |
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|             |             |             |             |             |
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| [Less Funds |             |             |             |             |
| Allocated   |             |             |             |             |
| from Other  |             |             |             |             |
| Sources:]{  |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Vaccines    | \$990       | \$1,056     | \$980       | -\$77       |
| for         |             |             |             |             |
| Children    |             |             |             |             |
| Current Law |             |             |             |             |
| (mandatory) |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Proposed    | 0           | 0           | 165         | 165         |
| Law Changes |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Public      | 1,101       | 1,116       | 1,116       | 0           |
| Health and  |             |             |             |             |
| Social      |             |             |             |             |
| Service     |             |             |             |             |
| Emergency   |             |             |             |             |
| Fund        |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
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| PHS         | 23          | 47          | 52          | +5          |
| Evaluation  |             |             |             |             |
| (Health     |             |             |             |             |
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|             |             |             |             |             |
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| **Total,    | **\$4,450   | **\$4,264   | **\$4,341   | **+\$77 **  |
| Current Law | **          | **          | **          |             |
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| FT          | 8,663       | 8,668       | 8,671       | +3          |
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+-------------+-------------+-------------+-------------+-------------+

The FY 2004 budget requests a total program level of \$6.5 billion for
the Centers for Disease Control and Prevention (CDC), a net increase of
\$61 million above the FY 2003 President\'s Budget. This net change
reflects \$240 million in program expansions, FY 2003 initialization of
childhood immunization improvements, completion of some new facilities
in FY 2003, and administrative streamlining. The FY 2004 budget for CDC
includes \$1.1 billion in mandatory immunization funding, and \$52
million from the Public Health Service evaluation interagency transfer
funds for activities related to Health Statistics.

Chronic Disease Prevention and Health Promotion

CDC supports numerous ongoing activities designed to prevent chronic
diseases including cardiovascular disease, diabetes, arthritis and
cancer. CDC also addresses the risk factors that are among the most
prominent contributors to death in the U.S. including tobacco, poor
diet, and lack of exercise. Chronic disease programs provide a wide
array of support to prevent the occurrence and progression of chronic
diseases. For example, the CDC funded State Diabetes Control program in
Minnesota has reduced participants\' risk for diabetes-related heart
problems by 40 percent and their risk for eye and kidney disease by 25
percent. Efforts to date have focused on reducing complications of
diabetes; the next step is to prevent its onset.

The budget includes \$834 million for Chronic Disease Prevention and
Health Promotion, a net increase of \$124 million, or 17 percent, above
the FY 2003 President\'s Budget.

Steps To A Healthier U.S. Initiative: The FY 2004 budget includes \$125
million, including \$100 million in new investments to pursue a
prevention initiative to reduce the burden of diabetes, obesity and
asthma-related complications in the population.

The centerpiece of this initiative will be a single Steps to a Healthier
US cooperative agreement program. This program will make awards to
States and communities to implement effective public health strategies
through community interventions to achieve healthier lifestyles. States
and communities will also address related risk factors, including a
specific emphasis on promoting healthy choices by youth.

The Steps initiative supports President Bush\'s HealthierUS program.
With a strong emphasis on proven interventions and existing science,
Steps will promote: State leadership and programs to motivate and
support responsible health choices, and to reduce the burden of disease;
Community initiatives to promote and enable healthy choices, with a
special focus on youth and the elderly; Health care and insurance
systems that put prevention first---reducing risk factors and reducing
complications of chronic disease; and, State and federal policies that
invest in the promise of prevention for all Americans.

The initiative\'s goals are to:

-   Prevent 75,000 to 100,000 Americans from developing diabetes,

-   Prevent 100,000 to 150,000 Americans from developing obesity, and

-   Prevent 50,000 Americans from being hospitalized for asthma.

Common reporting requirements on performance measures as well as a
coordinated evaluation process to measure performance progress will be
instituted as part of this initiative. CDC will lead the effort, with
full participation from HRSA, Administration for Children and Families,
Administration on Aging, and Agency for Healthcare Research and Quality.
This initiative will expand upon the Healthy Communities initiative
originally proposed in HRSA, in FY 2003.

Breast and Cervical Cancer Screening: The budget includes \$211 million
for the National Breast and Cervical Cancer Early Screening Detection
Program (NBCCEDP), an increase of \$10 million. This increase will
expand screening, diagnostic, and case management services to at-risk
women, especially minority women, providing an additional 32,000
screenings. Since its inception in 1991, over 3 million screening tests
have been provided by the NBCCEDP, with over 12,000 cases of breast
cancer and over 800 cases of invasive cervical cancer diagnosed. CDC
also supports education and outreach activities, case management
services, and research to increase screening rates.

Youth Media Campaign: The budget includes \$5 million for the Youth
Media Campaign. These funds will enable CDC to maintain a library of
proven media messages for distribution by the Ad Council.

Other Chronic: In addition, the budget provides net increases totaling
\$9 million to improve

heart disease and stroke public health communications, add more States
to school health programs, and expand Comprehensive Cancer Control
programs.

Environmental Health

The budget includes \$150 million to maintain ongoing environmental
disease prevention programs. In FY 2004, CDC will continue its focus on
studying the relationship between exposure to toxic substances and human
health effect, and providing emergency response and coordination
capacity for natural disasters, and chemical, technological and
radiological emergencies. CDC will also continue its environmental
health tracking efforts, the goal of which is to develop a surveillance
system that can integrate environmental hazards data with human exposure
and health effects data that have possible links to the environment.

HIV/AIDS, STDs and TB

Over the last two decades, HIV/AIDS prevention and treatment have
advanced dramatically.

The number of deaths among persons with AIDS in this country has
declined markedly since 1996. However, new domestic HIV infections still
number an estimated 40,000 each year. Worldwide, 42 million people are
living with HIV/AIDS and five million of them became infected with HIV
in 2002. More than 800,000 children under 15 years of age, predominantly
in African countries, contracted HIV during 2002; more than 90 percent
were infected in the womb, during childbirth or through breastfeeding.
The budget includes \$1.28 billion, a net increase of \$46 million over
the FY 2003 President\'s Budget, for prevention and control of HIV/AIDS,
sexually transmitted diseases and tuberculosis.

Domestic HIV efforts are focusing on the overarching goal of helping
States reduce the number of new infections 50 percent by 2005.

A total of \$690 million supports HIV/AIDS prevention programs in every
State and territory to prevent new infections, link people who are
infected to medical care and translate scientific research into actual
program capacity-building assistance to more than 700 community-based
organizations.

The Global AIDS Program (GAP) will be funded at \$294 million, a
programmatic increase of \$50 million over the FY 2003 President\'s
Budget. GAP funds are implementing programs to reduce HIV transmission
while improving care and treatment of HIV/AIDS patients in resource poor
areas of the world. CDC works to prevent HIV infection and to provide
care and treatment for HIV/AIDS patients around the world. Average life
expectancy in four countries in Africa is less than 40 years old because
of the devastation caused by AIDS. Sub-Saharan Africa is home to 29.4
million people living with AIDS; approximately 3.5 million new
infections occurred there in 2002. CDC has established country programs
in 25 countries---17 in Africa, 5 in Asia, 2 in Latin America and 1 in
the Caribbean and works jointly with USAID in many of these nations.

Preventing Mother-to-Child Transmission: Within the overall global
HIV/AIDS request is \$150 million for prevention of mother-to-child
transmission, an increase of \$50 million over the FY 2003 President\'s
Budget for the President's Mother and Child HIV Prevention Initiative.
The combination of these funds, the FY 2003 request for CDC, and equal
amounts requested in USAID meets the President\'s commitment to provide
a total of \$500 million for this effort through FY 2004. HIV infected
pregnant women give birth to an estimated two million children each
year; without intervention between 25 and 35 percent of these children
will become infected with the disease. Approximately 2000 children are
infected each day through their mothers. GAP has a defined strategy for
implementing programs to prevent mother-to-child transmission. The
strategy includes short-course antiretroviral drug therapy for
HIV-infected pregnant women, counseling on safe infant feeding after
delivery and postpartum AIDS care and treatment for HIV infected women
and their families. Together, CDC and USAID will target one million
women and aim to reduce HIV/AIDS transmission to their children by 40
percent.

Childhood Immunization

Delivery of safe and effective vaccines is one of the most
cost-effective methods of preventing illness. The goal for the year 2004
is to ensure that at least 90 percent of all two-year-olds receive the
full series of vaccines and that a vaccination system is built that will
sustain and further improve high coverage levels. The budget request of
\$1.6 billion includes two streams of funding to improve vaccination
rates. The mandatory Vaccines for Children (VFC) program provides free
vaccine to Medicaid recipients, the uninsured, American Indians and
Native Alaskans, and children with limited health coverage that does not
cover specific immunizations. The discretionary Section 317 program
provides funds for State immunization operational costs and many of the
vaccines used in public health clinics.

The budget includes three important immunization initiatives.

First, under current law, work will be initiated in VFC to build a
six-month, vendor-managed stockpile of all routinely recommended
childhood vaccines. A total of \$707 million in VFC funds will be used
between FY 2003 and FY 2006 for development of these stockpiles. This
includes added investments of \$143 million in FY 2003 and \$94 million
in FY 2004. HHS will develop an overall strategic plan to guard against
future vaccine shortages.

Second, legislation will be proposed to improve access to VFC vaccines
for children already entitled to them. The proposed legislation will
expand the number of access points for underinsured children---those
whose private insurance does not cover the immunizations---by allowing
them to receive their VFC vaccines at State and local public health
clinics. This change will both increase immunization rates for new
vaccines and reduce needs for discretionary funding.

Third, proposed legislation will also restore tetanus and diptheria
vaccines to the VFC program. The VFC statute caps prices for the three
vaccines that were in use prior to 1993, but the price caps are so low
that tetanus booster was removed from the VFC program in 1998 when no
vendor would bid on the contract. The change will also enable
development of a VFC stockpile for tetanus booster.

With these legislative changes, an additional \$165 million will be
added annually to the VFC budget to cover the additional children that
will be covered under this program and fund tetanus vaccines. Fewer
children will need to be covered through the discretionary immunization
program, leading to a \$110 million savings in the Section 317
discretionary program

While the budget includes these major policy initiatives, total 317 and
VFC obligations are projected to decline \$28 million between FY 2003
and FY 2004. This reflects the aggressive vaccine stockpile investments
planned for immediate implementation in FY 2003; the \$55 million
increase resulting from the legislative proposal; a \$28 million
reduction in the underlying VFC program as States \"catch-up\" in FY
2003 with new vaccines and immunizations deferred during the shortages;
and \$7 million in management savings in CDC\'s intramural program.

The immunization budget will continue to provide \$135 million for
global immunization activities, including polio eradication. While
worldwide polio cases were reduced by an estimated 95 percent between
1988 and 2002, a major international effort continues to reach the World
Health Organization\'s goal to certify global polio eradication by 2005.

Bioterrorism

The President\'s budget includes \$1.1 billion for bioterrorism
preparedness, the same level as the FY 2003 President\'s budget.

CDC will direct \$940 million of this amount to improving State and
local preparedness, \$158 million to improve CDC\'s internal
preparedness and response functions. \$18 million will continue to be
directed to applied anthrax research. The total funding level reflects
the creation of the new Department of Homeland Security, which is now
responsible for financing vaccine and pharmaceutical purchases for the
Strategic National Stockpile.

Upgrading State and Local Capacity: The budget includes \$940 million
for the State and local program, which emphasizes improved laboratory
capacity, enhanced epidemiological expertise in the identification and
control of diseases caused by terrorism, better electronic communication
and distance learning, and cooperative training between public health
agencies and local hospitals. In FY 2002, funding for bioterrorism was
awarded under a new approach that ensures coordination across public
health and medical systems, expects accountability, and recognizes
performance. This process coordinated funding from CDC and HRSA hospital
preparedness grants. This coordination will be expanded in FY 2003 and
FY 2004 to include efforts at FDA to increase the number of State food
labs in the Laboratory Response Network, a system which currently has
120 public health labs specifically trained in identifying pathogens
that could be used for bioterrorism.

CDC will continue to support linkages between public health departments
and health care providers by maintaining rapid communications capacity
and access to training via distance-learning mechanisms. The 24
university-based Centers for Public Health Preparedness (CPHP) will
continue to ensure that frontline public health workers have the
competencies to respond to current and emerging health threats. The
CPHPs provide ongoing education through teleconferences and training
programs in disaster management, implement and test reliable
communications systems, and offer other hands-on experiences such as
tabletop training exercises. In addition, resources will be available to
support disease detection and outbreak control, including
epidemiological and medical response.

Upgrading CDC Capacity: Funds totaling \$158 million will be used to
upgrade scientific response capacity at CDC. Funds will sustain
equipment and personnel, including the Rapid Response and Advanced
Technology (RRAT) Lab at the National Center for Infectious Diseases.
The RRAT lab specializes in the triage and analysis of biological
specimens suspected as potential agents of terrorism. Work will continue
on the rapid toxic screen, technology that can quickly identify up to
150 chemical threats.

Funds will also be used to support around-the-clock terrorism
surveillance and response operations at CDC\'s Emergency Operations
Center. The request will continue support for ten disaster response
teams and for approximately 64 Epidemic Intelligence Service (EIS)
Officers for assignment to States. Work will also continue in
conjunction with the Department of Agriculture, in accordance with an
emerging rule, to ensure that all entities that possess, use, or
transfer certain toxins have registered with the Select Agent program.
CDC inspected 105 laboratories in FY 2002 and, through the new
regulation, will be working toward the goal of inspecting all eligible
facilities.

Modern, Secure Laboratories and Facilities

The work conducted in laboratories at CDC is relied upon worldwide to
help control disease outbreaks, respond to emergencies and prevent
illness and injury. For example, analysis at CDC labs has been
instrumental in interpreting exposure of firefighters to 110 different
chemicals as a result of their response to the terrorist attacks on the
World Trade Center. The FY 2004 budget includes a total request of \$114
million to continue CDC's long-term master facilities plan to construct,
repair and secure facilities of the CDC.

Funding provided in FY 2003 will enable the completion of an
environmental health laboratory and one infectious disease laboratory.

A priority focus in FY 2004 is the construction of a new Headquarters/
Emergency Operations Center which will provide a permanent, secure, and
consolidated command and control center for CDC\'s response to terrorist
events, outbreaks and other natural disasters. The request will also
enable continued construction of critically needed campus-wide
infrastructure and physical security upgrades.

Office of the Director

The budget includes \$60 million for the Office of the Director, a net
increase of \$9 million above the FY 2003 President\'s Budget. CDC will
continue to concentrate management attention on achieving results in
accordance with the President\'s Management Agenda including the
implementation of the Unified Financial Management System to promote the
consolidation of accounting operations and reduce the cost of providing
accounting services throughout HHS.

Public Health Information Network: The budget includes an increase of
\$10 million for the development of the Public Health Information
Network (PHIN). PHIN will build upon and integrate existing public
health communication systems, and will include public health data
standards necessary for interoperability between the healthcare sector
and local, State, and Federal public health authorities. This work is
being coordinated closely with activities elsewhere in the Department
focused on improving information technology in the health care sector.

Birth Defects, Developmental Disabilities, Disability and Health

The FY 2004 budget includes \$87 million to support States in the
prevention of birth defects and developmental disabilities (such as
spina bifida) where proven strategies have been developed. Surveillance
activities are designed to help find causes for others, such as autism.
Other activities include tracking infants who test positive for hearing
loss to ensure that proper diagnostic follow-up and prevention services
are provided, and a pilot project for attention-deficit hyperactivity
disorder.

Epidemic Services and Response

CDC \'s epidemiologists are the \"disease detectives\" that determine
the cause of outbreaks and develop the countermeasures that stem the
spread of illness. For example, in FY 2002, Epidemic Intelligence
Service (EIS) officers, trained by the CDC to detect and control disease
outbreaks, were sent to more than 69 outbreaks. The FY 2004 budget
includes \$76 million for the Epidemic Services and Response Program.
Funds will support efforts to provide epidemiological and technological
assistance and consultation to international, State and local health
agencies, to fund urban research centers to assess and improve the
health of urban communities, and to monitor and track infectious
diseases in this country.

Health Statistics

The FY 2004 budget includes \$125 million for health statistics
conducted by the National Center for Health Statistics (NCHS). NCHS will
continue to support surveys that provide a wealth of valuable
information to support decision-making and research on health. NCHS
supports the National Health Interview Survey, the National Health and
Nutrition Examination Survey, the National Vital Statistics System, and
the National Health Care Survey. These surveys, along with NCHS research
and analytic programs, provide critical information such as tracking
health insurance coverage, teen birth and out-of-wedlock data,
environmental exposure tracking, and early development of children data.
The budget will support technical updates to reengineer the vital
statistics system and a sample redesign for the National Health
Interview Survey.

Preventive Health Block Grant

The FY 2004 budget includes \$135 million for the Preventive Health and
Health Services Block Grant (PHHSBG). The PHHSBG provides its 61
grantees, including all States, two American Indian Tribes and 11
territories the autonomy and flexibility to fit prevention and health
promotion programs to their unique needs. States are encouraged to use
their PHHSBG funding to augment their efforts as part of the Prevention
Initiative---\"Steps\"---that addresses prevention of diabetes, obesity
and asthma.

Injury Prevention

Injuries are the number one killer of children and young adults in the
United States. The FY 2004 budget includes a total of \$145 million for
encouraging the use of programs and policies that are successful in
reducing injuries and deaths across the country. Examples of CDC
activities include support for State rape crisis programs, research to
prevent domestic violence, gathering data for the National Violent Death
Reporting System, and helping States develop systems to collect
surveillance data on child maltreatment and related injuries.

Public Health Improvement

The budget includes \$114 million for Public Health Improvement. Funding
is included for the Racial and Ethnic Approaches to Community Health
(REACH 2010) demonstration projects, which seek to eliminate racial
disparities in health in areas including chronic and infectious
diseases. Other activities funded within this amount includes the
National Electronic Disease Surveillance System (NEDSS) standards,
initially developed for tracking laboratory results, serves as the
foundation for many States\' bioterrorism information systems. Funds
also support a single point of contact for State-wide public health
issues, and provides training and performance measurement of public
health activities at the State, local, and national level.

Infectious Diseases

Infectious diseases are the leading cause of death globally. More than
35 newly emerging infectious diseases were identified in the world
between 1973 and 2002. In addition, foodborne diseases are estimated to
cause 5,000 deaths and 76 million illnesses in the U.S. each year. The
budget includes \$332 million in Infectious Diseases for work to prevent
and detect these diseases.

Strategies to combat infectious diseases are developed by focusing on
surveillance, improving State laboratory ability to detect selected
pathogens and trace outbreaks, slowing the development of antibiotic
resistant microbes, and reducing the number and severity of infections
acquired in hospitals. The Infectious Disease activity also provides
laboratory support for the HIV/AIDS, tuberculosis and immunization
programs.

Occupational Safety and Health

Each day, an average of 9,000 U.S. workers sustain disabling injuries on
the job, 16 workers die from an injury sustained at work, and 137
workers die from job-related diseases. The National Institute for
Occupational Safety and Health (NIOSH) establishes and disseminates
scientific and public health information necessary to ensure safe and
healthful working conditions for millions of American men and women.
Research will continue to address solutions to occupational disease and
workplace safety concerns in those fields where the dangers are the
greatest.

The budget includes a total of \$246 million, \$1 million below the FY
2003 President\'s Budget. In addition to its ongoing activities, NIOSH
assists in the implementation of the Energy Employees Occupational
Illness Compensation Act of 2000. Funds for this activity are provided
by the Department of Labor.

Agency for Toxic Substances and Disease Registry (ATSDR)

ATSDR is managed as part of CDC and is the lead public health agency
responsible for public health activities related to Superfund sites.
ATSDR develops profiles of the health effects of hazardous substances,
assesses health hazards at specific Superfund sites, and provides
consultations to prevent or reduce exposure and related

illnesses.

The budget includes \$73 million for ATSDR. Funding for ATSDR is
provided through the Veterans Affairs, Housing and Urban Development
Appropriations Subcommittee.

Administrative and Information Technology Savings Across CDC, the budget
includes \$17 million for pay raises, and \$55 million in savings
related to the President\'s Management Agenda as a result of
consolidating administrative functions and information technology,
organizational delayering to speed decision making processes,
competitive outsourcing, implementation of effective workforce planning
and human capital management strategies, and adoption of other economies
and efficiencies in administrative operations.

CDC is focusing on reducing the costs of the information technology
infrastructure, such as providing e-mail messaging services, helpdesk,
and remote access. CDC is also looking to retire some systems that will
be replaced by a more comprehensive and integrated solution.

**National Institutes of Health**

Overview by Institute

  --------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -----------------------------
                                                                                                                                                                                                               **2004**
                                                                                                                                                                                                               
                                                                                                                                    **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**   **[ +/- 2003]{.underline}**
                                                                                                                                                                                                               
  Institutes:                                                                                                                                                                                                  
  National Cancer Institute\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                   \$4,113                  \$4,609                  \$4,771                  +\$162
  National Heart, Lung, & Blood Institute\...\...\...\...\...\...\...\...\....                                                      2,554                    2,762                    2,868                    +106
  National Institute of Dental & Craniofacial Research\...\...                                                                      342                      369                      382                      +13
  Natl Inst. of Diabetes & Digestive & Kidney Disease\....                                                                          1,563                    1,703                    1,820                    +117
  National Institute of Neurological Disorders & Stroke\...                                                                         1,309                    1,416                    1,469                    +53
  National Institute of Allergy & Infectious Diseases\...\....                                                                      2,526                    3,981                    4,335                    +354
  National Institute of General Medical Sciences\...\...\...\...\....                                                               1,698                    1,849                    1,923                    +74
  Natl Inst. of Child Health and Human Development\...\.....                                                                        1,109                    1,195                    1,245                    +50
  National Eye Institute\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                              580                      625                      648                      +23
                                                                                                                                                                                                               
  National Institute of Environmental Health Sciences:                                                                                                                                                         
                                                                                                                                                                                                               
  Labor/HHS Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                           563                      609                      631                      +22
                                                                                                                                                                                                               
  VA/HUD Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                         81                       76                       79                       +3
                                                                                                                                                                                                               
  National Institute on Aging\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                      891                      958                      994                      +37
                                                                                                                                                                                                               
  Natl Inst. of Arthritis & Musculoskeletal & Skin Dis\...\...                                                                      447                      485                      503                      +17
  Natl Inst. on Deafness & Communication Disorders\...\....                                                                         341                      366                      380                      +15
  National Institute of Mental Health\...\...\...\...\...\...\...\...\...\...\...\...                                               1,234                    1,333                    1,382                    +50
  National Institute on Drug Abuse\...\...\...\...\...\...\...\...\...\...\...\.....                                                885                      960                      996                      +36
  National Institute on Alcohol Abuse & Alcoholism\...\....                                                                         383                      415                      430                      +15
  National Institute for Nursing Research\...\...\...\...\...\...\...\...\....                                                      120                      130                      135                      +5
  National Human Genome Research Institute\...\...\...\...\...\.....                                                                428                      458                      478                      +20
  Natl Inst. for Biomedical Imaging & Bioengineering\...\....                                                                       262                      270                      282                      +12
  National Center for Research Resources\...\...\...\...\...\...\...\...\...                                                        985                      1,065                    1,054                    -11
  Natl Center for Complementary & Alternative Med\...\.....                                                                         104                      112                      116                      +4
  Natl Center for Minority Health & Health Disparities\.....                                                                        157                      186                      193                      +7
  Fogarty International Center\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                        56                       62                       64                       +2
  National Library of Medicine\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                        274                      306                      316                      +10
  Office of the Director\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                            253                      274                      318                      +44
  Buildings & Facilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                            296                      769                      80                       -689
  ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\...\...                                                                    [7 ]{.underline}         [ 0 ]{.underline}        [ 0 ]{.underline}        [ 0 ]{.underline}
                                                                                                                                                                                                               
  **Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... **                               **\$23,561 **            **\$27,343 **            **\$27,893 **            **+\$549 **
                                                                                                                                                                                                               
                                                                                                                                                                                                               
                                                                                                                                                                                                               
  Less Funds Allocated from Other Sources:                                                                                                                                                                     
  ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\...\...\...\...                                                                    -\$7                     \$0                      \$0                      \$0
  Type 1 Diabetes Research 1/\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                         [-100 ]{.underline}      [-100 ]{.underline}      [-150 ]{.underline}      [-50 ]{.underline}
                                                                                                                                                                                                               
  **Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... **                                 **\$23,454 **            **\$27,243 **            **\$27,743 **            **+\$499 **
                                                                                                                                                                                                               
                                                                                                                                                                                                               
                                                                                                                                                                                                               
  **Labor/HHS Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\..... **                                        **\$23,373 **            **\$27,168 **            **\$27,664 **            **+\$496 **
                                                                                                                                                                                                               
  **VA/HUD Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... **                                     **\$81 **                **\$76 **                **\$79 **                **+\$3 **
                                                                                                                                                                                                               
                                                                                                                                                                                                               
                                                                                                                                                                                                               
  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...   17,250                   17,693                   17,526                   -167
                                                                                                                                                                                                               
                                                                                                                                                                                                               
                                                                                                                                                                                                               
  1/ These funds were pre-appropriated in the Benefits Improvement and Protection Act of 2000 and P.L. 107-360.                                                                                                
                                                                                                                                                                                                               
  --------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -----------------------------

Overview by Mechanism

  ----------------------------------------------------------------------------------------------------------------------- --------------------------- --------------------------- --------------------------- -----------------------------
                                                                                                                                                                                                              **2004**
                                                                                                                                                                                                              
                                                                                                                          **[2002]{.underline}**      **[2003]{.underline}**      **[2004]{.underline}**      **[ +/- 2003]{.underline}**
                                                                                                                                                                                                              
  Mechanism:                                                                                                                                                                                                  
  Research Project Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                 \$13,016                    \$14,298                    \$15,204                    +\$906
  *\[ \# of Non-Competing Grants \]\...\...\...\...\...\...\...\...\...\...\...\.... *                                    *\[24,856\]*                *\[26,195\]*                *\[26,958\]*                *\[+763\]*
  *\[ \# of New/Competing Grants\]\...\...\...\...\...\...\...\...\...\...\...\..... *                                    *\[9,471\]*                 *\[10,165\]*                *\[10,509\]*                *\[+344\]*
  *\[ \# of Small Business Grants\]\...\...\...\...\...\...\...\...\...\...\...\...\... *                                 *[\[1,894\]]{.underline}*   *[\[1,949\]]{.underline}*   *[\[2,053\]]{.underline}*   *[\[+104\]]{.underline}*
  *\[ Total \# of Grants \]\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... *                         *\[36,221\]*                *\[38,309\]*                *\[39,520\]*                *\[1,211\]*
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
  Research Centers\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                          2,117                       2,422                       2,589                       +167
  Research Training\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                          653                         693                         715                         +22
  Research & Development Contracts\...\...\...\...\...\...\...\...\...                                                    1,793                       2,430                       2,779                       +349
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
  Intramural Research\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                            2,234                       2,549                       2,630                       +81
  Other Research\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                      1,933                       2,149                       2,214                       +65
  Extramural Research Facilities Construction\...\...\...\.....                                                           118                         457                         0                           -457
  Research Management and Support\...\...\...\...\...\...\...\...\...                                                     786                         920                         969                         +49
  National Library of Medicine\...\...\...\...\...\...\...\...\...\...\...\...\...                                        274                         306                         316                         +10
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
  Office of the Director\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                            253                         274                         318                         +44
  Buildings and Facilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                               296                         769                         80                          -689
  NIEHS VA/HUD Appropriation (Superfund)\...\...\...\...                                                                  81                          76                          79                          +3
  ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\....                                                                     [7 ]{.underline}            [ 0 ]{.underline}           [ 0 ]{.underline}           [ 0 ]{.underline}
  **Total, Program Level\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... **                              **\$23,561 **               **\$27,343 **               **\$27,893 **               **+\$549 **
                                                                                                                                                                                                              
  Less Funds Allocated from Other Sources:                                                                                                                                                                    
  ONDCP Drug Forfeiture Fund Transfer (NIDA)\...\....                                                                     -\$7                        \$0                         \$0                         \$0
  Type 1 Diabetes Research 1/\...\...\...\...\...\...\...\...\...\...\...\...\....                                        [-100 ]{.underline}         [-100 ]{.underline}         [-150 ]{.underline}         [-50 ]{.underline}
  **Total, Budget Authority\...\...\...\...\...\...\...\...\...\...\...\...\...\..... **                                  **\$23,454 **               **\$27,243 **               **\$27,743 **               **+\$499 **
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
  **Labor/HHS Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\... **                                        **\$23,373 **               **\$27,168 **               **\$27,664 **               **+\$496 **
                                                                                                                                                                                                              
  **VA/HUD Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\..... **                                     **\$81 **                   **\$76 **                   **\$79 **                   **+\$3 **
                                                                                                                                                                                                              
  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   17,250                      17,693                      17,526                      -167
                                                                                                                                                                                                              
                                                                                                                                                                                                              
  1/ These funds were pre-appropriated in the Benefits Improvement and Protection Act of 2000 and P.L. 107-360.                                                                                               
                                                                                                                                                                                                              
  ----------------------------------------------------------------------------------------------------------------------- --------------------------- --------------------------- --------------------------- -----------------------------

This Administration continues its strong commitment to biomedical
research. In FY 2003, the President\'s Budget completed the five-year
doubling of the NIH budget. As a result of the doubling, NIH will be
funding nearly 10,000 more research grants than it did before the
doubling began--- 10,000 more ideas that could lead to vaccines, cures,
and treatments, as well as fundamental scientific breakthroughs, that
could open up even more new opportunities for improving human health.
NIH can also now support the training of over 1,500 more scientists each
year than it could in FY 1998. This investment will help ensure there
are enough trained professionals ready to turn today\'s research
advances into tomorrow\'s medical success stories.

Building on the research momentum generated over the past five years,
the FY 2004 budget provides \$27.9 billion for NIH. This is a net
increase of \$549 million, or 2.0 percent, over the FY 2003 President\'s
Budget. However, as a result of converting approximately \$1.4 billion
from one-time non-recurring costs in FY 2003 for facilities construction
and anthrax vaccine procurement, NIH research programs and support will
have a robust increase of over \$1.9 billion, or 7.5 percent.

NIH is the world\'s largest and most distinguished organization
dedicated to maintaining and improving health through medical science.
Its budget is composed of 27 appropriations for its Institutes and
Centers, Office of the Director, and Buildings and Facilities. In FY
2004, over 80 percent of the funds appropriated to NIH will flow out to
the extramural community, which supports work by more than 50,000
researchers affiliated with about 1,700 university, hospital, and other
research facilities. About 9-10 percent of the budget will support an
in-house, or intramural, program of basic and clinical research
activities managed by world-class physicians and scientists. This
intramural program, which includes the NIH Clinical Center, gives our
nation the unparalleled ability to respond immediately to health
challenges nationally and worldwide. Another 3 percent will provide for
research management and support.

Research Priorities in FY 2004

In fulfilling its mission, NIH strives to maintain a diverse portfolio
of research founded on both public health need and scientific
opportunity. The FY 2004 budget request will allow NIH to address
imperative requirements in biodefense; continue progress in promising
arenas of science related to specific diseases such as cancer, HIV/AIDS,
diabetes, Parkinson\'s disease, Alzheimer\'s disease; and pursue whole
new avenues of post-genomics research.

Biodefense Research: Our Nation\'s ability to detect and counter
bioterrorism ultimately depends heavily on the state of biomedical
science. In FY 2004, the number one priority for the program increases
requested in the NIH budget is supporting research needed for the war
against terrorism. To guide this research, NIH last year developed a
Strategic Plan for Biodefense Research and a Biodefense Research Agenda
for CDC Category A Agents, with short-, intermediate-, and long-term
goals. These plans stress two overarching, complementary, and urgent
components: a) basic research on the biology of microbial agents with
bioterrorism potential and the properties of the host\'s response to
infection and defense mechanisms; and b) applied research with
predetermined milestones for the development of new or improved
diagnostics, vaccines, and therapeutics. NIH will continue to consult
with the new Department of Homeland Security, the HHS Assistant
Secretary for Public Health Emergency Preparedness, and the Department
of Defense to ensure full coordination with other Federal agencies in
the war against terrorism.

On January 7th, the President submitted a budget amendment to reallocate
\$225 million within the \$1.7 billion FY 2003 biodefense budget request
for NIH in order to accelerate construction of specialized biosafety
laboratories at universities and research institutions across the
country that must be built first in order to carry out priority
biodefense and infectious disease research. This budget amendment
increases the FY 2003 request for extramural biodefense laboratory
construction from \$150 million to a total of \$375 million. The first
six or seven of these biosafety level (BSL) 3 or 4 research facilities
would be financed with FY 2003 funds, instead of the three or four
originally proposed.

For FY 2004, the President\'s budget proposes a total of \$1.6 billion
for NIH biodefense efforts. While this is a net overall decrease of
\$121 million, it is the result of significant one-time, non-recurring
biodefense expenses in FY 2003, including \$746 million in intramural
and extramural laboratory construction and \$250 million for anthrax
vaccine procurement costs. By retaining these prior-year one-time
expenditures in the research program, NIH\'s biodefense research
activity will effectively expand by \$875 million in FY 2004. Examples
of planned research initiatives for FY 2004 include developing novel
therapeutic strategies for blocking the effects of botulism toxin;
establishing animal models and standardized reagents, microarray panels,
and other materials for the study of priority pathogens; expanding
research to discover how the two main cell types of the immune system, B
and Y lymphocytes, help regulate immune responses to dangerous microbes;
and further accelerating the testing of new biodefense therapeutics,
vaccines, and diagnostic tools. NIH is currently testing a range of
candidate vaccines in clinical and pre-clinical studies, including
third-generation vaccines against smallpox; a second-generation vaccine
to prevent anthrax; a DNA vaccine to prevent Ebola virus; and a new
vaccine for plague.

NIH will continue to provide support for advanced research and
early-phase clinical trials needed to develop new biodefense vaccines
and other countermeasures. However, the NIH budget for FY 2004 does not
include resources for vaccine procurement. Once a determination is made
that these NIH-developed countermeasures are licensable and
industrial-scale production is feasible, subsequent procurement
contracts would be financed from a new mandatory account in the
Department of Homeland Security. Legislation is also being proposed to
give NIH more flexible management tools to further accelerate its
biodefense research.

HIV/AIDS Research: The FY 2004 budget includes a total of \$2.9 billion
for HIV/AIDS-related research. This is an increase of \$110 million, or
4.0 percent over the FY 2003 level. The FY 2004 NIH HIV/AIDS research
agenda continues the following overarching themes: HIV prevention
research, including development of vaccines, microbicides, behavioral
interventions, and strategies to prevent perinatal transmissions;
therapeutics research to develop simpler, less toxic, and cheaper drugs
and regimens to treat HIV infection and its associated illnesses,
malignancies, and other complications; international research,
particularly to address the critical research and training needs in
developing countries; and research targeting the disproportionate impact
of the AIDS epidemic on racial and ethnic minority populations in the
United States. All of these efforts require a strong foundation in basic
science. The overall budget request for NIH also includes \$100 million
in NIAID to continue HHS contributions initiated in FY 2002 to the

Global Fund to Fight HIV/AIDS, Malaria, and Tuberculosis.

Institutional Development Awards (IDeA) Program: For FY 2004, the budget
proposes \$210 million for the Institutional Development Awards (IDeA)
program, an increase of \$25 million or 14 percent, over FY 2003. These
funds are included within the request for the National Center for
Research Resources (NCRR). This increase supports NIH\'s continuing
efforts to develop a critical mass of competitive biomedical researchers
in States that have not fully participated in NIH research funding in
the past.

Best Pharmaceuticals for Children Act: The request for NIH includes an
additional \$25 million, for a total of up to \$50 million, to continue
implementing the Best Pharmaceuticals for Children Act (BPCA). Under the
Act, NIH is responsible for contracting for studies cited by FDA as
needed to provide dosage, safety, and effectiveness data in children to
permit labeling of off-patent drugs for pediatric use when manufacturers
decline to perform the studies. NIH, working cooperatively with FDA and
other outside experts, has recently published a list that identified the
12 highest priority drugs needing pediatric review. NIH and FDA have
also been working to identify the specific pediatric testing that needs
to be done; issue requests for manufacturers to perform the studies;
and, if they decline to do the testing, issue requests for proposals
from NIH to have these studies conducted under contract. NIH has
announced that the first two requests for proposals will cover the drugs
sodium nitroprusside, for the controlled reduction of blood pressure;
and lorazepam, for the treatment of status epilepticus and for sedation
in the pediatric intensive care unit. NIH will also request proposals to
establish a BPCA Coordinating Center which will help those conducting
pediatric clinical trials funded under this authority.

Diabetes and Obesity: The epidemic of obesity threatens the Nation\'s
health by sharply increasing the incidence of Type 2 diabetes, fatty
liver disease, kidney failure, and cardiovascular and other diseases.
However, dramatic advances in our understanding of regulation of
appetite and weight offer new opportunities to develop methods to treat
obesity and to prevent Type 2 diabetes and other obesity-related
diseases. The FY 2004 budget includes an increase of \$14 million for
expanded trans-NIH research programs in obesity and diabetes. Total NIH
diabetes spending in FY 2004 is estimated to be \$946 million. This
includes \$150 million, an increase of \$50 million over FY 2003,
specifically for research on the prevention and cure of type 1 diabetes.
These special diabetes funds were reauthorized in December of 2002, with
annual funding increasing to \$150 million through FY 2008.

\"Roadmap\" Funding: As an additional effort to accelerate fundamental
discovery and translation of that new knowledge into preventive and
therapeutic strategies, the FY 2004 budget request for the Office of the
Director includes an increase of \$35 million for strategic \"roadmap\"
initiatives. These funds will be allocated by the NIH Director to the
Institutes and Centers to address critical roadblocks and knowledge gaps
that currently constrain rapid progress in biomedical research. Three
broad initiatives will be stimulated with these funds: 1) new pathways
to discovery, which includes a comprehensive understanding of the
building blocks of the body's cells and tissues and how complex
biological systems operate, regenerative medicine, structural biology,
molecular libraries, nanotechnology, computational biology and
bioinformatics, and molecular imaging; 2) multidisciplinary research
teams of the future; and 3) re-engineering the clinical research
enterprise. These efforts will allow the NIH to rethink the technical
and human infrastructure required to translate findings from genetics
and proteomics into front-line treatments and prevention strategies.

Research Project Grants

The support of basic medical research through competitive,
peer-reviewed, and investigator-initiated research project grants (RPGs)
represents 55 percent of NIH\'s total budget request for FY 2004.

In FY 2004, the NIH budget provides \$15.2 billion, a 6.3 percent
increase over FY 2003, to fund 39,520 total projects, the highest level
in the agency\'s history. This is 1,211 more grants in total than are
expected to be funded in FY 2003.

Competing RPGs: Within this total, NIH estimates it will support 10,509
competing RPGs in FY 2004, an increase of 344 over FY 2003 and itself a
record high. Of these, 322 will be fully funded in the first year they
are awarded, for \$179 million in FY 2004. This includes programs such
as Academic Research Enhancement Awards, Shannon Awards, and challenge
grant programs, all of which were initially designed with multi-year
funding as an intrinsic part of the program. NIH will undertake a study
this year to determine the types of grants that can be fully funded from
both the point of financial stewardship and scientific accountability.
Following this study, other categories of grants may also be considered
for multi-year funding. The average cost of research project grants will
increase in the aggregate by 2.7 percent.

Extramural Research Facilities Construction

For FY 2004, no new funds are requested for extramural research
facilities construction grants, a reduction of \$457 million from FY
2003. Of this reduction, \$375 million is from the non-recurring
expenditures for extramural biodefense laboratory construction requested
for FY 2003, and \$82 million is from non-biodefense research facilities
construction. Over the past 10 years, nearly \$500 million has been
appropriated for non-biodefense extramural construction projects. In FY
2004, NIH\'s budget places a higher priority on the support of
additional research project grants.

Intramural Buildings and Facilities

A total of \$80 million is requested for NIH intramural buildings and
facilities (B&F) in FY 2004, a reduction of \$689 million from FY 2003.
Of this reduction, \$371 million is due to one-time construction of
biodefense research laboratories and physical security improvements on
NIH\'s intramural campuses, and \$318 million is from other
non-biodefense intramural facilities projects. The \$80 million
requested for FY 2004 will be used for general repairs and improvements
across NIH\'s nearly 200 total buildings. Over the past eight years,
through the FY 2003 request, Congress will have appropriated over \$800
million for major new, non-biodefense construction projects on the NIH
campus, including the Louis Stokes Consolidated Laboratory Facility; the
Mark O. Hatfield Clinical Research Center; the Dale and Betty Bumpers
Vaccine Laboratory Center; and the John E. Porter National Neurosciences
Research Center. On January 7th, the President submitted a budget
amendment to reallocate \$136 million within NIH\'s non-biodefense
research request in order to fully fund construction of the second phase
of the Porter Neuroscience Center in FY 2003.

Management Savings

Across NIH, the budget includes savings of \$151 million from better
management of administrative and information technology functions. In
support of the President\'s Management Agenda, NIH plans to save \$42
million from consolidating administrative functions, organizational
delayering; competitive sourcing, implementation of effective workforce
planning and human capital management strategies, and adoption of other
economies and efficiencies in administrative operations. Overall, NIH\'s
FTEs for FY 2004 decrease by a net 167, which includes -292 FTE in
administrative reductions and increases of +125 FTE for biodefense
research and research support. In addition, NIH plans to reduce
information technology expenditures to achieve \$109 million in savings
in FY 2004 primarily through consolidating information technology
infrastructure services such as e-mail, help desk, wireless networking,
and wide-area networking services across NIH; reducing costs associated
with overlapping areas of support for Institute research systems, such
as in reporting and tracking of research grant applications; and
accelerating the pace of subsuming local administrative systems into NIH
and HHS enterprise systems expected to be coming on-line in FY 2004 in
areas such as funds status monitoring and budget forecasting and
reporting.

**Substance Abuse and Mental Health Services Administration**

+-------------+-------------+-------------+-------------+-------------+
| \`          | **[2002]{.u | **[2003]{.u | **[2004]{.u | **2004**    |
|             | nderline}** | nderline}** | nderline}** |             |
|             |             |             |             | **[         |
|             |             |             |             | +/-2003]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Substance   |             |             |             |             |
| Abuse:      |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Substance   | \$1,725     | \$1,785     | \$1,785     | \$0         |
| Abuse Block |             |             |             |             |
| G           |             |             |             |             |
| rant\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Programs of |             |             |             |             |
| Regional    |             |             |             |             |
| and         |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| National    |             |             |             |             |
| Si          |             |             |             |             |
| gnificance: |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| T           | 291         | 358         | 557         | +199        |
| reatment\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Prevention  | [197        | [153        | [148        | [-5         |
| \...\...\.. | ]{          | ]{          | ]{          | ]{          |
| .\...\...\. | .underline} | .underline} | .underline} | .underline} |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Subtotal, | **\$2,213   | **\$2,296   | **\$2,490   | **+\$194 ** |
| Substance   | **          | **          | **          |             |
| Abuse       |             |             |             |             |
| \...\...\.  |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Mental      |             |             |             |             |
| Health:     |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Mental      | \$433       | \$433       | \$433       | \$0         |
| Health      |             |             |             |             |
| Block       |             |             |             |             |
| Grant\...\  |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Path        | 40          | 47          | 50          | +3          |
| Homeless    |             |             |             |             |
| Formula     |             |             |             |             |
| Gr          |             |             |             |             |
| ant\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Programs of |             |             |             |             |
| Regional    |             |             |             |             |
| and         |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| National    | 230         | 213         | 212         | -1          |
| Sig         |             |             |             |             |
| nificance\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Children\'s | 97          | 97          | 107         | +10         |
| Mental      |             |             |             |             |
| Health      |             |             |             |             |
| Service     |             |             |             |             |
| s\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Protection  | [32         | [32         | [32         | [ 0         |
| and         | ]{          | ]{          | ]{          | ]{          |
| Advo        | .underline} | .underline} | .underline} | .underline} |
| cacy\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Subtotal, | **\$832 **  | **\$822 **  | **\$834 **  | **+\$12 **  |
| Mental      |             |             |             |             |
| Health      |             |             |             |             |
| \...\       |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Program     | \$91        | \$77        | \$85        | +\$8        |
| Mana        |             |             |             |             |
| gement\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Rec         | [10         | [10         | [ 0         | [-10        |
| overy/Biote | ]{          | ]{          | ]{          | ]{          |
| rrorism\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total,    | **\$3,146   | **\$3,205   | **\$3,409   | **+\$204 ** |
| Program     | **          | **          | **          |             |
| Level\      |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Less Funds  |             |             |             |             |
| Allocated   |             |             |             |             |
| from Other  |             |             |             |             |
| Sources:    |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| PHSSEF\...  | -\$10       | -\$10       | \$0         | \$10        |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| PHS         | [ 0         | [ 0         | [-16        | [-16        |
| Evaluation  | ]{          | ]{          | ]{          | ]{          |
| Funds\...   | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total,    | **\$3,136   | **\$3,195   | **\$3,393   | **+\$198 ** |
| Di          | **          | **          | **          |             |
| scretionary |             |             |             |             |
| BA\...\     |             |             |             |             |
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| .\...\..... |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| FTE\...\.   | 582         | 588         | 572         | -16         |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

The FY 2004 budget for SAMHSA is \$3.4 billion, a net increase of \$204
million or 6 percent, over the FY 2003 President\'s Budget. The request
continues the President\'s commitment to reduce current illicit drug use
through the creation of a new treatment services voucher program. The
budget provides for increases in mental health services targeted towards
some of our most vulnerable individuals---children and homeless.
Resources are also provided to enhance our Federal and State level drug
and mental health data collection activities.

Substance abuse

The request includes \$2.5 billion, a net increase of \$194 million, or
9 percent, for substance abuse treatment and prevention activities. The
FY 2004 budget represents the third year of the President\'s commitment
to expand drug treatment services over five years. The Administration\'s
goal is to reduce current use of illicit drugs by 10 percent in two
years and 25 percent in five years.

Meeting the treatment needs of people who are currently substance
dependent is a major priority in this budget, and a new \$200 million
State voucher program is proposed. Over one million individuals receive
treatment for drug use each year, and it is estimated that as many as
100,000 of those seeking treatment are unable to access the appropriate
services. This new State voucher program will increase substance abuse
treatment capacity, consumer choice and access to a comprehensive
continuum of treatment options, including faith and community based
organizations. Approximately 100,000 people would receive services
through this effort. Awards will be through competitive grants and will
provide States with maximum flexibility in customizing a voucher program
to fit a State\'s unique needs.

To target those who currently use but are not dependent on drugs, the
budget continues the \$50 million State Targeted Capacity Expansion
program launched in FY 2003. This program will allow States to expand
screening and brief intervention services available in communities. The
goal is to increase treatment capacity by expanding the continuum of
care available in communities through increased access to clinically
appropriate treatment matched to the person\'s stage of illness and
problem severity. States will demonstrate, commit to, and report
performance targets for reducing overall drug use and the number of
people needing drug treatment. A greater emphasis has been placed on
marijuana and non-dependent users. Preliminary findings have shown that
brief interventions for marijuana and non-dependent drug users resulted
in significantly larger reductions in substance abuse problems for these
individuals.

A total of \$1.8 billion is requested for the Substance Abuse Prevention
and Treatment (SAPT) Block Grant. The SAPT Block Grant provides support
for over 10,500 community-based treatment and prevention organizations.

Mental Health

The budget includes \$834 million for mental health services, a net
increase of \$12 million over the FY 2003 President\'s Budget. The
request emphasizes increasing access to mental health services to some
of our most vulnerable citizens.

Children\'s Mental Health Services: Studies show that at least one in
five children and adolescents may have a mental health problem, yet an
estimated two-thirds are not expected to receive the mental health
services they need. The budget proposes \$107 million for Children\'s
Mental Health Services, an increase of \$10 million, or 10 percent. This
level will support mental health services to nearly 17,000 children and
adolescents with serious emotional disorders and their families.

Homeless Services: Recent studies have found that 20 percent of
individuals experiencing chronic homelessness also have a serious mental
illness. The budget includes \$50 million for the Projects for
Assistance in Transition from Homelessness (PATH), a \$3 million
increase over FY 2003. These funds will allow SAMHSA to reach out to
147,000 homeless individuals in an effort to get them off the streets
and into mental health and substance abuse treatment services, as well
as adequate housing. In addition to PATH, SAMHSA will be a major
contributor to the joint effort called the Initiative to End Chronic
Homelessness, administered by the Departments of Housing and Urban
Development, Veterans Affairs and Health and Human Services. This
initiative will improve the provision of permanent housing and support
services to chronically homeless individuals and families. The budget
also includes an increase for homeless policy academies, which bring
State policy makers together to improve service coordination for
homeless persons at the State and local level.

Other Mental Health: The President\'s budget also includes funding for
New Freedom demonstration projects with the Centers for Medicare and
Medicaid for home and community based waivers; grants to assists States
in developing programs for individuals with co-occurring mental health
and substance abuse disorders; grants to States to ensure Statewide
implementation of evidence-based practices to phase in non-use of
seclusion and restraints in mental health facilities.

A total of \$433 million is requested for the Community Mental Health
Services Block Grant to States that will support comprehensive community
services to 222,500 adults with a serious mental illness and children
with serious emotional disturbances.

Program Management

The FY 2004 budget includes \$85 million, a net \$8.5 million increase
over the FY 2003 President\'s Budget to support 516 FTE and increased
contribution to the agency SAMHSA-wide national surveys. The request
includes savings of \$2 million and 16 FTE associated with the
President\'s Management Agenda. The reduction reflects anticipated
savings from future competitive sourcing of commercial activities, as
well as savings in other administrative areas.

Information Technology

The request for SAMHSA, as a whole, reflects a reduction of \$6 million
in information technology resources, both direct and supported through
program contracts and other mechanisms. Savings will be achieved through
the consolidation of information technology services across the
Department, in addition to other efficiencies.

**Agency for Health Research and Quality**

+-------------+-------------+-------------+-------------+-------------+
|             | **[2002]{.u | **[2003]{.u | **[2004]{.u | **2004**    |
|             | nderline}** | nderline}** | nderline}** |             |
|             |             |             |             | **[         |
|             |             |             |             | +/-2003]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Health      | \$248       | \$184       | \$211       | +\$27       |
| Costs,      |             |             |             |             |
| Quality and |             |             |             |             |
| Outcomes    |             |             |             |             |
| Resear      |             |             |             |             |
| ch\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *Patient    | *55 *       | *60 *       | *84 *       | *+24 *      |
| Safety      |             |             |             |             |
| Research    |             |             |             |             |
| (           |             |             |             |             |
| non-add)\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| *           |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *Other      |             |             |             |             |
| Quality,    |             |             |             |             |
| Cost-Ef     |             |             |             |             |
| fectiveness |             |             |             |             |
| and*        |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *Intramural | *193 *      | *124 *      | *127 *      | *+3 *       |
| Research    |             |             |             |             |
| (non-add)   |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| *           |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Medical     | 49          | 53          | 55          | +2          |
| E           |             |             |             |             |
| xpenditures |             |             |             |             |
| Panel       |             |             |             |             |
| Survey      |             |             |             |             |
| s\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Current     | 0           | 10          | 10          | 0           |
| Population  |             |             |             |             |
| Surve       |             |             |             |             |
| y\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Program     | [3          | [3          | [3          | [ 0         |
| Support\    | ]{          | ]{          | ]{          | ]{          |
| ...\...\... | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Subtotal, | **\$299 **  | **\$250 **  | **\$279 **  | **+\$29 **  |
| Program     |             |             |             |             |
| Level\      |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
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| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Less        | [\$296      | [\$250      | [\$279      | [+\$29      |
| Transfers:  | ]{          | ]{          | ]{          | ]{          |
| PHS         | .underline} | .underline} | .underline} | .underline} |
| Evaluation  |             |             |             |             |
| Funds\...   |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total,    | **\$3 **    | ** \$0 **   | ** \$0 **   | ** \$0 **   |
| Budget      |             |             |             |             |
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| **          |             |             |             |             |
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| FTE\.       | 278         | 294         | 294         | 0           |
| ..\...\...\ |             |             |             |             |
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| \...\...\.. |             |             |             |             |
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|             |             |             |             |             |
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

The FY 2004 request for AHRQ provides a total program level of \$279
million, an increase of \$29 million, or 11.6 percent, from FY 2003
President\'s Budget. This request reflects the Department\'s priority on
improving patient safety and reducing the number of medical errors
through the implementation of information technology in hospitals.

AHRQ conducts and sponsors health services research to inform
decision-making and improve clinical care and the organization and
financing of health care. AHRQ supports the translation of research into
measurable improvements in the care Americans receive. This work
contributes not only to improved clinical care, but also to more
cost-effective care. AHRQ accomplishes its mission through partnerships
with other Federal agencies, academic institutions, medical societies,
managed care organizations, and health care payers.

The Agency supports research project grants and research contracts at
colleges and universities to capitalize on the expertise of academic
institutions. In addition, AHRQ has forged cooperative relationships
with major health care organizations to ensure that research funded by
the Agency is implemented by the major players in the health system. In
FY 2004, AHRQ will be fully funded through inter-agency transfers of
evaluation funds.

Health Costs, Quality, and Outcomes

The President\'s Budget will continue to support improvements through
research on the cost effectiveness and quality of health care by
providing a total of \$211 million.

Within this total funding, spending on patient safety efforts will
increase from \$60 million to \$84 million.

Patient Safety: A total of \$84 million is dedicated to patient safety
activities in FY 2004.

Of this total, \$50 million will be made available for hospital-based
information technology investments designed to enhance patient safety,
with an emphasis on small community and rural hospitals. These
investments will facilitate uptake of technologies such as computerized
physician order entry, computer monitoring for potential adverse drug
events, automated medication dispensing, computerized reminder systems
to improve compliance with guidelines, handheld devices for prescription
information, computerized patient records, and patient-centered
computerized support groups. An important aspect of diffusion of
effective use of information technology requires the development of a
business case for these tools. Working with public and private partners,
AHRQ will help use the data from these hospital information technology
investment demonstrations to effectively push proven technology through
the healthcare system.

\$10 million will be used toward promoting and accelerating the
development, adoption and diffusion of information technology in health
care. A consensus has emerged that a major obstacle to the development
and use of health information systems to support quality improvements
and patient safety is the lack of clinical terminology and messaging
standards that support interoperability. Progress is occurring as a
result of several efforts, including the recommendations of the National
Committee on Vital and Health Statistics, federal interagency efforts
such as the Consolidated Healthcare Informatics initiative, and the
activities of voluntary industry standards development organizations,
but significant advances on a broad scale require dedicated Federal
resources, leadership and coordination.

These priority projects will identify barriers and practical solutions
for the widespread adoption and use of information standards and
technology to support patient safety in the U.S., develop a common
vision for health information technology and standards across the health
care spectrum, and promote and accelerate efforts needed to make that
vision a reality in the U.S.

The remaining \$24 million in the patient safety budget supports a
variety of activities. AHRQ, the Centers for Disease Control and
Prevention, the Food and Drug Administration, and the Centers for
Medicare & Medicaid Services continue to work collaboratively to develop
a common Web interface for medical providers that will both enhance the
usefulness of adverse event information and reduce reporting burden for
their partners in the health care community. Funded at \$3 million in FY
2004, this streamlined reporting system will integrate data from such
systems as the National Healthcare Safety Network operated by CDC as
well as the reporting systems for drugs, biologics, vaccines, and
medical devices operated by FDA. In addition, AHRQ will continue a \$3
million series of challenge grants begun in FY 2003 designed to test new
error-reducing interventions and a \$2 million program to train safety
experts to assist States and local healthcare organizations in
developing a safety focus. Finally, AHRQ continues a number of grants
and contracts related to impact of technologies, workforce, and
organizational structure on patient safety.

Other Quality, Cost-Effectiveness and Intramural Research: An increase
of \$3 million will support those programs that provide ready access to
a wide breadth of national and State level data to accurately reflect
the status of the healthcare system and expenditures for providing care
in the system. An increase of \$2 million in Healthcare Cost and
Utilization Project (HCUP) will help to improve to improve availability
of the outpatient data, make HCUP data and quality indicators, such as
benchmarks, more usable, and facilitate effective use of these
improvements through outreach.

A \$1 million increase in the Consumer Assessment of Health Plans
(CAHPS) program will improve technical assistance and enable the
assessment of the impact of the program from the perspective of a
variety of audiences: consumers, health care providers, and purchasers.

Medical Expenditure Panel Surveys (MEPS)

The FY 2004 budget for MEPS includes a request for \$2 million over the
FY 2003 level for a total of \$55 million. MEPS is the collection of
detailed, national data on the health care services Americans use, how
much they cost, and who pays for them. It is the only national source of
visit-level information on medical expenditures. This requested increase
will be used to improve the usability and timeliness of MEPS data
through several activities. It will help sustain prior year enhancements
to the sample size and content of the surveys that collect information
from medical providers, insurers, and households. Enhancements in MEPS
will lead to a better understanding of the quality of care the typical
patient receives, and of disparities in the care delivered. MEPS data
are critical for tracking the impact of Federal and State programs,
including the State Children\'s Health Insurance Program (SCHIP),
Medicare and Medicaid.

National Reports on Quality and Disparities in Health Care: MEPS
supports two forthcoming reports required by AHRQ\'s 1999
reauthorization, to be released at the end of FY 2003. The National
Healthcare Quality Report\--the first-ever annual report on the quality
of health care in the United States\--will include information on
patient assessment of health care quality, clinical quality measures of
common health care services, and performance measures related to
outcomes of acute and chronic disease.

The second report\--the National Healthcare Disparities
Report--highlights populations that are at high risk for disparities in
care. These populations include the elderly, people in inner-city and
rural areas, women, children, minorities, low-income groups, and
individuals with special health care needs. The NHDR is being developed
in partnership with other HHS agencies to ensure synergy with existing
efforts, including Healthy People 2010.

Current Population Survey

To support State efforts, HHS is interested in improving the reliability
of State-level estimates of the uninsured obtained through the Census
Bureau\'s Current Population Survey (CPS). Of the five existing
government surveys, only one, the CPS, currently produces annual
estimates of the uninsured at the State level. \$10 million will go
toward the expansion and enhancement of information collected in the
CPS. This will provide more comprehensive information for States and the
Federal government to use in the development of plans to expand coverage
of the uninsured.

**Centers for Medicare & Medicaid Services**

# CMS Summary

+-------------+-------------+-------------+-------------+-------------+
|             | **[2002]{.u | **[2003]{.u | **[2004]{.u | ** 2004**   |
|             | nderline}** | nderline}** | nderline}** |             |
|             |             |             |             | **[+/-      |
|             |             |             |             | 2003]{.u    |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Current     |             |             |             |             |
| Law:        |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Medicare    | \$257,219   | \$273,015   | \$284,013   | +\$10,998   |
| /1\         |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Medicaid    | 147,512     | 162,366     | 176,754     | +14,388     |
| \...\       |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| SCHIP\.     | 3,682       | 4,751       | 5,090       | +339        |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| State       | [10         | [37         | [65         | [+28        |
| Grants and  | ]{          | ]{          | ]{          | ]{          |
| Demonstra   | .underline} | .underline} | .underline} | .underline} |
| tions\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total     | **\$408,423 | **\$440,169 | **\$465,922 | **+\$25,753 |
| Outlays,    | **          | **          | **          | **          |
| Current     |             |             |             |             |
| Law\..      |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Premiums    | -25,951     | -28,269     | -30,998     | -2,729      |
| \...\       |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Other       | [-42        | [-8         | [ 0         | [+8         |
| Offsetting  | ]{          | ]{          | ]{          | ]{          |
| Collections | .underline} | .underline} | .underline} | .underline} |
| (net)\...   |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total Net | **\$382,430 | **\$411,892 | **\$434,924 | **\$23,032  |
| Outlays,    | **          | **          | **          | **          |
| Current     |             |             |             |             |
| Law\..      |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Proposed    |             |             |             |             |
| Law:        |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Medicare    | \$0         | -\$130      | -\$201      | -\$71       |
| Admin       |             |             |             |             |
| istration\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Medicare    | 0           | 0           | 6,000       | \$6,000     |
| Mo          |             |             |             |             |
| dernization |             |             |             |             |
| (Allow      |             |             |             |             |
| ance)\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Medicaid/   | [ 0         | [225        | [3,411      | [3,186      |
| SCHIP       | ]{          | ]{          | ]{          | ]{          |
| \...\...\   | .underline} | .underline} | .underline} | .underline} |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total     | ** \$0 **   | **\$95 **   | **\$9,210   | **\$9,115   |
| Proposed    |             |             | **          | **          |
| La          |             |             |             |             |
| w\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total Net | **\$382,430 | **\$411,987 | **\$444,134 | **+\$32,147 |
| Outlays,    | **          | **          | **          | **          |
| Proposed    |             |             |             |             |
| Law         |             |             |             |             |
| /2\...\.    |             |             |             |             |
| ..\...\.... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| /1 Includes |             |             |             |             |
| benefits    |             |             |             |             |
| and         |             |             |             |             |
| admi        |             |             |             |             |
| nistration. |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| /2 Total    |             |             |             |             |
| net outlays |             |             |             |             |
| equal       |             |             |             |             |
| current law |             |             |             |             |
| outlays     |             |             |             |             |
| minus the   |             |             |             |             |
| impact of   |             |             |             |             |
| proposed    |             |             |             |             |
| legislation |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| and         |             |             |             |             |
| offsetting  |             |             |             |             |
| receipts.   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

The FY 2004 budget request for the Centers for Medicare & Medicaid
Services (CMS) is \$444.1 billion in net outlays. The request finances
Medicare, Medicaid, the State Children\'s Health Insurance Program
(SCHIP), the Health Care Fraud and Abuse Control Program (HCFAC), State
insurance enforcement, and CMS' operating costs. This budget reflects an
increase of \$32.1 billion over FY 2003.

The FY 2004 President's Budget includes important proposals for
modernizing Medicare, a program that represents the Nation\'s commitment
to our seniors and disabled. It dedicates \$400 billion over ten years
(2004- 2013) to support the President's framework for targeted
improvements, including: providing access to subsidize prescription drug
coverage for beneficiaries; enhancing Medicare+Choice; modernizing
Fee-for-Service and changing the appeal system. The President proposes
to provide access to prescription drug coverage that will protect
beneficiaries from high drug expenses and provide low-income
beneficiaries with additional assistance. The budget enhances
Medicare+Choice by linking payments to the rising cost of providing
health care services. It modernizes Fee-for-Service by adding a
provision to protect beneficiaries against high out-of-pocket costs
caused by serious illness. Lastly, the FY 2004 budget proposes to
provide consumers with information to help make informed decisions
regarding the quality of care provided in hospitals and nursing homes.

The President's Budget also proposes fundamental changes to the Medicaid
and SCHIP programs. Building upon the Health Insurance Flexibility and
Accountability and Pharmacy Plus waiver templates, the Administration is
proposing a bold new Medicaid modernization plan to introduce more State
flexibility and fiscal stability into the program. The centerpiece of
this reform is the creation of State HealthCare Partnership Allotments
which would replace the current entitlement funding structure with two
allocations that will enhance State flexibility and promote innovation.

The budget also includes significant new efforts to help the disabled
under the New Freedom Initiative and the extension of assistance to
vulnerable populations through the Transitional Medical Assistance and
QI-1 programs. The budget includes a proposal to extend the availability
of expiring SCHIP funds until FY 2004.

Lastly, the budget includes \$65 million in funding for CMS'
Revitalization Plan. This Plan will allow CMS to make use of recent
advances in technology and improve the way it processes and analyzes
claims data.

# Medicare

Medicare Trust Fund

+-------------+-------------+-------------+-------------+-------------+
|             | **2002**    | **2003**    | **2004**    | **Request** |
|             |             |             |             |             |
|             | **          | **[         | **[         | **[+/-      |
|             | [Actual]{.u | Enacted]{.u | Request]{.u | Enacted]{.u |
|             | nderline}** | nderline}** | nderline}** | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Current     |             |             |             |             |
| Law:        |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| HI          | 145,307     | 150,000     | 159,418     | +9,418      |
| Be          |             |             |             |             |
| nefits\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| SMI         | [106,901    | [117,627    | [119,214    | [+1,587     |
| Benefits    | ]{          | ]{          | ]{          | ]{          |
| \...\...\.. | .underline} | .underline} | .underline} | .underline} |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Subtotal, | **\$252,208 | **\$267,627 | **\$278,632 | **+\$11,005 |
| Medicare    | **          | **          | **          | **          |
| B           |             |             |             |             |
| enefits\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Adm         | 3,582       | 3,840       | 3,936       | +96         |
| inistration |             |             |             |             |
| /1\...\     |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| HCFAC       | 963         | 1,075       | 1,075       | 0           |
| /           |             |             |             |             |
| 2\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Quality     | 354         | 346         | 370         | +24         |
| Improvement |             |             |             |             |
| Organizat   |             |             |             |             |
| ions\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Transfers   | [112        | [127        | [ 0         | [-127       |
| to          | ]{          | ]{          | ]{          | ]{          |
| M           | .underline} | .underline} | .underline} | .underline} |
| edicaid\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total     | **\$257,219 | **\$273,015 | **\$284,013 | **+\$10,998 |
| Outlays,    | **          | **          | **          | **          |
| Current     |             |             |             |             |
| Law\...\    |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Premiums\.  | -25,951     | -28,269     | -30,998     | -2,729      |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Other       | [-42        | [-8         | [ 0         | [+8         |
| Offsetting  | ]{          | ]{          | ]{          | ]{          |
| Co          | .underline} | .underline} | .underline} | .underline} |
| llections\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total Net | **\$231,226 | **\$244,738 | **\$253,015 | **+\$8,277  |
| Outlays,    | **          | **          | **          | **          |
| Current     |             |             |             |             |
| Law\...\    |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| **          |             |             |             |             |
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| Proposed    |             |             |             |             |
| L           |             |             |             |             |
| egislation: |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Premium     | 0           | 50          | 55          | +5          |
| Interaction |             |             |             |             |
| with        |             |             |             |             |
| Medicaid    |             |             |             |             |
| pol         |             |             |             |             |
| icies\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Proposed    | 0           | -130        | -201        | -71         |
| User        |             |             |             |             |
| Fees\...\.  |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Medicare    | [0          | [0          | [6,000      | [+6,000     |
| Mo          | ]{          | ]{          | ]{          | ]{          |
| dernization | .underline} | .underline} | .underline} | .underline} |
| (Allowan    |             |             |             |             |
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| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total     | **[ \$0     | **[-\$80    | **[\$5,854  | **[+\$5,934 |
| Medicare    | ]{.u        | ]{.u        | ]{.u        | ]{.u        |
| Proposed    | nderline}** | nderline}** | nderline}** | nderline}** |
| Legi        |             |             |             |             |
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| \...\...\.. |             |             |             |             |
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| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total Net | **\$231,226 | **\$244,658 | **\$258,869 | **+\$14,211 |
| Outlays,    | **          | **          | **          | **          |
| Proposed    |             |             |             |             |
| Law\...     |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| **          |             |             |             |             |
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| 1/ Includes |             |             |             |             |
| Adm         |             |             |             |             |
| inistrative |             |             |             |             |
| payments to |             |             |             |             |
| the SSA and |             |             |             |             |
| other       |             |             |             |             |
| non-CMS     |             |             |             |             |
| agencies.   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| 2/ Health   |             |             |             |             |
| Care Fraud  |             |             |             |             |
| and Abuse   |             |             |             |             |
| Control,    |             |             |             |             |
| including   |             |             |             |             |
| FBI and     |             |             |             |             |
| OIG.        |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

Medicare Outlays

  ------------------------------------------------------------------------------------------------ ------------------------ ------------------------ ------------------------ ----------------------- --
                                                                                                                                                                                                      
                                                                                                                                                                                                      
                                                                                                   **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**   **[+/-]{.underline}**   
                                                                                                                                                                                                      
  Aged\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   34.6                     34.8                     35.0                     +0.2                    
  Disabled\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....       [5.9]{.underline}        [6.1]{.underline}        [6.3]{.underline}        [+0.2]{.underline}      
                                                                                                                                                                                                      
  Total Beneficiaries\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                  40.5                     40.9                     41.3                     +0.4                    
                                                                                                                                                                                                      
  ------------------------------------------------------------------------------------------------ ------------------------ ------------------------ ------------------------ ----------------------- --

Medicare is the Federal health insurance program for people age 65 or
older and people under age 65 who are disabled or suffer from end-stage
renal disease (ESRD). In FY 2004, the program will serve more than 41
million eligible individuals. Medicare consists of three parts:

Part A --Hospital Insurance (HI) is an entitlement for all qualified
beneficiaries. Part A pays for inpatient hospital care, some skilled
nursing facility care, home health care related to a hospital stay, and
hospice care. The HI program is funded through the HI Trust Fund, which
receives most of its income from the HI payroll tax (2.9 percent of
payroll, split evenly between employers and employees). The Medicare
Trustees recently reported that the HI Trust Fund\'s depletion date has
improved slightly, from 2029 to 2030, but HI spending will begin to
exceed tax receipts by 2016.

Part B --Supplementary Medical Insurance (SMI) coverage is optional.
However, 94 percent of those enrolled in Part A enroll in Part B. Part B
pays for medically necessary physician services, outpatient hospital
services, treatment for ESRD, laboratory services, durable medical
equipment, home health care, and certain other medical services and
supplies. Enrollees pay 25 percent of Part B costs (or \$58.70 per month
in 2003), with remaining costs covered by general revenue.

Part C --The Medicare+Choice program offers beneficiaries a variety of
coverage options, including a traditional HMO, a preferred provider
organization (PPO), or a private fee-for-service plan. Currently, 4.6
million, or 11 percent of beneficiaries, are enrolled in a
Medicare+Choice plan. These figures are lower compared to last year,
when 5.6 million beneficiaries, or 14 percent of all beneficiaries, were
enrolled. This drop in enrollment reflects the large number of plans,
about 407, that have left the Medicare+Choice program or reduced their
service areas in the last five years.

Medicare Spending Growth: Under current law, Medicare gross benefit
outlays are projected to increase from \$279 billion in FY 2004 to \$480
billion in FY 2013. The program is expected to grow at 6.0 percent per
year during this period. Part A benefit outlays are projected to grow
from \$159 billion in FY 2004 to \$258 billion in FY 2013, at an average
annual growth rate of 5.4 percent. Part B benefit outlays are expected
to grow from \$119 billion in FY 2004 to \$223 billion in FY 2013. The
Part B average annual growth rate during the projection period is 6.8
percent.

Health Care Fraud and Abuse Control Program (HCFAC): Title II of the
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
established the HCFAC Program. The program combats health care fraud,
waste, and abuse. Included within this overarching program is the
Medicare Integrity Program (MIP), which is run by CMS, Federal Bureau of
Investigation (FBI) health care investigation funding, and the Fraud and
Abuse Control account which is administered by a number of agencies
including the Administration on Aging, the Office of the Inspector
General, the Office of the General Counsel, and the Department of
Justice.

MIP consists of financial audits of provider cost reports, medical and
utilization reviews of individual claims, and the identification of
Medicare beneficiaries who have other insurance plans with primary
responsibility for paying claims. Funds are also earmarked to support
detection and investigation of program fraud and abuse. CMS also funds
provider education and training activities associated with preventing
fraud, waste and abuse and audits of managed care

plans.

In FY 2004, HIPAA authorizes \$720 million for MIP, the same amount as
FY 2003, as mandated by law. Within this level, CMS will fund activities
that will stop unnecessary payments before they leave the Trust Funds
through pre-payment review and provider education. These actions help
lower the payment error rate cited in recent Chief Financial Officer\'s
reports.

Also under MIP, CMS is developing contractor-specific error rates that
will gauge the progress the agency is making in correcting payment
errors by providers. This effort began in Summer 2000 and initial
results have shown that this new methodology will provide CMS with the
targeted information it needs to further reduce error rates in the
future.

HIPAA also created the Fraud and Abuse Control account. This account
funds much of the health care investigational and prosecutorial
activities of the HHS Office of Inspector General (OIG) and the
Department of Justice. The Fraud and Abuse Control account is funded at
\$241 million. In FY 2003, CMS expects to receive \$4.5 million from
this account to work with States that wish to develop Medicaid payment
error rates, \$3.7 million to begin work on SCHIP financial management,
and an additional \$10 million for Medicaid financial management. In FY
2004, the Secretary will work with the Attorney General to increase
Fraud and Abuse Control account spending for Medicaid financial
management to \$20 million.

The Administration's health care fraud, waste, and abuse control efforts
have helped protect the Medicare Trust Funds. These efforts, in addition
to improved provider compliance, have cut the Medicare overpayment error
rate in half from FY 1996 through FY 2002, from 14 percent to 6.3
percent. We have set a goal of further reducing the error rate to 4
percent by FY 2008. Recent Medicare Trustee\'s reports have cited our
health care fraud, waste, and abuse control efforts as a contributing
factor in the slower Medicare spending growth experienced over the last
several years. We hope to bring similar success to the
state-administered Medicaid and SCHIP programs as well.

Quality Improvement Organizations (formerly known as Peer Review
Organizations): These organizations were established by Title XI,
Section 1151 of the Social Security Act, Part B, to serve the following
functions:

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

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

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

QIOs are a central player in this Administration\'s efforts to improve
the quality of care provided to Medicare's beneficiaries. Under their
current three year funding plan, QIOs are part of groundbreaking efforts
underway in Medicare to promote public awareness and use of information
about the quality of care delivered in nursing homes, hospitals, and
home health agencies, and assist providers seeking to improve quality of
care outcomes. These efforts are essential to Administration goals to
modernize and strengthen the Medicare program.

In November 2002, HHS and CMS launched the national Nursing Home Quality
Initiative (NHQI). The initiative provides new comparative information
to consumers and new resources to facilities all aimed at improving
nursing home quality of care. Not only will consumers be better informed
about the performance of individual nursing homes, but nursing homes
themselves will be able to identify what they must do in order to
improve quality. In 2003, HHS plans to report similar information on
home health agencies.

As of January 1, 2003, nursing homes across America are required to
publicly post the number of nursing staff they have on duty to care for
patients on each daily shift. Posting this information was required by
Congress in recent legislation. Providing this information to consumers
is consistent with the NHQI's goal of arming families with information
about the quality of nursing homes in their area.

Last December, HHS joined with national hospital leadership, consumers,
and the National Quality Forum to initiate voluntary public reporting of
10 quality outcome measures for hospitals. This agreement with the
hospital industry also includes a three-State pilot project and a
standardized patient experience survey instrument.

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

Medicare Modernization

This budget builds upon the President's framework for Medicare
modernization, including a access to subsidized prescription drug
benefit, better insurance protection, and better private options for all
beneficiaries. This budget allocates \$6 billion in FY 2004, \$130
billion over five years and \$400 billion over 10 years to modernize
Medicare.

Providing Access to Prescription Drugs: While drugs were not a standard
part of health insurance coverage when Medicare was created, they are an
integral part of modern medicine today. However, with few exceptions,
Medicare does not cover outpatient prescription drugs. The drug benefit
would protect beneficiaries against high drug expenditures and would
provide additional assistance to low-income beneficiaries. It would
offer beneficiaries a choice of plans, and would support the
continuation of the coverage that many beneficiaries already receive
through employer-sponsored and private health insurance plans.

More Choice through Health Plan Competition: The absence of prescription
drug coverage is not the only serious gap in the Medicare benefit
package: beneficiaries are increasingly unable to obtain coverage
through Medicare+Choice plans. Although Medicare+Choice was established
to offer beneficiaries a private plan option for their health coverage,
few new types of plans have entered the program, and many have withdrawn
because Federal payments to Medicare+Choice plans have not kept pace
with rising health care costs.

In the short term, this Administration believes that Medicare+Choice
payments must be linked to the costs of providing health care services,
including prescription drugs. Beneficiaries should have access to the
same kind of reliable health care options available to most Americans.
Those health care options should be provided through a market-based
system in which private plans compete to provide coverage for
beneficiaries. Those beneficiaries who select less costly options should
be able to keep most of the savings.

Preventive Benefits: When the Medicare program began, preventive
benefits were not included in the benefits package. Recognizing the
value of preventive services in preventing illness and saving lives,
several services were added over the years. However, this coverage is
insufficient and beneficiaries face hundreds of dollars each year in
deductibles and copayments. The cost may prevent many beneficiaries from
actually seeking out the

services to which they are entitled.

Modernized Fee-For-Service (FFS): The Medicare benefits package needs to
be updated to meet the needs of beneficiaries in the twenty-first
century and come into better alignment with the insurance packages
offered by the private sector. Catastrophic coverage and a more
rationalized system of cost-sharing should be considered to protect the
beneficiaries against high out-of-pocket expenditures.

Provider Payments: Payments to physicians have decreased over the past
two years and are expected to decrease further over the next several
years. These decreases are the result of a payment formula defined in
statute. This budget proposes to adjust the formula to use actual data
instead of estimates in current and previous updates. This would result
in higher updates for the next several years. Also, we will work with
Congress to monitor payments to other providers, as many sources have
found that some providers are being overpaid, and these overpayments
could be used to modernize the Medicare program.

Additional Medicare Improvements: This budget includes two other
proposals that support efforts to modernize and improve the Medicare
program:

-   The Administration will pursue legislation to ensure that Medicare
    more accurately reimburses for covered outpatient drugs, including
    the cost of administering them.

-   Medicare and the Federal employees Health Benefits Program jointly
    finance health insurance for about 2.1 million Federal retirees and
    their dependents. The Administration will work with stakeholders to
    better coordinate these two programs and look to the practices of
    the private sector to ensure high quality, cost-conscious choices
    for retirees.

A Full View of Medicare\'s Financial Health: Medicare is not financially
secure for the retirement of the baby boom generation. The 2002 Medicare
Trustees Report estimates the Hospital Insurance Trust Fund will go
insolvent in 2030. Currently, there is no comprehensive measure of
Medicare's solvency that accounts for both Part A and Part B Trust Fund
financing. This underestimates the magnitude of Medicare's financial
difficulties. The Medicare Trustees acknowledge this disconnect in their
2001 Trustees report by stating that, "Although this report focuses on
the financial status of the Hospital Insurance (HI) Trust Fund, it is
important to recognize the financial challenges facing the Medicare
program as a whole and the need for integrated solutions."

# Medicaid

Medicaid Outlays

+-------------+-------------+-------------+-------------+-------------+
| Current     | **2002**    | **2003**    | **2004**    | **Request** |
| Law:        |             |             |             |             |
|             | **          | **[         | **[         | **[+/-      |
|             | [Actual]{.u | Enacted]{.u | Request]{.u | Enacted]{.u |
|             | nderline}** | nderline}** | nderline}** | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Benefits    | \$140,239   | \$153,464   | \$167,686   | +\$14,222   |
| /1\         |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| State       | [7,273      | [8,902      | [9,067      | [+\$165     |
| Adm         | ]{          | ]{          | ]{          | ]{          |
| inistration | .underline} | .underline} | .underline} | .underline} |
| \...\...\.  |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total Net | **\$147,512 | **\$162,366 | **\$176,754 | **+\$14,388 |
| Outlays,    | **          | **          | **          | **          |
| Current Law |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| /1 Includes |             |             |             |             |
| Vaccines    |             |             |             |             |
| for         |             |             |             |             |
| Children    |             |             |             |             |
| Outlays.    |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| /2 Number   |             |             |             |             |
| may not add |             |             |             |             |
| due to      |             |             |             |             |
| rounding.   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

Medicaid Enrollment

  --------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ --
                                                                                                                                                                  **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**   
                                                                                                                                                                                                                                             
  Aged 65 and Over\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                  4.2                      4.3                      4.3                      
  Blind and Disabled\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                 7.5                      7.8                      7.9                      
  Needy Adults\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....           9.8                      10.3                     10.6                     
  Needy Children\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....             [18.4]{.underline}       [19.1]{.underline}       [19.6]{.underline}       
                                                                                                                                                                                                                                             
  **Total /1\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... **   **39.9**                 **41.4**                 **42.4**                 
                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                             
  /1 Numbers may not add due to rounding.                                                                                                                                                                                                    
                                                                                                                                                                                                                                             
  --------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ --

Medicaid is a jointly-funded, Federal-State program that provides
medical assistance to certain low-income groups. In FY 2004,
approximately 42.4 million individuals will be covered by Medicaid.
These individuals include children, the aged, blind, and/or disabled,
people who meet eligibility criteria under the old Aid to Families with
Dependent Children (AFDC) program, and individuals who receive Medicaid
benefits through waivers and amended State plans that have higher income
limits. Under current law, the Federal share of Medicaid outlays is
expected to be about \$176.8 billion in FY 2004. This is a \$14.4
billion (8.9 percent) increase over projected FY 2003 spending.

Background

Under Medicaid, State expenditures for medical assistance are matched by
the Federal government using a formula based on per capita income in
each State relative to the national average per capita income. Federal
matching rates for FY 2004 will range from 50 to 77 percent for medical
assistance payments. The average Federal matching rate is approximately
57 percent. In addition to medical assistance payments, the Medicaid
appropriation funds the Vaccines for Children program and the Federal
share of Medicaid State and local administration.

Historically, eligibility for Medicaid has been based on receipt of cash
assistance under AFDC or Supplemental Security Income (SSI). With the
creation of the Temporary Assistance for Needy Families (TANF) program
in 1996 (which replaced AFDC) eligibility for Medicaid and cash
assistance was de-linked. Medicaid eligibility remains tied to AFDC
program rules in place as of July 16, 1996. All those who qualify under
the 1996 AFDC rules and most SSI recipients, commonly referred to as the
\"categorically eligible,\" are covered under State Medicaid programs.
States have the option to cover some individuals not eligible under AFDC
or SSI rules (e.g., people with higher incomes in institutions,
low-income pregnant women and children, and aged, blind, and disabled
people below the poverty line), and may cover people at higher incomes
by disregarding a portion of their incomes. States may also cover
\"medically needy\" individuals. Such individuals meet the categorical
eligibility criteria, but have too much income or too many resources to
meet the financial criteria.

Medicaid covers pregnant women and infants whose family income does not
exceed 185 percent of the Federal poverty level. As of September 30,
2002, all children under the age of 19 living below the poverty level
are eligible for Medicaid.

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

Program Developments

Medicaid Growth: Outlays are estimated to grow by 10.1 percent from FY
2002 to FY 2003. Prescription drug spending, nursing homes,
community-based long-term care costs, and payments to health plans are
expected to be significant contributors to this expenditure growth and
are expected to continue to contribute to program growth in future
years. State programs providing \"enhanced payments\" to institutional
providers have also played a significant role in driving up Medicaid
costs at an accelerated rate. Although recently issued regulations will
eventually curtail much of the impact of these payments, enhanced
payments will contribute to higher spending growth for a number of years
during the transition period.

According to State estimates, the fastest growing service category in
the Medicaid program is prescription drugs. States expect the
prescription drug category, which includes drug rebate offsets, to grow
by \$2.2 billion, or 14.1 percent, between FY 2003 and FY 2004. The
State estimated increase for prescription drugs accounts for 14.9
percent of the total FY 2004 benefit growth.

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

Currently, CMS has approved 27 Statewide comprehensive health care
reform demonstrations in 23 States. CMS has also approved two sub-state
health reform demonstrations and 10 demonstrations specifically related
to family planning.

Health Insurance Flexibility and Accountability (HIFA): In August 2001,
President Bush announced the Health Insurance Flexibility and
Accountability (HIFA) demonstration, a new Section 1115 initiative. HIFA
enables States to use Medicaid and SCHIP funds in concert with private
insurance options to expand coverage to low-income, uninsured
individuals, with a focus

on those with incomes at or below 200 percent of the Federal Poverty
Level.

The main goals of the HIFA initiative are to encourage innovation in the
Medicaid and SCHIP programs, give States the programmatic flexibility to
increase health insurance, simplify the waiver process, and increase the
accountability of both the States and the Federal government in ensuring
SCHIP and Medicaid funds are spent appropriately.

To date, the Administration has approved seven HIFA demonstration
waivers (six of which also affect the SCHIP program), in Arizona,
California, Colorado, Illinois, Maine, New Mexico and Oregon. These
Medicaid and SCHIP demonstration waivers focus on vulnerable, uninsured
populations, such as pregnant women, parents and children on Medicaid
and SCHIP, and other adults with incomes less than twice the Federal
Poverty Level.

Pharmacy Plus: The Administration developed Pharmacy Plus waivers under
Section 1115 to help low-income seniors and people with disabilities who
need assistance with prescription drug purchases. Pharmacy Plus is
directed to Medicare beneficiaries with low-incomes and people with
disabilities with incomes of 200 percent or less of the Federal poverty
level (FPL) who are not eligible for full Medicaid benefits. Four States
have approved Pharmacy Plus waivers (Florida, Illinois, South Carolina,
and Wisconsin) and Maryland has revised its statewide 1115 demonstration
to add a pharmacy benefit. Eight other States have applications pending.

Medicaid and SCHIP Reform

To increase State flexibility and promote State innovation in health
care, the Administration is introducing new options. States now have the
option to accept their Federal Medicaid and SCHIP funding in two
lump-sum allotments - one for acute care and one for long-term care -
with an additional provision that States may transfer 10 percent of
their funding between each allotment. The size of each participating
State's allotment will be determined by FY 2002 expenditure levels
increased annually using a specified trend rate. The State will also be
expected to contribute maintenance of effort (MOE) funds based on FY
2002 State expenditures. MOE will also be inflated annually by a trend
rate, but one lower than that for Federal allotments.

States will be given significant flexibility within the allotment to
design health insurance options for their uninsured populations.
Building upon the HIFA initiative, States will also be encouraged to
seek private sector solutions to insuring their Medicaid population,
including premium assistance programs, and coordination with any
federally enacted health tax credit. The program is budget neutral over
10 years.

Medicaid Legislative proposals

Please note that FY 2004 budget estimates assume program operation in
the absence of Medicaid/SCHIP reform. Final estimates for most
Medicaid/SCHIP proposals depend on State participation in the State
Health Care Partnership Allotment option.

Extension of Transitional Medical Assistance: Transitional Medical
Assistance (TMA) provides health coverage for former welfare recipients
after they enter the workforce. TMA allows families to remain eligible
for Medicaid for up to 12 months after they lose welfare benefits due to
earnings from work. This provision was enacted along with welfare reform
and was scheduled to sunset in September 2002. Congress has extended
this program, through continuing resolutions, into 2003. The budget
proposal would extend TMA through FY 2008, costing \$175 million in FY
2003, \$400 million in FY 2004 and \$2.4 billion over five years.

Simplification of Transitional Medical Assistance: The 2004 President\'s
Budget proposes to simplify eligibility for Transitional Medical
Assistance benefits to the low-income working poor. There are four
provisions to the proposal.

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

-   States may waive income reporting requirement for beneficiaries.

-   States that have Medicaid eligibility for children and families with

-   incomes up to 185 percent of poverty may waive their TMA program
    requirements.

-   States have the option of offering TMA recipients \"Health Coupons\"
    to purchase private health insurance instead of offering traditional
    Medicaid benefits.

This plan is estimated to cost \$20 million in 2004 and \$290 million
over five years.

Drug Rebates Based on Average Manufacturer\'s Price: Over the past year,
it has become evident that the best price component of the rebate can be
confusing, as it is not always clear which prices a manufacturer must
include when calculating and reporting to CMS its best price. In
addition, best price may serve to limit the discounts that
private-sector purchasers are able to negotiate with pharmaceutical
manufacturers. The Administration is interested in exploring with
Congressional Committees of jurisdiction policy options in this area
that would improve the Medicaid drug pricing and reimbursement system
and generate program savings. The current methodology sets rebates equal
to the difference between a drug\'s average manufacturer\'s price (AMP)
and the manufacturer\'s best price for that medication.

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

-   respite services for caregivers of disabled adults.

-   respite services for caregivers of severely disabled children.

-   home and community based services for children currently residing in
    psychiatric residential treatment facilities.

These three demonstrations will cost \$8 million in FY 2004 and \$778
million over ten years. They will be funded out of mandatory Medicaid
funds.

In addition, HHS is proposing to fund a fourth demonstration project to
address shortages of community direct care workers. This last project
would be funded out of the CMS Research, Demonstrations, and Evaluation
budget.

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

In this five-year demonstration project, the Federal government will
fully reimburse States for one year of Medicaid services for individuals
who move from institutions into at-home care. After this initial year,
States will be responsible for matching the Federal government at their
respective FMAP rates. This demonstration will cost \$350 million in FY
2004 and \$1.75 billion over five years.

Paying Nursing Facilities for Residents that Elect Hospice: Current law
requires States to pay room and board to the agency providing hospice
services if clients are receiving hospice and are residing in a nursing
facility. In turn, the agency providing hospice services pays the
nursing facility. This system is burdensome and unnecessarily
inefficient. This proposal will eliminate the requirement that State
agencies make room and board payments to hospice for Medicaid and dually
entitled beneficiaries residing in a nursing facility who are also
receiving hospice services. Through this proposal the Federal government
will require the State to make these room and board payments directly to
the nursing facilities. This proposal is technical and has no costs
associated with it.

Partnership for Long Term Care: This proposal would eliminate the
legislative prohibition of developing more Partnership programs. The
Partnership for Long Term Care (LTC) was formulated to explore
alternatives to current long-term care financing by blending public and
private insurance. Four States currently have these partnerships whereby
private insurance is used to cover the initial cost of LTC. Consumers
who purchase Partnership-approved insurance policies can become eligible
for Medicaid services after their private insurance is utilized, without
divesting all their assets as is typically required to meet Medicaid
eligibility criteria. This proposal has no costs associated with it.

Extension of Premium Benefits to Certain Qualified Individuals (QI-1s):
Under the QI-1 program, which expired in FY 2002, Medicaid pays Medicare
Part B premiums for Medicare beneficiaries with incomes between 120 and
135 percent of poverty. Currently Part B premiums cost approximately
\$700 a year. The Administration recognizes the burden these premiums
place on low-income beneficiaries and proposes to extend the QI-1
benefit for five more years. States will continue to be fully reimbursed
for the cost of the program. This extension is estimated to cost \$50
million in FY 2003, \$115 million in 2004, and \$645 million over five
years.

Spousal Exemption: This proposal extends eligibility for Medicaid
benefits to the spouses of disabled individuals entering the workforce.
The lack of spousal coverage is a significant impediment to employment
for many low-income disabled individuals and this exemption smooths the
road to independence. The Federal government will invest \$16 million in
this program for FY 2004 and \$238 million over 10 years.

Extending the Availability of Expiring SCHIP Funds: According to current
estimates, about \$830 million in SCHIP funds will return to the
Treasury at the end of FY 2003. This budget proposal would extend the
availability of the expiring funds to States through FY 2004. This would
save the Medicaid program \$230 million from FY 2004 to FY 2013. See the
SCHIP Section of the Budget in Brief for more detail.

Child Support Enforcement Proposal: This proposal requires States to
review child support cases every three years, thereby increasing the
number of State medical child support reviews for TANF recipients. A
higher rate of reviews would result in more children receiving private
health insurance and consequently decrease the number of children who
receive their health care through the Medicaid program. This proposal
has no fiscal effect on Medicaid in FY 2004 but will save the program
\$103 million over 10 years.

Disability Determination Proposal: The Social Security Administration
has proposed a management improvement that has a Medicaid impact. The
proposal requires that 50 percent of all favorable adult disability
benefit decisions be reviewed to verify eligibility. The program will
save money in the Medicaid program by insuring that only legally
disabled individuals receive Medicaid services due to their SSI status.
The proposal saves the Medicaid program \$1 million in FY 2004 and \$599
million over 10 years.

Additional Funding for the Vaccines for Children (VFC) Program: VFC is a
CDC administered, Medicaid-funded program that administers free vaccines
to children. The Administration is proposing two legislative changes to
the program. First, the Administration proposes to lift the price cap on
the tetanus-diphtheria booster, thereby increasing access for VFC
eligible children. Second, the Administration would allow under-insured
children to receive VFC administered inoculations at State and local
health departments in addition to Federally Qualified Health Centers and
Rural Health Centers. These proposals will cost an additional \$165
million in FY 2004 and \$1.6 billion over ten years.

Advanced Purchase of Durable Medical Equipment: CMS will issue guidance
to States clarifying States\' ability to purchase allowable DME or
assistive devices up to 60 days prior to patient discharge from a
nursing home. This will allow Medicaid beneficiaries to transition into
the community easier by allowing time for them to learn how to use the
equipment and make adjustments as needed. This proposal has no fiscal
impact on the Medicaid program.

Presumptive Eligibility for Community-Based Services: This proposal will
establish a State Medicaid option allowing presumptive eligibility for
institutionally qualified individuals who are discharged from hospitals
into the community. This will increase the number of Medicaid
beneficiaries who receive home and community-based services. This
proposal will have no effect on the Medicaid budget.

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

# State Children's Health Insurance Program

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

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

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

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

-   expanding Medicaid,

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

-   a combination of both approaches.

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

Implementation and Enrollment

By September 1999, SCHIP plans were approved for all 50 States, the
District of Columbia, and five Territories. As of January 2003, States
have received approval for 21 Medicaid expansion programs, 19 separate
programs, 16 combination programs, and 146 State plan amendments.

Today, 39 States cover children in families with incomes up to 200
percent of the FPL. Of these States, 13 cover children above that level.
Six of the States cover children up to 300 percent of the FPL, and one
State covers children up to 350 percent of the FPL.

During FY 2002, an estimated 4.2 million children were enrolled in
SCHIP.

SCHIP Reports and Evaluations

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

The Balanced Budget Refinement Act of 1999 (BBRA) also required HHS to
conduct an independent evaluation of 10 States. The interim evaluation
report is scheduled to be submitted to Congress early this year. A final
report is due to Congress in 2004.

BBRA also directed the Secretary, through the Inspector General, to
evaluate SCHIP every three years. The OIG is instructed to evaluate: 1)
State compliance with the requirement that Medicaid-eligible children
are not enrolled in SCHIP, and, 2) State progress made in reducing the
number of uninsured children. The OIG released two reports in February
2001 which fulfill these requirements. In order to satisfy the
requirement to submit these evaluations every three years, the OIG plans
to work on a new series of evaluations this year. The OIG will expand
the scope of the follow-up studies to more comprehensively assess the
SCHIP program by analyzing a broader array of States.

As directed by BBRA, the Comptroller General submitted a report to
Congress monitoring these OIG audits. The Comptroller General\'s report
suggests that the OIG expand the study to include a more diverse sample
of States.

SCHIP Waivers

The requirements of Federal law and regulations can be waived by the
Department of Health and Human Services (HHS) in order to give States
the programmatic flexibility to increase health insurance coverage and
encourage innovation in their SCHIP programs. These waivers can enable
States to more effectively tailor their programs to meet local needs,
and they allow States to experiment with new approaches to providing
health care services to SCHIP recipients.

Section 1115 waivers allow States to waive certain provisions of Federal
law and demonstrate innovative methods for improving coverage and the
quality of services for children. As of December 2002, SCHIP waivers
were approved for Maryland, Minnesota, New Jersey, New Mexico (2), Ohio,
Rhode Island, and Wisconsin. These Section 1115 waivers provide health
insurance to uninsured children, their parents, and pregnant women.

Health Insurance Flexibility and Accountability (HIFA) Demonstration
Initiative

In August 2001, the Administration invited States to participate in the
HIFA demonstration initiative. This new Section 1115 approach encourages
States to develop comprehensive insurance coverage for individuals at
twice the Federal poverty level and below using SCHIP and Medicaid
funds. It gives States the flexibility to increase health insurance
coverage through support of private group health coverage, and
simplifies the waiver application process.

The main goals of the HIFA initiative are to encourage innovation in the
Medicaid and SCHIP programs, give States the programmatic flexibility to
increase health insurance, simplify the waiver process, and increase the
accountability of both the States and the Federal government in ensuring
SCHIP and Medicaid funds are spent appropriately.

Since December 2001, the Administration has approved six HIFA
demonstration waivers that affect SCHIP\--in Arizona, California,
Colorado, Illinois, New Mexico and Oregon. These demonstration waivers
target vulnerable, uninsured populations, such as pregnant women,
parents and children on Medicaid and SCHIP, and other adults with
incomes less than twice the Federal Poverty Level.

Legislative Proposals

Extending the Availability of Expiring SCHIP Funds: The Balanced Budget
Act of 1997 (BBA) authorized SCHIP grants to the States for each fiscal
year between 1998 and 2007. States are given three years in which to
spend each year's allotment. If States have not spent their entire
allotment by the end of the third year, BBA requires these unspent funds
to be redistributed to States that have used all of their funds. These
redistributed funds would remain available for one year, after which
time any of the unspent redistributed funds revert to the Treasury at
the end of the fiscal year. At the end of FY 2002, approximately \$1.2
billion reverted back to the Treasury.

According to current estimates, approximately \$830 million in SCHIP
funds will return to the Treasury at the end of FY 2003.

The budget proposal would extend the availability of FY 2000 funds for
one year, through FY 2004. This proposal costs \$35 million in 2004, and
\$565 million over 10 years.

This extension of availability will allow States to maintain their
current coverage levels, as well as provide additional health coverage
to more uninsured Americans under HIFA.

Medicaid and SCHIP Reform: Building on the success of HIFA in increasing
flexibility and reducing the administrative burden on States, the
Administration proposes the State Health Care Partnership Allotments.
The proposal would help reduce the complexity of the current Medicaid
and SCHIP programs. These optional allotments combine SCHIP and Medicaid
funding to provide States with two individual allotments: long-term care
and acute care. The increased flexibility of these allotments will allow
each State to innovatively tailor their provision of health benefit
packages for its low-income, uninsured citizens (refer to the Medicaid
section of the Budget-in-Brief for further details).

SCHIP Outlays

+-----------+---+-----------+-----------+-----------+-----------+---+
|           |   | **2002**  | **2003**  | **2004**  | **2003**  |   |
|           |   |           |           |           |           |   |
|           |   | **[Act    | **[Projec | **[Projec | **[+/-    |   |
|           |   | ual]{.und | ted]{.und | ted]{.und | 2         |   |
|           |   | erline}** | erline}** | erline}** | 004]{.und |   |
|           |   |           |           |           | erline}** |   |
+-----------+---+-----------+-----------+-----------+-----------+---+
|           |   |           |           |           |           |   |
+-----------+---+-----------+-----------+-----------+-----------+---+
| *         |   |           |           |           |           |   |
| **Current |   |           |           |           |           |   |
| Law***    |   |           |           |           |           |   |
+-----------+---+-----------+-----------+-----------+-----------+---+
|           |   |           |           |           |           |   |
+-----------+---+-----------+-----------+-----------+-----------+---+
| Total     |   | \$3,682   | \$4,751   | \$5,090   | +\$339    |   |
| Outlays\  |   |           |           |           |           |   |
| ...\...\. |   |           |           |           |           |   |
| ..\...\.. |   |           |           |           |           |   |
| .\...\... |   |           |           |           |           |   |
| \...\...\ |   |           |           |           |           |   |
| ...\...\. |   |           |           |           |           |   |
| ..\...\.. |   |           |           |           |           |   |
| .\...\... |   |           |           |           |           |   |
| \...\.... |   |           |           |           |           |   |
+-----------+---+-----------+-----------+-----------+-----------+---+
|           |   |           |           |           |           |   |
+-----------+---+-----------+-----------+-----------+-----------+---+

SCHIP Enrollment

  -------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------
                                                                                                                             **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**
                                                                                                                                                                               
                                                                                                                                                                               
                                                                                                                                                                               
  Children, Total /1\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   4.2                      4.8                      4.8
                                                                                                                                                                               
                                                                                                                                                                               
  /1 This figure does not include children covered with regular Medicaid match after SCHIP allotment is exhausted.                                                             
                                                                                                                                                                               
  -------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------

**State Grants and Demonstrations **

  ------------------------------------------------------------------------------------------------------------ -------------------------- ---------------------------- --------------------------- -------------------------------
                                                                                                               **2002**                   **2003**                     **2004**                    **Request **
                                                                                                                                                                                                   
                                                                                                               **[Actual]{.underline}**   **[Estimate]{.underline}**   **[Request]{.underline}**   **[+/- Enacted]{.underline}**
                                                                                                                                                                                                   
                                                                                                                                                                                                   
  [Budget Authority]{.underline}                                                                                                                                                                   
                                                                                                                                                                                                   
  Ticket to Work grant programs/1\...\...\...\...\...\.....                                                    \$67                       \$72                         \$77                        +\$5
  Qualified High-Risk Pools grant programs\.....                                                                                          [\$60 ]{.underline}          [\$40 ]{.underline}         [-\$20 ]{.underline}
  **Total Budget Authority\...\...\...\...\...\...\...\...\...\...\...\... **                                  **\$67 **                  **\$132 **                   **\$117 **                  **\$15 **
                                                                                                                                                                                                   
  [Outlays]{.underline}                                                                                                                                                                            
  Ticket to Work grant programs\...\...\...\...\...\...\...\...                                                \$10                       \$30                         \$50                        +\$20
  Qualified High-Risk Pools grant programs\.....                                                                                          [\$7 ]{.underline}           [\$15 ]{.underline}         [+\$8 ]{.underline}
  **Total Outlays\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... **                   **\$10 **                  **\$37 **                    **\$65 **                   **\$28 **
                                                                                                                                                                                                   
                                                                                                                                                                                                   
  /1 The Ticket to Work and Work Incentives Improvement Act was signed into law on December 17, 1999.                                                                                              
  The legislation established appropriations for the grant programs starting in FY 2001.                                                                                                           
  /2 Legislation which established the qualified high-risk pool grant programs was passed on August 6, 2002.                                                                                       
                                                                                                                                                                                                   
  The legislation established appropriations for the grant programs starting in FY 2003.                                                                                                           
                                                                                                                                                                                                   
  ------------------------------------------------------------------------------------------------------------ -------------------------- ---------------------------- --------------------------- -------------------------------

The Ticket to Work and Work Incentives Improvement Act (TWWIIA)

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

In FY 2004, the budget authority provided by statute for the two grant
programs totals \$77 million. Medicaid Infrastructure Grants are
authorized and appropriated for \$35 million of non-matched Federal
funding. Demonstration to Maintain Independence and Employment is
authorized and appropriated for \$42 million. States must match Federal
funding for this demonstration program at the normal Federal matching
rate.

As of December 31, 2002, 41 entities (40 States and the District of
Columbia) were approved for funding from the Infrastructure Grant
Program since its inception. For fiscal year 2003, 36 entities (35
States and the District of Columbia) will receive funding through the
Medicaid Infrastructure Grant program. With this funding, States plan to
make systemic changes to the Medicaid program that will help individuals
with disabilities gain employment and retain their health care coverage.
These changes are designed to increase and improve Medicaid buy in
programs, enhance State personal assistance service programs, and
explore other employment support options.

Three States (Rhode Island, Texas, and Mississippi) and the District of
Columbia were awarded Demonstration to Maintain Independence and
Employment grant funding since the program was started. States
implementing demonstration grant programs will provide Medicaid
equivalent services to targeted populations of working individuals with
disabilities. The demonstration projects will be used to evaluate the
impact of providing Medicaid benefits to a working person with a
potentially severe disability. The State demonstration projects approved
so far will cover the HIV/AIDS, Multiple Sclerosis, and
Bi-Polar/Schizophrenia populations.

Qualified High-Risk Pools

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

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

The legislation also makes available \$40 million in both FY 2003 and FY
2004 for the States that already operate qualified pools that meet the
requirements of the statute. The FY 2003 funds will be available until
the end of FY 2004 and the FY 2004 funds will be available until the end
of FY 2005. A letter and grant application will be sent to the governors
and State insurance commissioners of these States in early 2003. The
deadlines for the States to apply for these grants will be included in
the grant instructions.

# Program Management

+-----------+-----------+-----------+-----------+-----------+---+
|           | **2002**  | **2003**  | **2004**  | **2004**  |   |
|           |           |           |           |           |   |
|           | **[Act    | **[Enac   | **[Requ   | **[+/-2   |   |
|           | ual]{.und | ted]{.und | est]{.und | 003]{.und |   |
|           | erline}** | erline}** | erline}** | erline}** |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Medicare  | \$1,605   | \$1,748   | 1,777     | +\$29     |   |
| O         |           |           |           |           |   |
| perations |           |           |           |           |   |
| /         |           |           |           |           |   |
| 1\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Survey    | 253       | 248       | 248       | 0         |   |
| and       |           |           |           |           |   |
| Ce        |           |           |           |           |   |
| rtificati |           |           |           |           |   |
| on\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Federal   | 530       | 562       | 581       | +18       |   |
| Admin     |           |           |           |           |   |
| istration |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\..... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Rese      | 117       | 28        | 63        | +35       |   |
| arch\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\..... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Revit     | [ 0       | [ 0       | [65       | +65       |   |
| alization | ]{.u      | ]{.u      | ]{.u      |           |   |
| Plan\.    | nderline} | nderline} | nderline} |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| **CMS     | **\$2,506 | **\$2,587 | **\$2,734 | **+147 ** |   |
| Budget    | **        | **        | **        |           |   |
| Authority |           |           |           |           |   |
| Subtotal  |           |           |           |           |   |
| /2\..     |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
| **        |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| CLIA/HMO  | \$45      | \$45      | \$45      | \$0       |   |
| and Data  |           |           |           |           |   |
| Spendi    |           |           |           |           |   |
| ng\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\..... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| National  | [17       | [16       | [14       | [-2       |   |
| Medicare  | ]{.u      | ]{.u      | ]{.u      | ]{.u      |   |
| Education | nderline} | nderline} | nderline} | nderline} |   |
| Program   |           |           |           |           |   |
| \...\...  |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| **Rei     | **\$62 ** | **\$61 ** | **\$59 ** | **\$2 **  |   |
| mbursable |           |           |           |           |   |
| Spending  |           |           |           |           |   |
| Subtot    |           |           |           |           |   |
| al\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
| **        |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| CLIA/Sale | -45       | -45       | -45       | 0         |   |
| of        |           |           |           |           |   |
| Data/HMO  |           |           |           |           |   |
| User      |           |           |           |           |   |
| Fe        |           |           |           |           |   |
| es\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| National  | [-17      | [-16      | [-14      | [+2       |   |
| Medicare  | ]{.u      | ]{.u      | ]{.u      | ]{.u      |   |
| Education | nderline} | nderline} | nderline} | nderline} |   |
| Program   |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\..... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| **User    | **-\$62   | **-\$61   | **-\$59   | **+\$2 ** |   |
| Fee       | **        | **        | **        |           |   |
| Subtota   |           |           |           |           |   |
| l\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\..... |           |           |           |           |   |
| **        |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Proposed  | [ \$0     | [-        | [-\$201   | [-\$71    |   |
| Disc      | ]{.u      | \$130]{.u | ]{.u      | ]{.u      |   |
| retionary | nderline} | nderline} | nderline} | nderline} |   |
| User      |           |           |           |           |   |
| Fees\     |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| *         | **\$2,506 | **\$2,457 | **\$2,533 | **+\$76   |   |
| *Proposed | **        | **        | **        | **        |   |
| Budget    |           |           |           |           |   |
| Authority |           |           |           |           |   |
| \         |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
| **        |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Proposed  | \$2,506   | \$2,457   | \$2,533   | +\$76     |   |
| O         |           |           |           |           |   |
| utlays\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\..... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| FTE\..    | 4,497     | 4,661     | 4,486     | -175      |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\..... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| /1 The FY |           |           |           |           |   |
| 2002 and  |           |           |           |           |   |
| FY 2003   |           |           |           |           |   |
| columns   |           |           |           |           |   |
| include a |           |           |           |           |   |
| \$73      |           |           |           |           |   |
| million   |           |           |           |           |   |
| comp      |           |           |           |           |   |
| arability |           |           |           |           |   |
| a         |           |           |           |           |   |
| djustment |           |           |           |           |   |
| for the   |           |           |           |           |   |
| costs of  |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| p         |           |           |           |           |   |
| rocessing |           |           |           |           |   |
| Medicare  |           |           |           |           |   |
| appeals   |           |           |           |           |   |
| under the |           |           |           |           |   |
| Benefits  |           |           |           |           |   |
| Im        |           |           |           |           |   |
| provement |           |           |           |           |   |
| and       |           |           |           |           |   |
| P         |           |           |           |           |   |
| rotection |           |           |           |           |   |
| Act       |           |           |           |           |   |
| (BIPA) of |           |           |           |           |   |
| 2000.     |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| /2        |           |           |           |           |   |
| Numbers   |           |           |           |           |   |
| may not   |           |           |           |           |   |
| add due   |           |           |           |           |   |
| to        |           |           |           |           |   |
| rounding. |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+

CMS' FY 2004 Program Management budget request is \$2.7 billion in
budget authority, a \$147 million or 5.7 percent increase over the FY
2003 President\'s Budget. The total program level request is \$2.8
billion. This level assumes \$201 million in proposed user fees in
addition to the \$59 million in current offsetting collections from
Medicare+Choice plans for the National Medicare & You Education Program
(NMEP), the user fees for the Clinical Laboratory Improvement Amendments
program, and for the sale of data.

The two proposed fees for duplicate claims and Medicare appeals filing
total \$201.0 million. As proposed, the appropriation would be reduced
by the amount of the fees upon enactment of user fee legislation.
Assuming these fees are enacted, CMS' proposed law budget authority
request is \$2.5 billion.

CMS is making a major commitment to modernize its infrastructure and
operations through a \$65 million Revitalization Plan. Over the next few
years, the initial investment in this plan will help CMS take advantage
of advances in technology and improve information systems that allow the
agency to process claims and analyze claims data.

CMS' FY 2004 budget is driven by ever increasing workloads, such as
processing 1.1 billion claims, answering 45 million inquiries, handling
nearly 8 million appeals, responding to over 9 million calls to the
1-800-MEDICARE toll-free line, and conducting over 71,000 health care
facility inspection and complaint investigations. CMS' budget is also
affected by legislative provisions it must implement as a result of the
Health Insurance Portability and Accountability Act (HIPAA), the
Balanced Budget Act (BBA), the Balanced Budget Refinement Act (BBRA),
TWWIIA, the Benefits Improvement and Protection Act (BIPA), and TAA.
Finally, CMS has devoted significant resources over the past few years
to comply with financial management laws governing all Federal agencies,
such as the Federal Financial Management Improvement Act (FFMIA), the
Government Information Security Reform Act (GISRA), and the Government
Performance and Results Act (GPRA).

CMS' budget also reflects top budget, legislative, and management
priorities of the Administration, including: reforming the Medicare
appeals process; educating beneficiaries about their health plan and
benefit choices; reducing burden on our partners; improving financial
management performance through ongoing implementation of the healthcare
general ledger accounting system (HIGLAS); and strategic management of
its human resources

Medicare Operations

The Medicare Operations budget supports a broad array of activities. The
budget is \$1.8 billion, an increase of \$29 million, or 1.6 percent,
over the FY 2003 President's Budget level comparably adjusted for the
services that will be transferred to CMS but are now performed by the
Social Security Administration.

By law, the Medicare program is administered by private insurance
companies, or contractors. Contractor responsibilities include:
processing claims and making benefit payments; responding to the needs
and inquiries of Medicare beneficiaries and health care providers and
suppliers; and developing and implementing management changes to improve
program operations. In addition, Medicare Operations funds a variety of
mission critical information technology systems. For example, it funds
managed care systems, standard processing systems, and maintenance on
current contractor systems.

CMS' Medicare Operations includes:

Ongoing Activities: carriers' and fiscal intermediaries' regular
activities, such as processing claims, conducting hearings and appeals,
answering inquiries, and educating providers and beneficiaries.

Systems Maintenance: activities to keep shared claims processing systems
current.

Operations: Common Working File (CWF), funding for termination costs of
contractors leaving the program, and moving all contractors to three
standard claims processing systems.

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

Legislative Mandates: funding for implementing new legislation such as
HIPAA, BBA, BBRA, BIPA, CFO, and FFMIA.

Program Improvements: funding contractor oversight, reducing regulatory
burden on health care providers, and the Medicare training network.

In FY 2004, CMS will process 1.1 billion claims and answer an estimated
45 million inquiries. We expect a slight decrease in the unit cost to
process a claim from FY 2003 estimates. In FY 2004, the unit cost to
process a Part A claim will be \$0.87, slightly below the estimated
President's Budget FY 2003 unit cost projections of \$0.89 for a Part A
claim. Part B unit costs are estimated to dip from \$0.67 in the FY 2003
President\'s Budget to \$0.65 in FY 2004.

Approximately 67 percent of the FY 2004 Medicare Operations program
level request will be spent on mission critical contractor workloads,
including claims processing, on-going appeals (as distinguished from the
new appeals process), inquiries, and provider assistance. CMS will spend
\$1,184 million in FY 2004, a 5 percent increase over the FY 2003
President's Budget level. Medicare contractors have been experiencing a
dramatic rise in Part B claims workload and expect to see an 11 percent
increase in total claims over the FY 2003 President's Budget estimate.

Legislative mandates comprise 20 percent of the Medicare Operations
budget and are funded at \$354 million in FY 2004, a 0.4 percent
increase over the comparable FY 2003. The bulk of this substantial
increase reflects CMS' implementation of BIPA Section 521 appeals
reform.

Systems maintenance spending will be \$72.1 million in FY 2004, a \$12.9
million, or 15 percent, decrease below FY 2003.

CMS Operations spending will be \$82.6 million in FY 2004, a decrease of
\$20.3 million, or 20 percent, below FY 2003.

Funding decreases also occur in the Program Improvements and Enterprise
activities within Medicare Operations. Program Improvements will be
funded at \$17.3 million in FY 2004, a \$1.7 million, or a 9 percent
decrease, below FY 2003 levels. Meanwhile, Enterprise activities will be
funded at \$53.1 million, a decrease of \$6.2 million, or 11 percent.

Finally, CMS will provide \$14.0 million towards the Department-wide
Information Technology (IT) Enterprise Infrastructure Fund (\$11.0
million) and Unified Financial Management System (\$3.0 million).

Federal Administration

For FY 2004, the President's Budget requests \$580.6 million for CMS'
Federal administrative costs. This is an increase of \$18.1 million over
the FY 2003 President's Budget level. The additional \$18.1 million will
allow CMS to: cover pay increases, support the Nursing Home Oversight
Improvement Program (NHOIP) activities, begin to implement BIPA section
522, and fund the New Freedom Initiative. It includes savings achieved
through consolidation of Information Technology infrastructure services.

The FY 2004 President\'s Budget proposes a total of 4,586 FTE for CMS.
Funding for FTE is in Federal Administration, Medicare Operations, and
the Health Care Fraud and Abuse Control account. The requested level
includes FTE for continuing operations, Health Insurance Portability and
Accountability Act (HIPAA) enforcement, and Medicaid oversight
activities.

The Healthy Start, Grow Smart program will publish and disseminate a
series of 13 informational brochures in English and Spanish to new
Medicaid mothers. These brochures are distributed at the time of birth
and monthly over the first year of the child\'s life. Each publication
focuses on activities that stimulate infant brain development and build
the skills these children need to be successful in school. In addition
to these educational suggestions, each Healthy Start pamphlet includes
vital health and safety information for new parents. Content for each
brochure is tied to the developmental states of the child at the time it
is sent.

The FY 2004 budget includes \$13.0 million to run Healthy Start, Grow
Smart for the coming year. These funds will be used primarily for
printing costs, and postage. This initiative will be fully funded by the
Federal government, but will be operated solely by the States.

This budget also continues support for the Healthcare Integrated General
Ledger and Accounting System (HIGLAS) project which is part of the
Department-wide Unified Financial Management System (UFMS).

Research, Demonstrations and Evaluation

The FY 2004 budget requests \$63.4 million for the Research,
Demonstrations and Evaluation program, \$35 million more than the FY
2003 request. This increase supports two Administration priorities, Real
Choice Systems Change Grants and the President's New Freedom Initiative.

The budget proposes \$40 million to continue funding for Real Choice
System Change Grants. These grants will allow States to improve
community based support systems to enable people with disabilities and
long-term illnesses to live and participate in their communities. These
changes will allow children and adults with disabilities or long-term
illnesses to (1) live in the most integrated community setting possible,
(2) exercise choices about their living environment, and (3) obtain
quality services in a manner as consistent as possible with community
living preferences and priorities. In FY 2002, 25 new and 5 supplemental
Real Choice System Change Grants were awarded.

The budget requests \$3 million for New Freedom Initiative
demonstrations. The demonstrations test the extent to which workforce
shortages and instabilities might be addressed through better
coordination with the Temporary Assistance for Needy Families (TANF)
program. This includes making vouchers for worker health insurance or
for tuition or day care credits available to qualifying individuals.
Participating states would be expected to develop options for workers to
purchase affordable group health coverage through the state health
insurance system or similar organized insurance group.

At the \$63.4 million request level, a small number of high-priority
research projects will be funded. These projects include the Medicare
Current Beneficiary Survey, evaluating CMS programs and developing
alternatives, and implementing a scaled back number of projects mandated
by the BBA, BBRA, and BIPA.

Survey and Certification

CMS' FY 2004 budget request is \$247.6 million, the same as the FY 2003
President's Budget request. Ensuring the safety of beneficiaries and the
quality of care provided in health facilities are two of CMS' most
critical responsibilities. CMS contracts with State agencies to inspect
health facilities providing services to Medicare and Medicaid
beneficiaries and to ensure compliance with Federal health, safety, and
program standards.

Included in this total is \$35.2 million to continue implementing
activities associated with the Nursing Home Oversight Improvement
Program (NHOIP), such as: imposing immediate sanctions on nursing homes
found guilty of a second offense that causes actual harm to residents;
conducting more frequent inspections of nursing homes with repeat
violations; and conducting more focused reviews of a nursing home\'s
efforts to prevent bed sores, dehydration, and malnutrition. CMS will
also continue to invest money to expedite investigation of resident
complaints within a ten-day time frame.

Of the total request, \$203.9 million will allow States to inspect
long-term care facilities and home health agencies at their
legislatively mandated frequencies, as well as maintain the FY 2003
recertification levels for ESRD facilities, non-accredited hospitals,
hospices, rural health clinics, ambulatory surgical centers, outpatient
physical therapy, and outpatient rehabilitation facilities. CMS expects
to complete a total of 23,400 initial or recertification inspections. In
addition, CMS estimates conducting 47,900 visits in response to
beneficiary or family complaints.

The remaining \$8.5 million will fund base support contract activities.
These activities include maintenance and enhancements to the Online
Survey Certification and Reporting (OSCAR) data system, which contains
information on nursing home survey results and outcomes; support
services for surveying psychiatric hospitals; and curricula development
for surveyor training.

The Nursing Home Oversight Improvement Program: The President's Budget
for CMS commits \$92.5 million in mandatory and discretionary funds to
the NHOIP in FY 2004, an increase of \$6.5 million over CMS' FY 2003
amount. CMS is committed to working with residents and their families,
advocacy groups, providers, States, and Congress to ensure that
residents receive quality care and protection.

In conjunction with States, CMS successfully imposes immediate sanctions
against nursing homes that have caused harm to a resident in consecutive
survey cycles; focuses on preventing bed sores, malnutrition, and abuse
as part of the annual nursing home survey; investigates complaints
alleging actual harm to residents within 10 days; and staggers surveys
and conducts visits on weekends, early mornings and evenings, when
quality, safety and staffing problems may be more likely to occur. CMS
also conducts more frequent inspections of nursing homes with repeated
serious violations.

Revitalization Plan

The FY 2004 budget request includes \$65 million in two-year money to
fund the first year of a multi-year Revitalization Plan. The Medicare
program has relied on a number of antiquated legacy systems that have
been characterized by the General Accounting Office (GAO) and the
Department\'s OIG as inflexible, insecure, and obsolete.

The Revitalization Plan will begin the process of improving CMS' systems
security (\$34 million), modernizing the agency\'s Medicare
fee-for-service claims processing systems (\$17.8 million), modernizing
CMS\' information technology data structure (\$11.2 million), and
revamping the agency\'s internal infrastructure (\$2 million).

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

National Medicare&You Education Program

In FY 2004, the National Medicare & You Education Program (NMEP) will
continue to fund the following activities: mailings to beneficiaries
with general information about Medicare, plus specific information on
plans available in their areas; a toll-free telephone service staffed by
customer service representatives able to provide information on
available plans; www.medicare.gov, the user-friendly Internet site that
provides comparative information on plans by zip code; community-based
outreach activities such as those provided by the State Health Insurance
Assistance Programs (SHIPs); and a national advertising campaign that
educates beneficiaries about available services in Medicare.

In FY 2004, CMS will also continue to provide the enhanced service
levels it began in FY 2002. These include 24-hour-a-day,
seven-day-a-week access to customer service representatives at
1-800-MEDICARE and the implementation of a web-based decision tool, the
Medicare Personal Plan Finder, on http://www.medicare.gov.

The President\'s Budget provides approximately \$149.5 million to
finance NMEP activities. NMEP is funded through a variety of sources,
including \$122 million from Program Management, as well as an estimated
\$13.5 million in the QIO/PRO account, and \$14 million in
Medicare+Choice user fees.

Clinical Laboratory Improvement Amendments:

The Clinical Laboratory Improvement Amendments of 1988 (CLIA '88)
expanded survey and certification of clinical laboratories from
Medicare-participating and interstate commerce laboratories to all
facilities testing human specimens for health purposes. CLIA '88 also
introduced user fees to finance survey and certification activities at
clinical laboratories. User fees are credited to the Program Management
account but are available until expended for CLIA activities.

The CLIA program is fully operational, with 177,300 laboratories
registered with CMS, 21.8 percent of which are subject to routine
inspection (every 2 years) under the program. Workloads for each
inspection period includes a 5 percent sample review of the 16,200
accredited laboratories, surveys of 20,980 non-accredited laboratories,
State validation surveys of 810 accredited laboratories, and
approximately 1,570 follow-up survey and complaint investigations.

Program Management Priorities

Appeals Reform: CMS' FY 2004 budget includes \$129 million to implement
Medicare appeals reform as required by BIPA, and for the transfer of the
Medicare hearing function currently performed by Administrative Law
Judges in the Social Security Administration. In addition, the
Administration proposes several changes to the Medicare appeals process
to give CMS additional flexibility to reform the appeals system. These
changes will enable CMS to respond to beneficiary appeals in a more
timely and effective manner.

Beneficiary Education: One of CMS' top priorities is making sure that
beneficiaries and their caregivers are active and informed participants
in their health care decisions. Last year, CMS implemented new and
expanded services to help beneficiaries better understand their health
care options and where they can obtain information about them. CMS plans
to continue these enhanced and expanded services in FY 2004:

-   Expanded call center services. Beginning in October 2001, customer
    service representatives at 1-800-MEDICARE were available 24 hours a
    day, seven days a week.

-   Development of a web-based decision tool. The Medicare Personal Plan
    Finder, which became available in October 2001, enhances the
    databases currently available on http://www.medicare.gov by allowing
    beneficiaries to narrow down the health plan choices available in
    their zip codes based on the features that are most important to
    them.

-   Beneficiary education campaign. CMS continued its \$25 million media
    campaign to help beneficiaries make informed decisions about their
    health plan options. The campaign, which coincided with the 2003
    open enrollment period, encouraged beneficiaries to call
    1-800-MEDICARE and visit http://www.medicare.gov with their Medicare
    questions. The campaign also advertised the new nursing home quality
    information available on http://www.medicare.gov. CMS will continue
    to ensure that the toll-free line is able to accommodate increased
    call volume in FY 2004.

HIGLAS: In FY 2004, CMS plans to spend \$57 million for both the
contractor and internal accounting systems. HIGLAS is an important
component of CMS' Medicare contractor oversight. We are requesting
two-year appropriations authority for these funds.

HIGLAS represents a coordinated approach to improving the accounting and
financial management processes used by CMS' Medicare contractors to
administer the Medicare Parts A and B programs, and the agency\'s
central administrative accounting and financial management processes.
The goals of HIGLAS are to deploy an integrated, enterprise-wide
financial management solution to support administrative and program
financial management needs. The project will focus on the contractors\'
accounts receivable, accounts payable, general ledger, and reporting
processes and replace CMS' legacy accounting system and systems that
currently support its procurement, travel management, grants management,
and asset management.

HIGLAS will ensure that CMS can meet all of these objectives by creating
a state-of-the-art uniform agency-wide accounting system. HIGLAS
information will feed into the Department-wide system to allow the
Department to produce automated audited reports.

One of the Secretary's top priorities is to centralize the Department\'s
financial accounting process through a Unified Financial Management
System (UFMS). A major segment of UFMS is HIGLAS.

HIPAA Enforcement: In October 2002, CMS was tasked with the
responsibility for enforcing the HIPAA Administrative Simplification
security, transactions, identifiers and code sets standards. The FY 2004
request includes \$10 million to begin activities related to the
start-up and implementation of the enforcement program.

In order to enforce the HIPAA standards, CMS will assemble an
enforcement staff, write an enforcement regulation that outlines the
enforcement program, implement the enforcement system, and begin to
accept complaints. CMS intends to provide education and technical
assistance to covered entities to help them achieve compliance, rather
than seeking out non-compliant entities and imposing fines on them. If a
covered entity is found to be non-compliant, CMS will work with them to
achieve compliance and will only impose civil monetary penalties if
these efforts fail.

President's Management Agenda: CMS is currently implementing the
President\'s Management Agenda. Successes in the current activities are
the basis for initiatives within the 2004 budget. President\'s
Management Agenda highlights within each section include:

Human Capital: through strategic placement of resources, CMS was able to
transfer 93 FTE from administrative areas to direct mission support.

Competitive Sourcing: CMS has already transferred 122 positions to the
Department as a result of the Department's consolidated Human Resource
Initiative. In addition, CMS has submitted a plan identifying 17
functions (210 FTEs) that will be subject to a competitive sourcing
study in 2004.

Financial Management: Improving financial management is a top priority
for CMS. CMS is in the process of revamping its fragmented and
incomplete account reporting system with the development of HIGLAS.
HIGLAS will be an integrated, enterprise-wide financial management
solution to support administrative and program financial management
needs. CMS has also been in the forefront of measuring payment error and
developing corrective action plans to lower its payment error rate. CMS
has lowered the Medicare payment error rate from 14 percent in FY 1996
to 6.3 percent in FY 2002. CMS is currently in the process of developing
methodologies to measure payment error in both the Medicaid and SCHIP
programs through the HCFAC program.

Expanding E-Gov: CMS is continuing work with expanded 1-800 Medicare
call center services and enhanced general web services. In addition, CMS
is taking a lead role in the Consolidated Health Informatics (CHI)
initiative which will adopt a single set of government wide health data
inter-operability standards for Federal agencies. This will allow
agencies to share health data regardless of the system that collects the
data.

Budget and Performance Integration: The FY 2004 agency budgets will
continue the focus on results-oriented government guided by performance
as part of the President's Management Agenda. In 2002, two of CMS'
programs, the MIP and SCHIP were assessed using the President\'s
Performance Assessment Rating Tool (PART), and were found to be
successful. As a result of the MIP PART, two new program integrity goals
were introduced for FY 2004.

Legislation Supporting the Discretionary Budget

The FY 2004 President's Budget includes two user fee proposals totalling
\$201 million that, if enacted, could improve the efficiency and lower
the cost of processing Medicare claims in the future. The budget also
includes proposals for Medicare appeals and contractor reform.

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

Appeals Filing Fee: This allows the Secretary to assess a \$50 fee for
providers who wish to elevate a fee-for-service appeal to the Qualified
Independent Contractor level of adjudication. This fee will finance a
case control system, which will allow CMS to log and track appeals that
advance to the QIC level of adjudication and beyond (\$6 million).

Appeals Reform: The budget assumes that BIPA Section 521 will be
modified to allow CMS 16 months to implement reforms once funding is
received. This will allow CMS time to begin the process of contracting
with the QICs. The budget also assumes a reduction in the number of QICs
and an increase in decision-making timeframes to allow for adequate
record development from one level of review to the next.

Contracting Reform: We will again pursue contracting reform to bring the
Medicare contracting system closer to the Federal Acquisition
Regulations that govern virtually all other contractor procurement.
During the past legislative session, language similar to the
Administration\'s was included in many of the Medicare packages proposed
by Congress.

CMS Performance Highlights

CMS' primary mission is to assure health care security for its
beneficiaries. CMS' Annual Performance Plan and Report (APP) emphasizes
this focus by helping CMS expand its resources in ways that enhance
service to the public, encourage accountable stewardship of Agency
resources, and ensure that its programs are monitored and evaluated for
their effectiveness. The APP is designed to reflect goals that are
representative of CMS' vast responsibilities. CMS has had many
challenges and demands and, overall, is reporting positive results for
FY 2002. Although results for several of the 35 FY 2002 goals are still
pending, approximately 77 percent of the goals have been reported, with
74 percent of those goals reaching their targets. Further, over 51
percent of the total FY 2004 goals support the President's Management
Agenda. CMS also included two new program integrity goals, developed
during the Program Assessment Rating Tool (PART) process, in the FY 2004
plan. Following are some of CMS' performance achievements and
advancements that support important Administration priorities:

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

-   CMS cut the Medicare fee-for-service error rate virtually in half
    over the past few years, from 14 percent in FY 1996 to 6.3 percent
    in FY 2002. The FY 2004 target is 4.8 percent.

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-   The MIP will be further strengthened by the implementation of two
    new FY 2004 goals, developed during the PART process, which measure
    the provider compliance rate and the contractor error rate.

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-   The Medicaid Payment Accuracy Measurement (PAM) model began with two
    States in FY 2001 and has expanded to 12 States as of FY 2003. By FY
    2004, the model will enable CMS to produce both State specific and
    national level estimates and ultimately reduce Medicaid payment
    error rates.

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

-   One of the QIO goals is to protect the health of Medicare
    beneficiaries age 65 years and older by increasing the percentage of
    those who receive an annual vaccination for influenza and a lifetime
    pneumococcal vaccination. For FY 2001, 67.4 percent (target 72
    percent) received an influenza vaccination and 63.3 percent (target
    63 percent) received a pneumococcal vaccination. Shortages of
    vaccination were among the reasons for not reaching this target.

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-   A key performance goal is to increase the percentage of female
    Medicare beneficiaries age 65 and older who receive a biennial
    mammogram. CMS surpassed its FY 2001 target of 51 percent by
    reaching 51.6 percent.

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-   Given the growing prevalence of diabetes nationally, CMS plans to
    increase special eye exams for its diabetic beneficiaries,
    reflecting its commitment to improve diabetes care. CMS surpassed
    its FY 2001 goal to increase the rate of biennial diabetic eye exams
    to 68.3 percent by achieving a rate of 68.9 percent. CMS anticipates
    future success with this goal based on the progress seen thus far.

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

-   CMS and States exceeded the FY 2002 goal to enroll an additional
    million children in SCHIP or Medicaid over the previous year\'s
    level. In fact, CMS and the States enrolled 1.2 million children
    over the FY 2001 level. According to the Statistical Enrollment Data
    System (SEDS), approximately 5.3 million children participated in
    SCHIP-funded coverage (either a separate child health program or a
    Medicaid expansion) in FY 2002, and many more were enrolled in
    "regular" Title XIX Medicaid through increased outreach efforts and
    application simplification strategies undertaken as a result of
    SCHIP.

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-   CMS is also developing a performance goal for immunization of
    two-year olds on Medicaid. In FY 2002, CMS continued to work with
    States on its project to increase the percentage of Medicaid
    two-year old children who are fully immunized.

-   CMS is developing a goal to establish formal Federal-State
    collaborations for improving health care delivery and quality for
    Medicaid and SCHIP populations using performance measures. In FY
    2002, CMS met with States to explore a strategy to effectively use
    performance measures to quantify and stimulate measurable
    improvement in delivering quality health care.

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

-   One performance measure is to improve the effectiveness of
    disseminating Medicare information to beneficiaries. In order to
    help beneficiaries make informed health care decisions, CMS employs
    a variety of strategies through many CMS beneficiary-centered
    programs to maximize information channels and to ensure that
    targeted audiences, are reached with the "right information at the
    right time." In FY 2002, CMS continued to track beneficiary
    education efforts toward the ultimate five-year target of
    beneficiary accessibility and understanding of educational efforts
    in the area of the Medicare+Choice program.

-   To promote beneficiary and public understanding of CMS and its
    programs, CMS developed a goal to improve and measure beneficiary
    awareness of (1) the core features of Medicare needed to use the
    program effectively, and, (2) CMS sources from which additional
    information can be obtained. In FY 2002, CMS developed baselines and
    future targets.

**Administration for Children and Families**

The FY 2004 budget request for ACF totals \$47.0 billion, a net decrease
of \$405 million, or 1 percent below the FY 2003 President\'s Budget. Of
these funds, \$13.4 billion is the discretionary program level and
\$20.4 billion is the entitlement budget authority.

Discretionary Spending

  -------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -----------------------------
                                                                                                                                                                                                  **2004**
                                                                                                                                                                                                  
                                                                                                                       **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**   **[ +/- 2003]{.underline}**
                                                                                                                                                                                                  
  Strengthening Families:                                                                                                                                                                         
  Compassion Capital Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                          \$30                     \$100                    \$100                    \$0
  Mentoring Children of Prisoners\...\...\...\...\...\...\...\...\...\...\...\...\.....                                0                        25                       50                       +25
  Promoting Responsible Fatherhood/Healthy Marriage\...\...\...\...                                                    0                        20                       20                       0
  Maternity Group Homes\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                           0                        10                       10                       0
  Center for Faith-Based and Community Initiatives\...\...\...\...\.....                                               0                        1                        1                        0
  Head Start 1/\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....          \$6,537                  \$6,668                  \$6,816                  +\$148
  LIHEAP:                                                                                                                                                                                         
  Regular Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                      \$1,700                  \$1,400                  \$1,700                  +\$300
  Emergency Contingency Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                 [300 ]{.underline}       [300 ]{.underline}       [300 ]{.underline}       [ 0 ]{.underline}
  Subtotal, LIHEAP\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                       \$2,000                  \$1,700                  \$2,000                  +\$300
  Child Care & Development Block Grant (CCDBG):                                                                                                                                                   
  Child Care & Development Block Grant\...\...\...\...\...\...\...\...\...\....                                        \$2,090                  \$2,090                  \$2,090                  \$0
  Research and Evaluation Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                               [10 ]{.underline}        [10 ]{.underline}        [10 ]{.underline}        [ 0 ]{.underline}
  Subtotal, Child Care\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                       \$2,100                  \$2,100                  \$2,100                  \$0
  Community Services:                                                                                                                                                                             
  Community Services Block Grant\...\...\...\...\...\...\...\...\...\...\...\...\...                                   \$650                    \$570                    \$495                    -\$75
  Individual Development Accounts\...\...\...\...\...\...\...\...\...\...\...\...\...                                  25                       25                       25                       0
  Community Services Discretionary Programs\...\...\...\...\...\...\....                                               [64 ]{.underline}        [45 ]{.underline}        [32 ]{.underline}        [-13 ]{.underline}
  Subtotal, Community Services \...\...\...\...\...\...\...\...\...\...\...\...\....                                   \$739                    \$640                    \$552                    -\$88
  Promoting Safe and Stable Families (PSSF):                                                                                                                                                      
  Discretionary\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....              \$70                     \$200                    \$200                    \$0
  *Mandatory (non-add)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... *                      *[305 ]{.underline}*     *[305 ]{.underline}*     *[305 ]{.underline}*     *[ 0 ]{.underline}*
  *Subtotal, PSSF Program Level (non-add)\...\...\...\...\...\...\...\... *                                            *\$375 *                 *\$505 *                 *\$505 *                 \$0
  Independent Living:                                                                                                                                                                             
  Discretionary\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....              \$0                      \$60                     \$60                     \$0
  *Mandatory (non-add)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... *                      *[140 ]{.underline}*     *[140 ]{.underline}*     *[140 ]{.underline}*     *[ 0 ]{.underline}*
  *Subtotal, Independent Living Program Level (non-add)\..... *                                                        *\$140 *                 *\$200 *                 *\$200 *                 \$0
                                                                                                                                                                                                  
  Refugee and Entrant Assistance\...\...\...\...\...\...\...\...\...\...\...\...\...\...                               \$460                    \$453                    \$428                    -\$25
                                                                                                                                                                                                  
  *Victims of Torture (non-add)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... *                          *10*                     *10*                     *10*                     *0*
  Unaccompanied Alien Children (Transfer form INS)\...\...\...\....                                                    [ 0 ]{.underline}        [33 ]{.underline}        [34 ]{.underline}        [+1 ]{.underline}
  Subtotal, Refugees\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                       \$460                    \$486                    \$462                    -\$24
  Native Americans\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                46                       45                       45                       0
  Developmental Disabilities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                     140                      140                      140                      0
  Child Abuse/Welfare\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                  421                      421                      421                      0
  Federal Administration \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                  172                      172                      180                      +8
  Social Services Research & Demonstration\...\...\...\...\...\...\...\...\....                                        31                       6                        6                        0
  Early Learning Fund \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                 25                       0                        0                        0
  Runaway and Homeless Youth\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                              103                      103                      103                      0
  Adoption Incentives/Awareness\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                            56                       56                       56                       0
  Violence Against Women\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                       [127 ]{.underline}       [127 ]{.underline}       [127 ]{.underline}       [ 0 ]{.underline}
                                                                                                                                                                                                  
  **Total, ACF Discretionary Budget Authority\...\...\...\...\...\... **                                               **\$13,057 **            **\$13,080 **            **\$13,449 **            **+\$369 **
                                                                                                                                                                                                  
                                                                                                                                                                                                  
                                                                                                                                                                                                  
  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....        1,465                    1,512                    1,472                    -40
                                                                                                                                                                                                  
                                                                                                                                                                                                  
  /1 FY 2002, FY 2003 and FY 2004 funding levels included \$1.4 billion advanced appropriation for subsequent years.                                                                              
                                                                                                                                                                                                  
  -------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -----------------------------

The FY 2004 discretionary budget totals \$13.4 billion, a net increase
of \$369 million or 2.8 percent over the FY 2003 President\'s Budget.

Strengthening Families/Supporting Communities

The President's Budget reinforces a commitment to fund faith- and
community-based organizations that can provide innovative services at
the grass-roots level.

Successful outcomes for those in need can come from many sources, not
just the Government. In every instance where this Administration sees a
responsibility to help people, it will look to faith-based
organizations, charities, and community groups that have shown the
ability to change lives. These groups will not replace Government, but
rather partner with it to make life better for those in need.

Compassion Capital Fund: The budget provides a total of \$100 million
for the Compassion Capital Fund. In FY 2002, HHS awarded the first round
of grants to 21 intermediary organizations which will provide technical
assistance to help faith- and community-based organizations access
funding sources, operate and manage their programs, develop and train
staff, expand the reach of programs into the community and replicate
promising programs. Funds were also awarded for research into best
practices and to develop a national resource center and information
clearinghouse. At the level requested in FY 2004, an estimated 80
intermediary organizations will be funded, the third year of the fund.

Mentoring Children of Prisoners: The request doubles the FY 2003
President\'s Budget for Mentoring Children of Prisoners for a total of
\$50 million to expand the number of grantees to 20 in FY 2004. Recently
authorized, this program will award grants of up to \$5 million each to
enable public and private organizations to establish or expand projects
that provide mentoring for children of incarcerated parents and those
recently released from prison.

The arrest and incarceration of a parent often results in traumatic
separations for children, followed frequently by erratic shifts from one
caregiver to another. As a group, these children are less likely than
their peers to succeed in school and more likely to succumb to substance
abuse, gangs, early childbearing, and delinquency. This program will
help children through the time parents are imprisoned, including efforts
to keep children connected to a parent in prison, and increase the
chances that the family can come together successfully when the parent
is released.

Promoting Responsible Fatherhood and Healthy Marriages: The
Administration is committed to helping the over 25 million children who
live in homes without fathers. To assist non-custodial fathers to become
more involved in the lives of these children, the budget provides \$20
million in competitive grants to faith- and community-based
organizations, along with Indian tribes and tribal organizations, to
encourage and help fathers to support their families, avoid welfare,
improve fathers\' ability to manage family business affairs, and support
healthy marriages and married fatherhood.

Maternity Group Homes: The President's Budget includes \$10 million to
provide pregnant and parenting youth access to transitional living
opportunities, an alternative to the environments of violence and
despair which many young pregnant mothers face, to secure brighter
futures for their children. These funds will support adult-supervised
community-based group homes for mothers who cannot live safely with
their own families, and a range of coordinated services including
childcare, job training, and counseling.

The Center for Faith-Based and Community Initiatives: Since its
inception in 2001, the Center for Faith-Based and Community Initiatives
(CFBCI) has continued to work with agencies across the department to
eliminate barriers in regulations, rules, internal guidance, policies
and procedures, and practices to the participation of faith-based and
other community organizations; to propose the development of innovative
pilot and demonstration programs; and to promote and ensure compliance
with current Charitable Choice provisions. Outreach activities include
numerous workshops and presentations to HHS program areas, other
government agencies, special interest groups and faith- and
community-based groups.

Head Start

The budget request includes \$6.8 billion for Head Start, a net increase
of \$148 million over the FY 2003 President\'s Budget. In FY 2004,
almost 923,000 children will receive Head Start services including
62,000 children in Early Head Start. This increase, coupled with a
reallocation of resources through legislative changes proposed as part
of the Head Start reauthorization, will be used to maintain current
service levels and increase enrollment by up to 10,500 children.

The Administration\'s Good Start, Grow Smart initiative has made
significant progress in improving Head Start, by sharpening the focus on
school readiness, improving teacher training and mandating a system to
determine the success of Head Start programs in preparing children for
school. The FY 2004 Head Start reauthorization offers the unique
opportunity to encourage what works in Head Start and initiate new
efforts to promote school readiness and State and local coordination.

The Head Start program has a long tradition of delivering comprehensive
and high-quality services designed to foster healthy development for
low-income children. In addition, the entire range of Head Start
services is responsive and appropriate to each child\'s and family\'s
developmental, ethnic, cultural, and linguistic heritage and experience.

Child Care

The Child Care and Development Block Grant (CCDBG) program provides
funds to States, territories, and tribes to assist low-income families,
including families receiving temporary public assistance and those
transitioning from public assistance, in obtaining child care so they
can work, attend training, or pursue educational opportunities.

In FY 2004, funding for child care will provide assistance to an
estimated 1.8 million children each month, with a total budget of \$4.8
billion including \$2.1 billion in discretionary funds and \$2.7 billion
in mandatory funds. In addition, when added to other Federal and related
State funds available for child care, nearly 2.5 million children will
be served in an average month in FY 2004.

Our most recent data suggest that Federal and related State funds
provide child care services to 28 percent of children eligible for the
Child Care Development Fund under State rules. Further, for children in
families with incomes below poverty for a family of three, the
proportion served increases to 45 percent.

Subsidized child care services are available to eligible families
through certificates or contracts with providers. Parents may select any
legally operating child care provider. Child care providers serving
children must meet basic health and safety requirements set by States
and tribes. These requirements must address prevention and control of
infectious diseases, including immunizations; building and physical
premises safety; and minimum health and safety training.

Community Services Programs

Community services programs fund a range of programs and activities
providing housing and employment assistance, education and training
services, nutrition, energy assistance, health and substance abuse
treatment, as well as economic development opportunities.

The budget proposes a total of \$552 million in support of the Community
Services Block Grant (CSBG), Individual Development Accounts and other
community services programs which have demonstrated performance. This is
\$88 million less than the FY 2003 President\'s Budget. The budget
targets funds to programs which have proven track records of success and
reduces funding for programs where similar services are provided by
other Federal grant programs.

As part of the CSBG reauthorization, the Administration intends to work
to develop a set of performance measures to be consistently applied by
all States and Community Action Agencies (CAAs) to ensure program
outcomes and accountability. Once established, CAAs will be held
accountable to performance targets. Non-performing CAAs may lose their
historical designation and be subject to a State-run award competition,
open to other area community-based organizations.

Low Income Home Energy Assistance Program (LIHEAP)

The FY 2004 budget provides a total of \$2.0 billion for LIHEAP,
including \$1.7 billion for formula block grants to States and \$300
million for contingency funding. The contingency funds are available for
release in a heating or cooling emergency such as extreme temperature or
high fuel prices, or to meet energy needs related to a natural disaster.

LIHEAP provides heating and cooling benefits to approximately 4.6
million households each year. Of the households receiving heating
assistance, almost forty percent include an elderly member, one-third
include a person with a disability, over forty percent include a child
under age 18, and one-third do not receive any other public assistance.

Refugee and Entrant Assistance

The budget requests \$428 million in FY 2004 for refugees, asylees,
Cubans/Haitians, and victims of torture and trafficking. The funding
level reduction below the FY 2003 President\'s Budget reflects the
impact of a lower than initially estimated number of arrivals entering
the country in FY 2002 and FY 2003. The FY 2004 request is sufficient to
support a full eight months of cash and medical assistance and access to
social service programs such as English language training, case
management, employment preparation, and job placement and retention
services. In addition, the budget continues support for services,
including rehabilitation, social and legal services for those who have
experienced torture as well as access to benefits to the same extent as
refugees for victims of trafficking.

Recognizing the Office of Refugee Resettlement\'s expertise in assisting
refugee children, in March, 2003 the Unaccompanied Alien Children
program will be transferred from the Immigration and Naturalization
Service (INS) to ACF. With an estimated budget of \$34 million in FY
2004, ACF will be able to provide for the care and safety of more than
5,000 alien children each year. The FY 2003 President's Budget includes
\$33 million for this activity, reflecting an initial estimate of the
resources which will be transferred from INS to HHS.

Developmental Disabilities

Today, there are nearly four million Americans with developmental
disabilities. Developmental disabilities are severe, chronic
disabilities attributable to mental and/or physical impairment, which
manifest before age 22 and are likely to continue indefinitely.

In FY 2004, the budget request includes \$140 million, the same level as
the FY 2003 President\'s Budget, for programs that support partnerships
with State governments, local communities, and the private sector to
assist people with developmental disabilities to reach their maximum
potential through increased independence, productivity, and community
integration.

HHS Office on Disability: In 2002, HHS announced the creation of the
Office on Disability to oversee the coordination, development and
implementation of programs and special initiatives within HHS that
impact people with disabilities. The office will build on the
President\'s New Freedom Initiative and centralize many of the
recommended strategies outlined in the report to President Bush,
Delivering on the Promise, which explored solutions to reducing barriers
in all areas of society for people with disabilities.

Native American Programs

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

Other ACF

In FY 2004, the President\'s Budget includes \$421 million through the
Child Abuse/Welfare programs to support States and localities in their
efforts to protect children by strengthening families and preventing
abuse and neglect. These funds will help to provide services to prevent
child abuse and neglect and to intervene in cases in which child
maltreatment has been reported. In addition, the budget includes \$56
million for the Adoption Incentives and Adoption Awareness programs to
support efforts to encourage adoptions. Funds are available to States to
enhance their overall adoption program as well as competitive grants to
train health care professionals and continue a national media campaign,
informing the public about the adoption of children with special needs.
The budget also maintains funds for programs that offer safe havens and
access to services for victims of domestic violence (\$127 million) and
runaway and homeless youths (\$103 million).

Central to the ACF mission is sound research to help guide State and
local efforts to help low-income families become and remain economically
self-sufficient and to strengthen families. The FY 2004 budget maintains
the FY 2003 level for the Social Services Research and Demonstration
program.

The budget does not support the Early Learning Fund, which was funded at
\$25 million in FY 2002. The Administration supports similar activities
which promote early literacy in the Department of Education and the Head
Start program.

Federal Administration

The Federal Administration request is \$180 million in FY 2004,
including an estimated 1,472 FTE. The budget includes an additional \$2
million to support the increasing demands of ACF\'s child and family
services reviews. The reviews are designed to ensure that State child
welfare agency practice is in conformity with Federal child welfare
requirements and to assist States to enhance their capacity to help
children and families achieve positive outcomes. In addition, the budget
includes \$5 million to develop and implement measures to reduce the
incidence of erroneous payments in TANF, Foster Care, and Head Start.

The budget level includes savings totaling \$7.9 million resulting from
the President\'s Management Agenda and the consolidation and elimination
of duplicative information technology projects across ACF programs.
Workforce cost savings will be achieved through consolidating
administrative functions, implementation of effective workforce planning
and human capital management strategies, and adoption of other economies
and efficiencies in administrative operations.

**Administration for Children and Families**

+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           | **2004**  |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           | **[2      | **[2      | **[2      | **[ +/-   |   |
|           | 002]{.und | 003]{.und | 004]{.und | 2         |   |
|           | erline}** | erline}** | erline}** | 003]{.und |   |
|           |           |           |           | erline}** |   |
+-----------+-----------+-----------+-----------+-----------+---+
| TAN       | \$17,009  | \$19,009  | \$17,609  | -\$1,400  |   |
| F/1\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\..... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Child     | 2,758     | 2,717     | 2,717     | \$0       |   |
| Care      |           |           |           |           |   |
| En        |           |           |           |           |   |
| titlement |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Child     | 3,846     | 4,037     | 4,346     | +\$309    |   |
| Support   |           |           |           |           |   |
| En        |           |           |           |           |   |
| forcement |           |           |           |           |   |
| & Family  |           |           |           |           |   |
| Support   |           |           |           |           |   |
| (net      |           |           |           |           |   |
| BA)\...\  |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Foster    | 6,622     | 6,496     | 6,814     | +\$318    |   |
| Care      |           |           |           |           |   |
| /Adoption |           |           |           |           |   |
| A         |           |           |           |           |   |
| ssistance |           |           |           |           |   |
| /2        |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Ch        | 37        | 50        | 50        | \$0       |   |
| ildren\'s |           |           |           |           |   |
| Research  |           |           |           |           |   |
| &         |           |           |           |           |   |
| Technical |           |           |           |           |   |
| Assist    |           |           |           |           |   |
| (net BA)  |           |           |           |           |   |
| /3\...    |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Promoting | 305       | 305       | 305       | \$0       |   |
| Safe and  |           |           |           |           |   |
| Stable    |           |           |           |           |   |
| Families  |           |           |           |           |   |
| /4        |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\.... |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| Social    | [         | [         | [         | [ \$0     |   |
| Service   | 1,700]{.u | 1,700]{.u | 1,700]{.u | ]{.u      |   |
| Block     | nderline} | nderline} | nderline} | nderline} |   |
| Grant     |           |           |           |           |   |
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| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
| \...\...\ |           |           |           |           |   |
| ...\...\. |           |           |           |           |   |
| ..\...\.. |           |           |           |           |   |
| .\...\... |           |           |           |           |   |
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|           |           |           |           |           |   |
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|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| **Total,  | *         | *         | *         | **-\$773  |   |
| Budget    | *\$32,277 | *\$34,314 | *\$33,541 | **        |   |
| Author    | **        | **        | **        |           |   |
| ity\...\. |           |           |           |           |   |
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| \...\.... |           |           |           |           |   |
| **        |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
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|           |           |           |           |           |   |
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|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| /1 FY     |           |           |           |           |   |
| 2002      |           |           |           |           |   |
| figure    |           |           |           |           |   |
| does not  |           |           |           |           |   |
| include   |           |           |           |           |   |
| the       |           |           |           |           |   |
| Co        |           |           |           |           |   |
| ntingency |           |           |           |           |   |
| Fund or   |           |           |           |           |   |
| the High  |           |           |           |           |   |
| Pe        |           |           |           |           |   |
| rformance |           |           |           |           |   |
| Bonus;    |           |           |           |           |   |
| budget    |           |           |           |           |   |
| authority |           |           |           |           |   |
| for these |           |           |           |           |   |
| funding   |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| sources   |           |           |           |           |   |
| was made  |           |           |           |           |   |
| available |           |           |           |           |   |
| in prior  |           |           |           |           |   |
| years. FY |           |           |           |           |   |
| 2003      |           |           |           |           |   |
| figure    |           |           |           |           |   |
| includes  |           |           |           |           |   |
| \$2       |           |           |           |           |   |
| billion   |           |           |           |           |   |
| for the   |           |           |           |           |   |
| C         |           |           |           |           |   |
| ontigency |           |           |           |           |   |
| Fund for  |           |           |           |           |   |
| FYs       |           |           |           |           |   |
| 03-07. FY |           |           |           |           |   |
| 2004      |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| includes  |           |           |           |           |   |
| \$50      |           |           |           |           |   |
| 0,000,000 |           |           |           |           |   |
| for high  |           |           |           |           |   |
| pe        |           |           |           |           |   |
| rformance |           |           |           |           |   |
| bonus for |           |           |           |           |   |
| FYs 04-08 |           |           |           |           |   |
| and       |           |           |           |           |   |
| \$20      |           |           |           |           |   |
| 0,000,000 |           |           |           |           |   |
| for       |           |           |           |           |   |
| family    |           |           |           |           |   |
| formation |           |           |           |           |   |
| demons    |           |           |           |           |   |
| trations, |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| research, |           |           |           |           |   |
| and TA    |           |           |           |           |   |
| for FY    |           |           |           |           |   |
| 2004.     |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
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|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| /2 In FY  |           |           |           |           |   |
| 2003 and  |           |           |           |           |   |
| FY 2004   |           |           |           |           |   |
| the       |           |           |           |           |   |
| Foster    |           |           |           |           |   |
| Care      |           |           |           |           |   |
| /Adoption |           |           |           |           |   |
| A         |           |           |           |           |   |
| ssistance |           |           |           |           |   |
| has an    |           |           |           |           |   |
| a         |           |           |           |           |   |
| dditional |           |           |           |           |   |
| \$60      |           |           |           |           |   |
| million   |           |           |           |           |   |
| in        |           |           |           |           |   |
| disc      |           |           |           |           |   |
| retionary |           |           |           |           |   |
| funds for |           |           |           |           |   |
|           |           |           |           |           |   |
| education |           |           |           |           |   |
| vouchers  |           |           |           |           |   |
| in the    |           |           |           |           |   |
| In        |           |           |           |           |   |
| dependent |           |           |           |           |   |
| Living    |           |           |           |           |   |
| Program.  |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| /3 In FY  |           |           |           |           |   |
| 2002,     |           |           |           |           |   |
| Congress  |           |           |           |           |   |
| rescinded |           |           |           |           |   |
| \$21      |           |           |           |           |   |
| million   |           |           |           |           |   |
| in budget |           |           |           |           |   |
| authority |           |           |           |           |   |
| from this |           |           |           |           |   |
| account.  |           |           |           |           |   |
| The FY    |           |           |           |           |   |
| 2003 and  |           |           |           |           |   |
| FY 2004   |           |           |           |           |   |
| request   |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| includes  |           |           |           |           |   |
| \$15      |           |           |           |           |   |
| million   |           |           |           |           |   |
| for       |           |           |           |           |   |
| welfare   |           |           |           |           |   |
| research. |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
| /4        |           |           |           |           |   |
| Promoting |           |           |           |           |   |
| Safe and  |           |           |           |           |   |
| Stable    |           |           |           |           |   |
| Families  |           |           |           |           |   |
| has an    |           |           |           |           |   |
| a         |           |           |           |           |   |
| dditional |           |           |           |           |   |
| \$200     |           |           |           |           |   |
| million   |           |           |           |           |   |
| in        |           |           |           |           |   |
| disc      |           |           |           |           |   |
| retionary |           |           |           |           |   |
| funding.  |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+
|           |           |           |           |           |   |
+-----------+-----------+-----------+-----------+-----------+---+

**Entitlement Spending**

The Department\'s FY 2004 ACF budget includes \$33.541 billion in budget
authority for entitlement programs. The ACF entitlement programs serve
some of the nation\'s most vulnerable populations through programs such
as Temporary Assistance to Needy Families (TANF), Child Support
Enforcement, the Child Care, Foster Care, and Adoption Assistance. This
year\'s request anticipates the reauthorization of TANF and the Child
Care Entitlement, modifications in the Child Support Enforcement
program, and an option for States to receive their foster care funds as
a fixed allotment.

Temporary Assistance for Needy Families

The Personal Responsibility and Work Opportunity Reconciliation Act
(PRWORA) of 1996 dramatically changed the nation\'s approach to income
support of low-income families. PRWORA replaced individual entitlements
to welfare with time-limited assistance accompanied by work requirements
through the new TANF program. PRWORA also created a new partnership
between States and the Federal government, giving States considerable
flexibility to design their own TANF programs.

Welfare reform is widely regarded as a success. According to State
reports, work effort among current welfare participants in FY 2001 was
three times its 1996 levels. As of June 2002, caseloads had declined to
54 percent of 1996 levels. According to the most recent data available
from HHS studies, 75 percent of former welfare recipients worked at some
point during the year after leaving welfare. Former recipients generally
earn between \$7.00-8.00 per hour and their earnings rise, on average,
over the course of their first year off of welfare.

TANF is a capped pre-appropriated annual amount of approximately \$16.7
billion to States, Territories and eligible Tribal programs to help
families transition from welfare to self-sufficiency TANF expired at the
end of FY 2002. To date, Continuing Resolutions have provided funding
for TANF State Family Assistance Grants and other TANF components. The
TANF bonus to reward high-performing States is authorized through FY
2003. The 2002 Economic Recovery Act and Continuing Resolution provided
funds for the Supplemental Grants and Contingency Fund through March 31,
2003.

States have tremendous flexibility in determining how to use their TANF
dollars. States now spend less on cash payments than during initial
years of TANF implementation and more on helping families achieve
self-sufficiency. States may transfer up to a combined 30 percent of
their TANF funding to either the Child Care and Development Block Grant
or the Social Services Block Grant (SSBG) with not more than 4.25
percent transferable to SSBG (FY 2002 Appropriations language modified
current law allowing for 10 percent transfer to SSBG).

TANF Legislative Proposals

The FY 2004 budget reproposes the President\'s FY 2003 plan to build on
the considerable successes of welfare reform and to reauthorize
Temporary Assistance for Needy Families program. The proposal includes
five years of funding for Family Assistance Grants to States and
Territories at current levels; Supplemental Grants at the FY 2001 level
of \$319 million; restoring the allowable SSBG transfer to 10 percent as
well as renewal of the \$2 billion Contingency Fund with modified
Maintenance of Effort (MOE) and reconciliation requirements to make it
more accessible for States.

The central focus of the President\'s proposal is to strengthen work
requirements while allowing States greater flexibility in determining
what should count as work. The plan would require recipients to
participate 40 hours per week through a combination of a job and
activities to promote self-sufficiency. In addition, the plan also
strives to strengthen families. It includes a matching grant program for
initiatives to promote healthy marriages. The proposal would replace the
bonus to reduce out-of-wedlock births with a new initiative to fund
research, demonstrations, and technical assistance activities, primarily
targeted towards family formation and promoting healthy marriages. The
proposal also modifies the reward for high performing States by
directing a portion of the bonus funds to a matching grant program
geared towards effective family formation.

Child Care Entitlement to States

The current Child Care and Development Fund consists of the
discretionary CCDBG and the Child Care Entitlement funds preappropriated
under TANF and made subject to the rules of the CCDBG. The Child Care
Entitlement is composed of mandatory and matching funds. Two percent of
the mandatory entitlement funds are reserved for Indian Tribes and
Tribal organizations. The Child Care Entitlement relates in part to the
TANF program. States are mandated to spend at least 70 percent of the
Child Care Entitlement on families receiving TANF, transitioning from
TANF, or at risk of becoming eligible for TANF. States must also spend a
minimum of four percent of the all child care funds - mandatory,
matching, and discretionary - to improve the quality and availability of
healthy and safe child care for all families. Additional amounts of the
discretionary funds are also set aside for quality improvements and
research and referral activities.

For FY 2004, HHS is requesting funding the Child Care Entitlement of
\$2.7 billion. This is equal to the funding level provided under the
President\'s FY 2003 reauthorization request. States are allowed
flexibility in developing child care programs. These funds, combined
with the requested \$2.1 billion in discretionary child care funding,
will continue to provide valuable support for working families and help
move families from welfare to work.

Child Support Enforcement

The Child Support Enforcement (CSE) program is a joint Federal, State
and local partnership that seeks to ensure financial and emotional
support for children from both parents by locating noncustodial parents,
establishing paternity, and establishing and enforcing child support
orders. Child support services are available for all families with a
noncustodial parent, regardless of whether or not the custodial parent
receives welfare. Child support collections play an important role for
families transitioning from welfare to self-sufficiency, particularly in
light of time limits on receipt of cash assistance.

The CSE program continues to make impressive gains. Child support
collections hit a record \$20 billion in FY 2002, serving an estimated
17.1 million child support cases. In FY 2001, the program set a new
record amount of \$1.6 billion collected in overdue child support from
Federal income tax refunds, which benefitted more than 2.2 million
families. Last year, the Federal Parent Locator Services (FPLS) helped
locate more than four million non-custodial parents. In addition,
paternity was established for almost 1.6 million children in FY 2001.

The Federal government shares in the financing of this program by
providing a 66 percent match rate for general State administrative costs
and an enhanced match rate for paternity testing. In addition, States
receive incentive payments based on their performance on five key
measures: paternity establishment, support order establishment,
collections on current support, collections on past-due support, and
cost effectiveness. In FY 2004, the Federal government will spend an
estimated \$4.5 billion for these administrative costs. The CSE program
also includes a capped entitlement of \$10 million annually for grants
to States to facilitate noncustodial parents\' access to and visitation
of their children.

The CSE program assists families in obtaining the support they are owed
from noncustodial parents. Families in which a custodial parent has
never received cash assistance receive all child support collected on
their behalf. Child support collections on behalf of families receiving
TANF and some collections on behalf of former TANF recipients are shared
between the State and Federal governments. A portion of the collections
are shared with these families as well.

Child Support Legislative Proposals

The Budget anticipates the enactment of the child support provisions in
the President\'s 2003 welfare reform proposal, including proposals that
give States incentives to pass through additional child support to
families currently on welfare and to simplify distribution rules for the
benefit of families who formerly received cash assistance. Beginning in
FY 2006, the Budget proposes that the Federal government will share in
the costs of State efforts to expand policies for passing through and
disregarding child support for TANF families.

The provisions also require States to review and adjust child support
orders for families receiving TANF at least every three years beginning
in FY 2005; reduce the threshold for denying passports to noncustodial
parents owing overdue child support from \$5,000 to \$2,500; and give
States the ability to collect past-due child support by withholding a
limited amount of OASDI payments from beneficiaries in appropriate
cases. Finally, States will be required to charge a \$25 annual fee to
families who have never received AFDC or TANF assistance and receive
child support collections through the IV-D program.

The President\'s 2004 Budget provides additional proposals to enhance
and expand the existing automated enforcement infrastructure at the
Federal and State level and increase support collected on behalf of
children and families. These proposals require a total 10 year Federal
investment of \$218 million. In return these proposals offer an
impressive \$7.5 billion in increased child support payments for
families over 10 years. The Budget identifies a source of untapped
income for recovery of overdue child support \-- gambling proceeds.
Proposals are also included for access to insurance claims and
settlements databases; direct Tribal access FPLS and Tax Offset data;
and Federal seizure of accounts in multi-state financial institutions,
which will enable families in interstate situations to benefit from this
data match that has been so effective in identifying assets to secure
past due child support.

Lastly, the President\'s Budget proposes to increase funding for access
and visitation grants in support of the Administration\'s commitment to
strengthening fatherhood and parenting skills and increasing family
stability. Studies show that non-custodial parents who are involved in
their children\'s lives are more likely to pay child support. The
proposal would allow, for the first time, funds to be used by Tribal
organizations operating their own child support enforcement programs
under title IV-D of the Act.

Children\'s Research and Technical Assistance (CRTA)

The FY 2004 President\'s Budget includes \$49.7 million in funds for
welfare research and technical assistance for States. Of this amount,
\$34.7 million is devoted to two child support set-asides: one for
training and technical assistance (\$11.6 million) and the other to
assist in operating the Federal Parent Locator Service (FPLS) (\$23.1
million). The funds appropriated for these activities are equal to one
and two percent respectively of the amount paid to the Federal
government for its share of child support collections during the
preceding fiscal year.

The President\'s Budget proposal anticipates reauthorization of \$15
million annually in preappropriated mandatory funds for welfare research
through 2008. These funds will support research on the effects of
welfare reform and on ways to improve the welfare system.

Foster Care, Adoption Assistance, and Independent Living Programs

The FY 2004 budget request for the Foster Care, Adoption Assistance, and
the Independent Living programs is \$6.9 billion. These programs provide
essential services to vulnerable children by supporting safe living
environments and preparing for independence older foster youth who are
likely to age out of the system.

Of the total request, \$5.0 billion will support the Foster Care
program. This is a \$238 million increase from last year\'s request and
includes the cost of the legislative proposal described in the following
section. The funds will be used for maintenance payments and
administrative costs for approximately 240,600 children each month. In
addition, States may use the funds for training and for the operation
and development of the Statewide Automated Child Welfare Information
Systems (SACWIS), a computer-based data and information collection
system.

The budget includes \$1.7 billion for the Adoption Assistance program,
which supports families that adopt special-needs children. This is an
increase of \$80 million over the FY 2003 request. These funds will be
used to provide maintenance payments to adoptive families,
administrative payments for the costs associated with placing a child in
an adoptive home, and training professionals and adoptive parents. The
proposed level of funding will support approximately 348,700 children
each month.

The budget also contains \$200 million for the Independent Living
Program (ILP). This includes \$140 million in mandatory funds, the same
as the FY 2003 request, for a variety of services to ease the transition
from foster care for youth who will likely remain in foster care until
they turn 18 and former foster children between the ages of 18 and 21.
The total request also includes \$60 million in discretionary funds for
an education and training voucher program for the approximately 16,000
youths who age out of foster care each year.

Foster care proposal

The FY 2004 President\'s Budget includes a legislative proposal which
would allow States to move to an alternative system for foster care to
better meet the needs of their child welfare populations. States
choosing to participate will receive funds in the form of flexible
grants, which will serve as an incentive to create innovative child
welfare plans with a strong emphasis on prevention and family support.
Participating States will also face fewer administrative burdens. Under
the flexible funding plan, States will be required to continue to uphold
the child safety protections outlined in the Adoption and Safe Families
Act, agree to maintain existing levels of State investment in child
welfare programs, and continue to participate in the Child and Family
Services Reviews. The proposal provides access to the TANF Contingency
Fund from which States may receive additional funding under certain
circumstances if a severe foster care crisis were to arise. A \$30
million set-aside will be available for Indian Tribes, and a one-third
of one percent set-aside will be available for monitoring and technical
assistance of State foster care programs.

Promoting safe and Stable Families

The Promoting Safe and Stable Families (PSSF) program is a capped
entitlement program designed to assist States in coordinating services
related to child abuse prevention and family preservation. These
services include community-based family support, family preservation,
time-limited reunification services, and adoption promotion and support
services. States generally must spend at least 20 percent of their funds
on each of the above four categories. The Adoption and Safe Family Act
of 1997 (AFSA) established that a child\'s health and safety must be of
paramount concern in any efforts made by a State to preserve or reunify
a child\'s family. The FY 2004 request for PSSF is \$555 million, which
includes \$305 million in mandatory funds and \$250 million in
discretionary. This is equal to the FY 2003 request. Tribes are allotted
one percent of the mandatory funds and two percent of the discretionary
funds. The FY 2004 discretionary budget request for PSSF includes \$50
million for competitive grants to community-based groups, charitable and
faith-based organizations, and State and local governments to expand or
establish programs that provide mentors to children of prisoners.

Social Services Block Grant

The Social Services Block Grant (SSBG), a capped entitlement, provides
funds to assist States in delivering social services and allows States
substantial discretion in allocating funds in order to best suit their
specific needs. SSBG is funded at \$1.7 billion for FY 2004. This is the
same level as FY 2003. Programs or services that are frequently
supported by SSBG funds include child care, child welfare (foster care,
adoption and protective services), home-based services, employment
services, case management, adult protective services, prevention and
intervention programs, and special services for the disabled.

Performance Highlights

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

The Temporary Assistance to Needy Families (TANF) program achieved
remarkable success towards its primary goal of moving TANF recipients
from welfare to work and self-sufficiency. In FY 2001, all States met
the work requirement for all families and 88 percent of States with
two-parent family programs met the rigorous two-parent family work
participation rate. As of FY 2000, the program exceeded its target for
the percentage of adult TANF recipients who became newly employed. Also,
in FY 2000, of the adult TANF recipients or former recipients who became
employed, 65 percent retained their jobs over at least two quarters and
25 percent attained higher earnings over two quarters.

The Child Care and Development Fund is designed to help families achieve
and maintain self-sufficiency and improve the overall quality of child
care. The Child Care Bureau collaborates with the Head Start Bureau,
Department of Education, and the Health Resources and Services
Administration to achieve these goals. HHS estimates that in FY 2003 and
2004, CCDF funds will provide subsidies to even more than the 1.74
million served by CCDF subsidies on an average monthly basis in FY 2000.
Services are provided by over 9,000 child care centers and homes which
are accredited by a nationally recognized early childhood development
professional organization. CCDF is developing and implementing new and
improved performance measures to better meet HHS performance goals in
the future.

ACF Child Support Enforcement Overview

  ------------------------------------------------------------------------------------------------------------------------------------------- -------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                                                                              **2002**                   **2003**                     **2004**                     **2004**
                                                                                                                                                                                                                                   
                                                                                                                                              **[Actual]{.underline}**   **[Estimate]{.underline}**   **[Estimate]{.underline}**   **[+/- 2003]{.underline}**
                                                                                                                                                                                                                                   
  **Total Collections Distributed:**                                                                                                                                                                                               
                                                                                                                                                                                                                                   
  All Families\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...            \$17,879                   \$19,350                     \$20,875                     +\$1,525
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
  TANF program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                    2,080                      2,035                        2,078                        +43
  Federal Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                               1,151                      1,127                        1,151                        +24
  State Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                            929                        908                          927                          +19
  Foster Care program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                         49                         52                           54                           +2
  Federal Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                               28                         29                           30                           +1
  State Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                            21                         23                           24                           +1
  Total\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...   **\$20,008**               **\$21,437**                 **\$23,007**                 **+\$1,570 **
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
  **Administrative Costs:**                                                                                                                                                                                                        
                                                                                                                                                                                                                                   
  Federal Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...               \$3,481                    \$3,711                      \$4,035                      +\$324
  State Share\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....            [1,751]{.underline}        [1,875]{.underline}          [2,021]{.underline}          [+146 ]{.underline}
                                                                                                                                                                                                                                   
  Total\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...   **\$5,232**                **\$5,586**                  **\$6,056**                  **+\$470 **
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
  Incentive Payment to States\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                **\$450**                  **\$461**                    **\$454**                    **-\$7 **
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
  **Program Costs (Costs minus Distributed Collections ):**                                                                                                                                                                        
  Federal Costs \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                \$2,752                    \$3,016                      \$3,308                      +292
  State Costs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....            [351]{.underline}          [483]{.underline}            [616]{.underline}            [+133 ]{.underline}
  Net Costs to Taxpayers\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                              **\$3,103**                **\$3,499**                  **\$3,924**                  **+425 **
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                   
  NOTE: Program Costs equal the Administrative Costs minus the portion of collections distributed to TANF                                                                                                                          
                                                                                                                                                                                                                                   
  and Foster Care Programs                                                                                                                                                                                                         
                                                                                                                                                                                                                                   
  ------------------------------------------------------------------------------------------------------------------------------------------- -------------------------- ---------------------------- ---------------------------- ----------------------------

ACF Proposed Legislation

  --------------------------------------------------------------------------------------------------------------------------------------------- --------------------------- ---------------------------- ----------------------------
  **FY 2004 Proposed Legislation**                                                                                                                                                                       
                                                                                                                                                                                                         
  *savings are negative, costs are positive*                                                                                                                                                             
                                                                                                                                                                                                         
                                                                                                                                                                                                         
                                                                                                                                                **[FY 2004]{.underline}**   **[FY 04-08]{.underline}**   **[FY 04-13]{.underline}**
                                                                                                                                                                                                         
  **TANF (BA in millions)**                                                                                                                                                                              
  State and Territory Family Assitance Grants\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                          \$16,567                    \$82,835                     \$165,670
  Matching Grants to Territories\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                       15                          75                           150
  Supplemental Grants \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....            319                         1,595                        3,190
  High Performance Bonus\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                   500                         500                          1,000
  Family Formation, Research, Demonstration, and Techincal                                                                                                                                               
  Assitance Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...              200                         1,000                        2,000
  Tribal Work Program\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...           8                           40                           80
                                                                                                                                                                                                         
  Contingecy Fund \[Non-add\]\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                      [\[2,000\]]{.underline}     [2,000]{.underline}          [4,000]{.underline}
                                                                                                                                                                                                         
  **TANF Subtotal\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... **   \$17,609                    \$88,045                     \$176,090
                                                                                                                                                                                                         
                                                                                                                                                                                                         
                                                                                                                                                                                                         
  **Child Support Enforcement /1**                                                                                                                                                                       
                                                                                                                                                                                                         
  Federal Seizure of Accounts in Multi-State Financial Institutions \...\...                                                                    -\$1                        -\$41                        -\$117
  Require Intercept of Gaming Proceeds\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                  -1                          -21                          -77
  Provide for Garnishment of Longshore and Harbor Worker\'s                                                                                                                                              
  Compensation Act Benefits\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                         -1                          -9                           -19
  FPLS Access to Insurance Settlement Databases\...\...\...\...\...\...\...\...\...\...\....                                                    0                           -8                           -28
  Increased Funding for Access and Visitation \...\...\...\...\...\...\...\...\...\...\...\...\....                                             2                           32                           81
  Direct Access for Indian Tribes to the Federal Income Tax Refund                                                                                                                                       
  Offset Program and the Federal FPLS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                      0                           0                            0
  Contractor and Tribal Access to Tax Data\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                        0                           0                            0
  Optional Pass Through and disregard above Current Effort /2\...\...\...\...                                                                   0                           74                           212
  Optional Simplified Distribution /2\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                           0                           468                          1,478
  Review and Adjustment of Child Support Orders /3\...\...\...\...\...\...\...\...\...\...                                                      0                           -40                          -160
  Reduce Threshold for Passport Denial to \$2500\...\...\...\...\...\...\...\...\...\...\...\....                                               -1                          -10                          -20
  \$25 Annual Fee for Never -TANF Cases with Collections\...\...\...\...\...\.....                                                              -53                         -291                         -661
                                                                                                                                                                                                         
  OASDI Benefit Match\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...               [-6]{.underline}            [-38]{.underline}            [-78]{.underline}
                                                                                                                                                                                                         
  **Child Suport Enforcement Subtotal\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\... **                                -\$61                       \$116                        \$611
                                                                                                                                                                                                         
  **Child Welfare (BA in millions)**                                                                                                                                                                     
                                                                                                                                                                                                         
  Child Welfare Program Option\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                         \$35                        \$0                          \$0
                                                                                                                                                                                                         
  Contingency Fund /4\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....             [0]{.underline}             [0]{.underline}              [0]{.underline}
                                                                                                                                                                                                         
  **Child Welfare Subtotal\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... **              \$35                        \$0                          \$0
                                                                                                                                                                                                         
                                                                                                                                                                                                         
  /1 All of the child support proposals, with the exception of the user fee and a portion of the impact of mandatory review and adjustment,                                                              
                                                                                                                                                                                                         
  increase or decrease gross budget authority across the Federal government due to offsetting collections received by the Tresasury.                                                                     
                                                                                                                                                                                                         
  /2 These numbers do not reflect savings to Food Stamps.                                                                                                                                                
  /3 These numbers do not reflect savings to Medicaid.                                                                                                                                                   
                                                                                                                                                                                                         
  /4 The Child Welfare Program Option will provide States access to the TANF Contingency Fund.                                                                                                           
                                                                                                                                                                                                         
  While there is no additional BA for the contingency fund part of the proposal, outlays are projected at \$35 million                                                                                   
                                                                                                                                                                                                         
  from FY 2004 - FY 2008 and \$40 million from FY 2004 - FY 2013.                                                                                                                                        
                                                                                                                                                                                                         
  --------------------------------------------------------------------------------------------------------------------------------------------- --------------------------- ---------------------------- ----------------------------

Child Support Enforcement (CSE), which aims to assure that assistance in
obtaining support is available to children, consistently performs well.
In FY 2002 the CSE program collected \$20 billion for child support.
Also, the program is continuously improving on other aspects of
performance. In FY 2001 CSE exceeded its targets for all five of its
objectives. For example, CSE increased the percentage of paying cases
among IV-D arrearage cases to 60 percent. Also, CSE achieved a
cost-effectiveness ratio of \$4.10 (dollars collected per \$1 of
expenditures).

The Foster Care, Adoption Assistance and Independent Living programs
demonstrated success in improving safety, permanency, and well-being of
children. In CY 2000, the programs surpassed the targets for the
performance measure on safety. The programs also performed well on
permanency measures.

In FY 2001, 68 percent of children who exited the foster care system
exited through reunification within one year of placement. Also, the
percentage of children who exit care through adoption within two years
of placement increased to 23 percent in FY 2001 from 20 percent in FY
2000. The programs also improved on the family and child well-being
measure by increasing the percentage of children who had been in care
less than 12 months that had no more than two placement settings in FY
2001. **Administration on Aging**

The FY 2004 budget request for AoA is \$1.3 billion. This amount
maintains funding for AoA core services, consistent with the FY 2003
President\'s Budget; in addition, it includes \$2.8 million for start-up
costs for a White House Conference on Aging. Finally, the budget
transfers the Nutrition Services Incentive Program from the Department
of Agriculture to AoA.

Under the Older Americans Act, funds are distributed primarily by
formula. Services are provided through a nationwide network of State,
tribal and area agencies on aging to over 29,000 local service
providers. AoA will continue to build partnerships with other Federal
agencies that improve coordination of existing services and systems,
including:

-   Working with the Centers for Medicare and Medicaid Services (CMS)
    and others on efforts to help States redirect and integrate their
    systems of care to respond to older people\'s preference for care in
    the community;

-   Working with the Centers for Disease Control (CDC) on the Aging
    States Project to establish new statewide public health and aging
    network partnerships; and,

-   Working with the Federal Transit Administration to increase
    coordination of transportation services for older adults, which are
    a key to helping older people remain independent.

National Family Caregiver Support Program

The FY 2004 budget includes \$142 million to maintain funding for the
National Family Caregiver Support Program. Family caregivers provide an
invaluable resource to their loved ones as well as to America. AoA is
leading the Department\'s efforts to assist caregivers and provide them
with resources in their communities.

The National Family Caregiver Support Program, for a minimal cost,
provides information, counseling, respite and supplemental services that
support the efforts of America\'s caregivers. Research indicates that
informal caregiving supports can have a significant impact on the status
of caregivers, delay the need for institutional services, and
significantly reduce costs to Medicare, Medicaid and private payers.

Home and Community-based Supportive Services and Centers

Home and Community-based Supportive Services are the gateway to
independence for America\'s seniors. This program provides three
categories of services---access, in-home, and community services---which
improve the quality of life for elderly Americans. The budget for these
services totals \$357 million.

Services---including transportation, information and referral, chore,
homemaker and personal care services, and adult day care---make a
difference in the lives of seniors and help to ensure that they can
remain independent and in their own homes and communities. For example,
transportation is vital, particularly in areas which are typically
under-served by public transportation and where more than 70 percent of
older Americans live. In FY 2004, AoA estimates that the aging network
will provide 51 million rides, providing older Americans with the means
to visit health professionals, pharmacies and grocery stores. These
services are provided through senior centers and other community-based
resources.

Nutrition Programs

The budget requests a total of \$718 million for Nutrition Programs.
These funds will continue to provide home delivered meals to the most
frail and at-risk elderly---more than 300 million meals in FY 2004.
Nutrition Programs also offer nutrition screening, education and
counseling, services which are all necessary to maintain the health and
independence of older adults. Last year marked the 30th anniversary of
the Nutrition Programs, which have provided almost 6 billion meals to
at-risk older persons since their inception.

Research indicates that for many older Americans, the availability of a
home-delivered meal is crucial to their ability to function
independently at home---according to this research, meal preparation is
difficult or impossible for 41 percent of home delivered meal
recipients.

The FY 2004 budget proposes transferring intact the Nutrition Services
Incentive Program (NSIP) from the Department of Agriculture (USDA) to
AoA. Funds will continue to be distributed by the current USDA formula,
which is based on the number of meals served in the prior year. AoA will
work with USDA to ensure that States that wish to receive commodities in
lieu of cash may continue to do so.

Other Programs

White House Conference on Aging: The FY 2004 Budget requests \$2.8
million to provide startup funds for a White House Conference on Aging,
to take place by December 2005, as called for in the Older Americans
Act. The Conference is intended to provide a national forum on aging
issues and serve as a catalyst for the development of aging policy.

Grants for Native Americans: The FY 2004 request includes \$26 million
for grants for Native Americans. The 2000 Census identified nearly
213,000 American Indians and Alaskan Natives over the age of 60. AoA
programs supply nutritional and supportive services to older American
Indians, Alaskan Natives, and Native Hawaiians, helping them to remain
healthy and independent.

Prevention, Protection, and Network Support: The FY 2004 request
includes \$41 million to fund activities which: teach older Americans to
adopt healthier lifestyles in order to delay or prevent the onset of
chronic disease; protect vulnerable older Americans from abuse/neglect
and give them greater control over their living situations; and identify
local resources available for older Americans and their families.

Alzheimer\'s: The FY 2004 budget also includes \$11 million for the
Alzheimer\'s Disease Demonstration Grant program. These grants improve
the quality of services provided to those suffering from Alzheimer\'s
Disease by moving findings and approaches from theory to practice. Each
year, approximately 5,500 families receive direct home and
community-based services, and an additional 125,000 Alzheimer\'s
families receive support services. Many grantees are developing
culturally competent services for minority populations with limited
English proficiency. A total of 42 states have participated in
demonstration grants since the program's inception.

Program Innovations: A total of \$31 million is included to continue
innovative programs that initiate, develop, and test best practices in
serving the elderly. Projects also assist States, Area Agencies, and
community providers with information, assistance, and services,
involving specific aging related issues and the needs of vulnerable
subgroups of the elderly, including minority populations. Funding for
these programs is held at the FY 2003 President\'s Budget level.

Program Administration: A total of \$18 million and 120 FTE is requested
to support AoA activities. Within the overall request are savings of
\$732,000, which are attributed to achieving the goals of the
President\'s Management Agenda and efficiencies in information
technology infrastructure support.

  ----------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ----------------------------------
                                                                                      **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**   ** 2004 [ +/-2003]{.underline}**
                                                                                                                                                                 
                                                                                                                                                                 
  National Family Caregiver Support\...\...\...\...                                   \$142                    \$142                    \$142                    \$0
                                                                                                                                                                 
  Supportive Services and Centers\...\...\...\...\.....                               357                      357                      357                      0
                                                                                                                                                                 
  Nutrition Services:                                                                                                                                            
  Home-Delivered Meals\...\...\...\...\...\...\...\...\....                           \$176                    \$178                    \$178                    \$0
  Congregate Meals\...\...\...\...\...\...\...\...\...\...\...\...                    390                      390                      390                      0
  Nutrition Services Incentive Program\...\...                                        [150 ]{.underline}       [150 ]{.underline}       [150 ]{.underline}       [ 0 ]{.underline}
  **Subtotal, Nutrition Programs \...\...\... **                                      **\$716 **               **\$718 **               **\$718 **               ** \$0 **
                                                                                                                                                                 
  Program Innovations\...\...\...\...\...\...\...\...\...\...\...                     \$40                     \$31                     \$31                     0
  *Senior Medicare Patrols\...\...\...\...\...\...\...\.... *                         * 12 *                   *13 *                    *13 *                    * 0 *
  Aging Network Support Activities\...\...\...\....                                   2                        2                        2                        0
  Preventive Health Services\...\...\...\...\...\...\...\...                          21                       21                       21                       0
  Grants for Native Americans\...\...\...\...\...\...\...                             26                       26                       26                       0
  Protection of Vulnerable Older Americans.                                           18                       18                       18                       0
  Alzheimer\'s Disease\...\...\...\...\...\...\...\...\...\...\.....                  11                       11                       11                       0
  Program Administration\...\...\...\...\...\...\...\...\....                         18                       18                       18                       0
  White House Conference on Aging\...\...\...\...                                     [ 0 ]{.underline}        [ 0 ]{.underline}        [3 ]{.underline}         [+3 ]{.underline}
                                                                                                                                                                 
                                                                                                                                                                 
  **Total, Program Level\...\...\...\...\...\...\...\.... **                          **\$1,351 **             **\$1,344 **             **\$1,347 **             **+\$3 **
                                                                                                                                                                 
                                                                                                                                                                 
                                                                                                                                                                 
  Less Funds Allocated From Other Sources:                                                                                                                       
  Senior Medicare Patrols (HCFAC)\...\...\.....                                       [-\$2 ]{.underline}      [-\$3 ]{.underline}      [-\$3 ]{.underline}      **[ \$0 ]{.underline}**
                                                                                                                                                                 
  **Total, Budget Authority\...\...\...\...\...\..... **                              **\$1,349 **             **\$1,341 **             **\$1,344 **             **+\$3 **
                                                                                                                                                                 
                                                                                                                                                                 
                                                                                                                                                                 
  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   120                      120                      120                      0
                                                                                                                                                                 
  ----------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ----------------------------------

**Departmental Management**

  ------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -----------------------------
                                                                                                                                                                                                 **2004**
                                                                                                                                                                                                 
                                                                                                                      **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**   **[ +/- 2003]{.underline}**
                                                                                                                                                                                                 
  General Departmental Management:                                                                                                                                                               
                                                                                                                                                                                                 
  Adolescent Family Life\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....                                 \$29                     \$31                     \$31                     \$0
  Physical Fitness & Sports\...\...\...\...\...\...\...\...\...\...\...\...\.....                                     1                        1                        1                        0
                                                                                                                                                                                                 
  Office of Minority Health\...\...\...\...\...\...\...\...\...\...\...\...\...\...                                   50                       46                       47                       +1
  Office on Women\'s Health\...\...\...\...\...\...\...\...\...\...\...\...\....                                      27                       29                       29                       0
  Office for Human Research Protections \...\...\...\...\.....                                                        7                        8                        8                        0
  CCRF/ Reserve Affairs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                 1                        1                        1                        0
  Transformation of Commissioned Corps\...\...\...\...\....                                                           0                        0                        5                        +5
  Minority HIV/AIDS \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                              50                       50                       50                       0
  Office of Global Health Affairs\...\...\...\...\...\...\...\...\...\...\...                                         4                        4                        9                        +5
  IT Security and Innovation Fund\...\...\...\...\...\...\...\...\.....                                               22                       20                       18                       -2
  Other General Departmental Management \...\...\...\....                                                             143                      153                      155                      +2
  Evaluation Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                             22                       22                       22                       0
                                                                                                                                                                                                 
  Health Care Fraud and Abuse Control \...\...\...\...\...\....                                                       [4 ]{.underline}         [5 ]{.underline}         [5 ]{.underline}         [ 0 ]{.underline}
  **Total, GDM Program Level\...\...\...\...\...\...\...\...\...\...\..... **                                         **\$360 **               **\$370 **               **\$381 **               **+\$11 **
                                                                                                                                                                                                 
  Policy Research:                                                                                                                                                                               
                                                                                                                                                                                                 
  Broad-Based Research\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                  \$18                     \$18                     \$21                     +\$3
  State Innovation Fund\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                                 [2 ]{.underline}         [2 ]{.underline}         [2 ]{.underline}         [ 0 ]{.underline}
                                                                                                                                                                                                 
  **Total, PR Program Level\...\...\...\...\...\...\...\...\...\...\...\...\... **                                    **\$20 **                **\$20 **                **\$23 **                **+\$3 **
  **Total, GDM and PR Program Level\...\...\...\...\...\...\... **                                                    **\$380 **               **\$390 **               **\$404 **               **+\$14 **
                                                                                                                                                                                                 
  Public Health and Social Services Emergency Fund:                                                                                                                                              
                                                                                                                                                                                                 
  PHSSEF\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...              [\$1,487 ]{.underline}   [\$1,806 ]{.underline}   [\$1,896 ]{.underline}   [+\$90 ]{.underline}
                                                                                                                                                                                                 
  **Total, PHSSEF Program Level\...\...\...\...\...\...\...\...\..... **                                              **\$1,487 **             **\$1,806 **             **\$1,896 **             **+\$90 **
  **Total, DM Program Level\...\...\...\...\...\...\...\...\...\...\...\..... **                                      **\$1,867 **             **\$2,196 **             **\$2,300 **             **+\$104 **
                                                                                                                                                                                                 
  Less funds from other sources:                                                                                                                                                                 
                                                                                                                                                                                                 
  Evaluation Activities\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....                             \$40                     \$40                     \$43                     +\$3
                                                                                                                                                                                                 
  Health Care Fraud and Abuse Control \...\...\...\...\...\....                                                       [4 ]{.underline}         [5 ]{.underline}         [5 ]{.underline}         [ 0 ]{.underline}
                                                                                                                                                                                                 
  **Total, DM Budget Authority\...\...\...\...\...\...\...\...\...\...\... **                                         **\$1,823 **             **\$2,151 **             **\$2,252 **             **+\$101 **
                                                                                                                                                                                                 
  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....   1,414                    1,536                    1,532                    -4
                                                                                                                                                                                                 
                                                                                                                                                                                                 
                                                                                                                                                                                                 
  ------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -----------------------------

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

The FY 2004 budget request for GDM and Policy Research provides a total
program level of \$404 million, including appropriations of \$356
million, interagency transfers of \$43 million in evaluation funds, and
\$5 million in health care fraud and abuse funds. Included within the
GDM request are savings of \$6 million, resulting from savings of \$4
million attributed to achieving the goals of the President's Management
Agenda and savings of \$2 million attributed to information technology
consolidation efforts and spending reductions. The FY 2004 budget
request for the PHSSEF account is \$1.9 billion

General Departmental Management

The GDM account supports those activities associated with the
Secretary's roles in administering and overseeing the organization,
programs and activities of the Department. These activities are carried
out through thirteen Staff Divisions (STAFFDIVs). The GDM budget request
for FY 2004 totals \$381 million, an increase of \$11 million or 3
percent above the comparable FY 2003 level.

The GDM request also provides funding for program-related activities,
including the following:

Office of Population Affairs (OPA): The request of \$31 million will
continue to provide support for the Adolescent Family Life (AFL)
demonstration and research program authorized under Title XX of the
Public Health Service (PHS) Act. Through the grants awarded under this
program, AFL provides funding in three areas: care demonstration
projects, prevention projects, and research projects. This request also
continues to provide for abstinence-only prevention projects, as defined
by the Welfare Reform legislation (P.L. 104-193). Further, OPA also
administers the Family Planning program under Title X of the PHS Act,
which is funded through the Health Resources and Services
Administration.

Office of Minority Health (OMH): The OMH request of \$47 million, a \$1
million increase from FY 2003, will provide funding to continue disease
prevention, health promotion, service demonstration, and educational
efforts that focus on health concerns that cause the high rate of death
in racial and ethnic minority communities.

Office on Women's Health (OWH): The OWH request of \$29 million will
provide funding to continue the advancement of women's health programs
through the promotion and coordination of research, service delivery,
and education--both throughout HHS agencies and offices, with other
government organizations, and with consumer and health professional
groups.

Office of Human Research Protections (OHRP): The OHRP request of \$8
million will be used to accomplish the following: ensure implementation
of Departmental regulations for the protection of human subjects;
negotiate formal written assurances of compliance with institutions
engaged in research covered by OHRP; investigate and oversee
institutional compliance; and fund professional and public education.

Commissioned Corps Readiness Force (CCRF): The CCRF request of \$1
million will continue to support a cadre of approximately 1,100 active
duty US Public Health Service officers, qualified with special training
and skills and ready to rapidly deploy in emergency situations.

Transformation of the Commissioned Corps/Reserve Affairs: The FY 2004
request includes \$5 million to increase the size and skills of a fully
deployable active duty Commissioned Corps.

HIV/AIDS in Minority Communities: The FY 2004 request includes \$50
million to address the high-priority HIV prevention and treatment needs
of minority communities heavily impacted by HIV/AIDS. These funds allow
the Department to continue priority investments and public health
strategies targeted to reduce the disparities and burden of HIV/AIDS in
racial and ethnic minority populations.

Office of Global Health Affairs (OGHA): The OGHA request of \$9 million,
an increase of \$5 million from FY 2003, will support this newly-created
STAFFDIV formed from the Office of International and Refugee Health, the
US-Mexico Border Health Commission, and the Office of International
Affairs. The increase of \$5 million will support an HHS health care
initiative in Afghanistan.

In keeping with the vision that Secretary Thompson laid out following
his visit to Afghanistan, HHS has begun to develop a program of
cooperation in maternal and child health with the

Afghan Ministry of Health to achieve the following objectives:

• Demonstrate the ongoing commitment of the United States to
Afghanistan's reconstruction and to the Karzai Government;

• Bolster the ability of the Karzai Government to fulfill its promise to
provide essential services;

• Address dire healthcare needs in the Afghan population through the
creation of five maternal and child health teaching clinics throughout
the country;

• Provide opportunities for the training of local Afghan health care
workers in modern medicine; and

• Provide a vehicle for expatri-ate Afghan health workers to return to
Afghanistan.

Information Technology Security and Innovation Fund: The FY 2004 budget
request includes \$18 million to continue funding for the IT Security
and Innovation Fund. Projects funded through the IT Security and
Innovation Fund focus on HHS enterprise-wide investments, notably:
enterprise architecture; key E-Government projects; HHS common IT
infrastructure services; and on security and infrastructure to enable
HHS common administrative systems.

Policy Research

The Policy Research account examines broad issues that cut across agency
and subject lines, as well as new policy approaches developed outside
the context of existing programs. The FY 2004 request for Policy
Research includes \$2.5 million to continue the State Innovation Fund
and \$21 million to continue evaluation activities.

State Innovation Fund: The FY 2004 budget provides \$2.5 million to
continue a program to provide competitive grants to States to design,
demonstrate, and evaluate new models for delivering health and/or human
services at the community level to low-income adults, children, and
families. The grants are of two types: planning grants and demonstration
grants. FY 2004 will be the third year of funding for planning and
demonstration grants from this Fund. Measurable indicators of
performance to facilitate evaluation of the outcomes of the
demonstrations are a key ingredient of the program. States are
encouraged to integrate separate but related services funded by
different programs and/or provided by different agencies.

Broad-Based Research: The FY 2004 Policy Research budget also includes
\$21 million, a \$3 million increase from FY 2003, to support research
on issues that cut across agency and subject lines, as well as new
approaches developed outside the context of an existing program.
Priority issues that will be examined are those related to: the
well-being of children and youth; the outcomes of welfare reform and the
status of low-income families; reform of major public-sector programs,
especially Medicare and access for those who lack health insurance;
promoting and expanding consumer-directed home and community-based
services; nursing home quality; managed care and disability; post-acute
care; employment and disability; active aging; and science policy.

The increase of \$3 million will support the National Electronic Health
Information Initiative, to focus on national electronic health
information systems. This initiative will accelerate the development and
adoption of the technology and national standards necessary for
Electronic Health Record Information Systems and their use by the health
care and public health systems, as well as related support for the
National Health Information Infrastructure.

It is proposed that in FY 2004 the entire \$21 million request again be
derived through interagency transfers of evaluation funds.

HHS agencies will conduct significant health services and policy
research in FY 2004. This body of research covers a wide range of
subjects, from assessing the quality of health care provided to the
nation's elderly, to evaluating the effectiveness of programs aimed at
reducing health risk behaviors among teens and other high-risk
populations. The HHS Research Coordination Council (RCC), chaired by the
Assistant Secretary for Planning and Evaluation, works to ensure that
agencies collaborate in the conduct of health services research in order
to ensure the most efficient and effective use of research resources in
support of HHS's primary mission and objectives.

Public Health and Social Services Emergency Fund (PHSSEF)

The PHSSEF provides \$1.9 billion, a net \$90 million increase above FY
2003. This includes \$1.8 billion for bioterrorism and \$100 million for
a new effort to ensure the nation would have an adequate supply of
influenza vaccine in the event of a pandemic. The PHSSEF includes half
of the overall HHS bioterrorism budget of \$3.6 million.

Pandemic Influenza: The budget includes \$100 million to begin efforts
to ensure the nation has an adequate supply of vaccine in the event of
an influenza pandemic. The influenza strains circulating usually change
somewhat from year to year. Periodically, there is a major change in the
virus's genetic structure resulting from a strain that can cause
widespread disease and death. Three such global epidemics---called
pandemics---occurred in the 20th century. Such a pandemic could cause an
additional 90,000 to 300,000+ deaths in the U.S--- especially if
adequate vaccine were not available quickly. Once a pandemic begins, it
would be too late to accomplish the many key activities required to
minimize this toll. Therefore, planning and implementation of
preparatory activities must start well in advance.

Because influenza vaccines must be tailored to the viruses in
circulation and since a pandemic would be caused by an influenza virus
significantly different from today's viruses, vaccine cannot be prepared
in advanced and stockpiled. As a result, these funds will be used to
work with industry to develop year round domestic influenza vaccine
production capacity and production techniques that could be scaled up
rapidly --- provide surge capacity --- in the event of a pandemic.
Currently, the Nation uses about 90 million doses of influenza vaccine
annually. Preparing for a severe pandemic could require

280 - 575 million doses of vaccine, with no more than four or five
months lead time available for manufacturing. The added resources will
be used to develop a targeted and responsive strategy to resolve this
significant National deficiency.

Bioterrorism: The HHS FY 2004 budget includes \$3.6 billion for
bioterrorism. While this level is nominally \$233 million below the FY
2003 President's Budget, this change reflects the decision to have the
Department of Homeland Security finance the anthrax vaccine procurement
NIH will begin in FY 2003, and the completion of a number of one-time
expenditures for research laboratories in CDC, NIH, and the extramural
science

community. The entire \$3.6 billion FY 2004 request will fund ongoing
preparedness and research efforts, an increase of \$883 million above FY
2003 for comparable activities.

State and Local Preparedness: The Office of the Assistant Secretary for
Public Health Emergency Preparedness (ASPHEP) directs and coordinates
the efforts of CDC, HRSA and FDA to help States develop the personnel,
procedures and systems needed to detect and respond to a potential
bioterrorist attack. CDC supports State surveillance and epidemiology
capacity, laboratory capacity, communications and information technology
infrastructure, education and training, and health information
dissemination. HRSA's funding readies hospitals for medication and
vaccine distribution, quarantine and decontamination, communication, and
biological disaster drills. OASPHEP is involved with the planning,
review and evaluation processes for these activities.

Centers for Disease Control and Prevention: The FY 2004 request for the
PHSSEF includes \$1.1 billion for CDC, the same as FY 2003. The majority
of these funds (\$940 million) will support CDC's ongoing State and
local preparedness program. In addition, this request provides support
for State and local activities, upgrading capacity at CDC, expanding
national planning efforts, oversight of inter-laboratory transfers of
dangerous pathogens and toxins, laboratory safety inspections, and
anthrax research. Included in this total is funding to support CDC's
expanded role in regulating transfer of select biological agents.

Health Resources and Services Administration: The FY 2004 request for
the PHSSEF includes \$618 million for HRSA, the same as the FY 2003
level. The majority of these funds (\$518 million) will support the
third year of HRSA's hospital preparedness program. In addition to
continued support for regional and local hospital preparedness and
poison information centers, HRSA's request again provides funding for a
new program focused on medical curricula for instruction on the
detection and treatment of diseases that can be caused by bioterrorism.
Funds also will be used to address the unique needs of children during
and following a terrorist attack.

Office of the Secretary: The FY 2004 request for the PHSSEF includes
\$62 million for the Office of the Secretary, the same as FY 2003.

Office of the Assistant Secretary for Public Health and Emergency
Preparedness (ASPHEP): Funding is maintained at \$42 million in FY 2004.
The role of ASPHEP is to direct and coordinate the implementation of the
Department's bioterrorism programs and support the Department of
Homeland Security by providing health and medical leadership. The \$42
million includes funding for the ongoing operations of ASPHEP at
headquarters and in the field; supports the Secretary's Emergency
Response Team and the Department's International Early Warning
Surveillance efforts; provides funding for bioterrorism preparedness,
planning and evaluation studies and a advance research program to
promote a national bioscience research and development effort related to
civilian biodefense; and to continue the development of an effective
risk communication and information strategy for the public.

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

CyberSecurity: The FY 2004 request for the PHSSEF includes \$10 million
to protect the Department's information technology infrastructure from
cyber-terrorist attacks. These funds will provide continuous security
monitoring for all HHS systems, assets, and services.

Bioterrorism

Other than PHSSEF: Funds totaling \$1.8 billion are included for
bioterrorism activities in the following agency requests: This finances
the work of NIH and FDA. The FY 2004 request for NIH includes \$1.6
billion, a net decrease of \$120 million, from FY 2003. This decrease
reflects one-time FY 2003 expenses of laboratory construction and
anthrax vaccine procurement costs.

This request will support two complementary components: basic research
on the biology of microbial agents with bioterrorism potential and the
properties of the host's response to infection and defense mechanisms;
and applied research for the development of new or improved diagnostics,
vaccines, and therapies. Legislation is being proposed that will give
NIH more flexibility in accelerating biodefense research by providing
funding for procurement of countermeasures once such countermeasures are
considered licensable.

FDA's budget includes \$176 million for bioterrorism activities. Within
FDA's request, \$20.5 million will be directed to specific food safety
activities that implement the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002 (PHSBPRA), and related activities
needed to protect the food supply. These include improved communication
with State food laboratories, working with States to upgrade their food
safety efforts, and the new registration system for domestic and foreign
food facilities. FDA will continue to work closely with other Federal
agencies and industry to promote the development and availability of
defense countermeasures. FDA's request also reflects anticipated
efficiencies from management and information technology initiatives.

Cooperation with the Department of Homeland Security (DHS): The DHS has
been assigned

responsibility to finance the procurement of biodefense medical
countermeasures; as a result, funding for the National Pharmaceutical
Stockpile and smallpox vaccine which had previously been budgeted for in
HHS are now in the DHS request. HHS will continue to provide the
scientific leadership needed to determine what countermeasures are
needed, and will also procure and manage these pharmaceuticals for DHS.
The FY 2004 DHS request includes a new mandatory funding authority that
will ensure that adequate funding is available to procure needed new
countermeasures once sufficient research has been done to conclude that
the products will ultimately be proven safe and effective. The Office of
Emergency Response Headquarters and Regional Emergency Coordination
staff have also been transferred to DHS, along with the Metropolitan
Medical Response System, the National Disaster Medical System, and the
Mobile Training Center.

+-------------+-------------+-------------+-------------+-------------+
| \`          | **[2002]{.u | **[2003]{.u | **[2004]{.u | ** 2004**   |
|             | nderline}** | nderline}** | nderline}** |             |
|             |             |             |             | **[         |
|             |             |             |             | +/-2003]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Public    |             |             |             |             |
| Health and  |             |             |             |             |
| Social      |             |             |             |             |
| Services    |             |             |             |             |
| Emergency   |             |             |             |             |
| Fund**      |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| [Biot       |             |             |             |             |
| errorism:]{ |             |             |             |             |
| .underline} |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Centers for |             |             |             |             |
| Disease     |             |             |             |             |
| Control and |             |             |             |             |
| Prevention: |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Upgrading   | \$940       | \$940       | \$940       | \$0         |
| State and   |             |             |             |             |
| Local       |             |             |             |             |
| Capacity\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Upgrading   | 142         | 158         | 158         | 0           |
| CDC         |             |             |             |             |
| Cap         |             |             |             |             |
| acity\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Anthrax     | 18          | 18          | 18          | 0           |
| Vaccine     |             |             |             |             |
| Re          |             |             |             |             |
| search\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
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| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Independent | [2          | [ 0         | [ 0         | [ 0         |
| St          | ]{          | ]{          | ]{          | ]{          |
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| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Subtotal,   | \$1,102     | \$1,116     | \$1,116     | \$0         |
| CDC         |             |             |             |             |
| \...\.      |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
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| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Health      |             |             |             |             |
| Resources   |             |             |             |             |
| and         |             |             |             |             |
| Services    |             |             |             |             |
| Admi        |             |             |             |             |
| nistration: |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Hospital    | \$135       | \$518       | \$518       | \$0         |
| P           |             |             |             |             |
| reparedness |             |             |             |             |
| and         |             |             |             |             |
| Infra       |             |             |             |             |
| structure\. |             |             |             |             |
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| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Education   | 0           | 60          | 60          | 0           |
| Incentives  |             |             |             |             |
| for Medical |             |             |             |             |
| Curr        |             |             |             |             |
| iculum\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Tr          | 3           | 0           | 0           | 0           |
| auma/EMS\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
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| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| EMS for     | 19          | 19          | 19          | 0           |
| C           |             |             |             |             |
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| \...\...\.. |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
| Poison      | [21         | [21         | [21         | [ 0         |
| Control     | ]{          | ]{          | ]{          | ]{          |
| \...\...    | .underline} | .underline} | .underline} | .underline} |
| \...\...\.. |             |             |             |             |
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| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Subtotal,   | \$179       | \$618       | \$618       | \$0         |
| HRSA\..     |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
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| Office of   |             |             |             |             |
| the         |             |             |             |             |
| Secretary:  |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| OASPHEP:    |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Operations  | \$13        | \$13        | \$13        | \$0         |
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+-------------+-------------+-------------+-------------+-------------+
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
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| Subtotal,   | \$57        | \$62        | \$62        | \$0         |
| Office of   |             |             |             |             |
| the         |             |             |             |             |
| Secretar    |             |             |             |             |
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| **Subtotal, | **1,337 **  | **1,806 **  | **1,796 **  | **-10 **    |
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| Influenz    |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
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| **Total,    | **\$1,487   | **\$1,806   | **\$1,896   | **+\$90 **  |
| PHSSEF\...  | **          | **          | **          |             |
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| Recovery    |             |             |             |             |
| Activities  |             |             |             |             |
| in Agency   |             |             |             |             |
| Budgets**   |             |             |             |             |
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| Food and    |             |             |             |             |
| Drug        |             |             |             |             |
| Admi        |             |             |             |             |
| nistration: |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Food        | \$98        | \$98        | \$116       | +\$19       |
| Safety\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
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| Va          | 46          | 54          | 53          | -1          |
| ccines/Drug |             |             |             |             |
| s/Diagnosti |             |             |             |             |
| cs\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
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| S           | ]{          | ]{          | ]{          | ]{          |
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| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Subtotal    | \$157       | \$158       | \$176       | +\$18       |
| FDA\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| National    |             |             |             |             |
| Institutes  |             |             |             |             |
| of Health:  |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Research    | \$198       | \$750       | \$1,625     | +\$875      |
| 2/\...\..   |             |             |             |             |
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| ..\...\...\ |             |             |             |             |
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| ..\...\...\ |             |             |             |             |
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| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Anthrax     | 0           | 250         | 0           | -250        |
| Vaccine     |             |             |             |             |
| Procurem    |             |             |             |             |
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| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Extramural  | 0           | 375         | 0           | -375        |
| Physical    |             |             |             |             |
| Security &  |             |             |             |             |
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| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
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| Intramural  | [92         | [371        | [ 0         | [-371       |
| Physical    | ]{          | ]{          | ]{          | ]{          |
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| ..\...\...\ |             |             |             |             |
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| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Subtotal    | \$290       | \$1,746     | \$1,625     | -\$121      |
| NI          |             |             |             |             |
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| ...\...\... |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| CDC         | \$46        | \$120       | \$0         | -\$120      |
| Physical    |             |             |             |             |
| Security &  |             |             |             |             |
| Facilities  |             |             |             |             |
| 3/\...\.    |             |             |             |             |
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| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Recovery    | [\$23       | [ \$0       | [ \$0       | [ \$0       |
| A           | ]{          | ]{          | ]{          | ]{          |
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| ..\...\...\ |             |             |             |             |
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| \...\...\.. |             |             |             |             |
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| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Subtotal,   | [\$515      | [\$2,024    | [\$1,801    | [-\$223     |
| Bioterrori  | ]{          | ]{          | ]{          | ]{          |
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| Activities  |             |             |             |             |
| in Agency   |             |             |             |             |
| Bu          |             |             |             |             |
| dgets\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
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|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
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| **Total     | **\$1,830   | **\$3,830   | **\$3,597   | **-\$233 ** |
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| ...\...\... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
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+-------------+-------------+-------------+-------------+-------------+
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+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
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| B           |             |             |             |             |
| ioterrorism |             |             |             |             |
| Funding by  |             |             |             |             |
| Function:   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *Facilities | *\$138 *    | *\$866 *    | * 0 *       | *-\$866 *   |
| Constructi  |             |             |             |             |
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| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
| *           |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| *NIH        | * 0 *       | *250 *      | * 0 *       | *-250 *     |
| Vaccine     |             |             |             |             |
| P           |             |             |             |             |
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| .\...\..... |             |             |             |             |
| *           |             |             |             |             |
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| *Ongoing    | *[1,693     | *[2,714     | *[3,597     | *[+883      |
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| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| *           |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| ***Total    | *\$1,830 *  | *\$3,830 *  | *\$3,597 *  | *-\$233 *   |
| B           |             |             |             |             |
| ioterrorism |             |             |             |             |
| Funding     |             |             |             |             |
| (non-a      |             |             |             |             |
| dd)\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| ***         |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Transfers |             |             |             |             |
| to          |             |             |             |             |
| Department  |             |             |             |             |
| of Homeland |             |             |             |             |
| Security**  |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Centers for |             |             |             |             |
| Disease     |             |             |             |             |
| Control and |             |             |             |             |
| Prevention\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| National    | \$645       | \$300       | \-          | \-          |
| Pha         |             |             |             |             |
| rmaceutical |             |             |             |             |
| Stockpile   |             |             |             |             |
| (CDC)\..    |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Smallpox    | [512        | [100        | [ -         | [ -         |
| Vaccine     | ]{          | ]{          | ]{          | ]{          |
| (CDC        | .underline} | .underline} | .underline} | .underline} |
| )\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Subtotal,   | \$1,157     | \$400       | \-          | \-          |
| CDC\...\..  |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Office of   |             |             |             |             |
| Emergency   |             |             |             |             |
| Respon      |             |             |             |             |
| se\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| H           | \$17        | \$18        | \-          | \-          |
| eadquarters |             |             |             |             |
| and         |             |             |             |             |
| Regional    |             |             |             |             |
| Staff and   |             |             |             |             |
| Noble       |             |             |             |             |
| Training    |             |             |             |             |
| Center\..   |             |             |             |             |
| .\...\..... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| M           | 22          | 50          | \-          | \-          |
| etropolitan |             |             |             |             |
| Medical     |             |             |             |             |
| Response    |             |             |             |             |
| System\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Disaster    | [33         | [34         | [ -         | [ -         |
| Med. Asst.  | ]{          | ]{          | ]{          | ]{          |
| Team/Natl.  | .underline} | .underline} | .underline} | .underline} |
| Med. Resp.  |             |             |             |             |
| Team\...    |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Subtotal,   | \$72        | \$101       | \-          | \-          |
| OER\...\..  |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Transfer of | [\$3        | [\$3        | [ -         | [ -         |
| Overhead    | ]{          | ]{          | ]{          | ]{          |
| from HHS to | .underline} | .underline} | .underline} | .underline} |
| DHS         |             |             |             |             |
| 4/\...\     |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total,    | **\$1,232   | **\$504 **  | ** - **     | ** - **     |
| Transfers   | **          |             |             |             |
| to Homeland |             |             |             |             |
| Securit     |             |             |             |             |
| y\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\..... |             |             |             |             |
| **          |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| 1/ Reflects |             |             |             |             |
| FY 2002     |             |             |             |             |
| recission   |             |             |             |             |
| of a total  |             |             |             |             |
| of \$1.396  |             |             |             |             |
| in the      |             |             |             |             |
| PHSSEF.     |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| 2/          |             |             |             |             |
| Displayed   |             |             |             |             |
| on a        |             |             |             |             |
| comparable  |             |             |             |             |
| basis \--   |             |             |             |             |
| a           |             |             |             |             |
| ppropriated |             |             |             |             |
| \$88.5      |             |             |             |             |
| millon in   |             |             |             |             |
| the PHSSEF  |             |             |             |             |
| in FY 2002. |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| 3/          |             |             |             |             |
| Displayed   |             |             |             |             |
| on a        |             |             |             |             |
| comparable  |             |             |             |             |
| basis \--   |             |             |             |             |
| a           |             |             |             |             |
| ppropriated |             |             |             |             |
| in the      |             |             |             |             |
| PHSSEF in   |             |             |             |             |
| FY 2002.    |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| 4/          |             |             |             |             |
| Displayed   |             |             |             |             |
| on a        |             |             |             |             |
| comparable  |             |             |             |             |
| basis.      |             |             |             |             |
| Includes    |             |             |             |             |
| \$1.0 M     |             |             |             |             |
| from        |             |             |             |             |
| OASPHEP,    |             |             |             |             |
| \$.584 M    |             |             |             |             |
| from CDC,   |             |             |             |             |
| \$.583 M    |             |             |             |             |
| each from   |             |             |             |             |
| NIH and     |             |             |             |             |
| FDA, and    |             |             |             |             |
| \$.25 M     |             |             |             |             |
| from OIG.   |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

**Office for Civil Rights**

  ---------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -----------------------------------
                                                                         **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**   ** 2004 [ +/- 2003]{.underline}**
                                                                                                                                                    
                                                                                                                                                    
  Program Level\...\...\...\...\...\...\...\...\...\...\....             \$31                     \$33                     \$34                     +\$1
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
  FTE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....   242                      267                      267                      0
                                                                                                                                                    
  ---------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ -----------------------------------

The FY 2004 budget request for OCR is \$34 million, an increase of \$1
million over the FY 2003 level. OCR is responsible for enforcing civil
rights statutes that prohibit discrimination in Federally-assisted
health care and social services programs. These statutes prohibit
discrimination on the basis of race, national origin, disability, age,
and in limited instances, sex and religion.

Among the most significant issues that OCR addresses are: implementation
of the Supreme Court's 1999 decision in the Olmstead case concerning the
provision of services in the most integrated setting to persons with
disabilities; implementation and enforcement of medical privacy
regulations under the Health Insurance Portability and Accountability
Act (HIPAA); the effects of discrimination on racial disparities in
health care; nondiscriminatory implementation of the Temporary
Assistance to Needy Families (TANF) program and welfare-to-work
programs; assessment of the effects of managed care on services to
minority and disability communities; and removal of discriminatory
barriers to access for immigrant populations, including language
barriers affecting individuals with limited English proficiency.

OCR also implements inter-ethnic adoption civil rights requirements
intended to prevent racial and national origin discrimination in foster
care and adoption placements. In addition, OCR coordinates
implementation of the regulation that prohibits discrimination against
persons with disabilities in programs and activities conducted by HHS,
and government-wide enforcement of the Age Discrimination Act.

OCR enforces nondiscrimination requirements by processing and resolving
discrimination complaints, conducting reviews and investigations,
monitoring corrective action plans, and carrying out voluntary
compliance, outreach, technical assistance, and public education
activities. Each of OCR's compliance activities ensures that individuals
are treated in a nondiscriminatory manner by health and human services
provider agencies or facilities. OCR's work protects individual rights
and simultaneously supports HHS goals for strengthening the health and
well-being of individuals, families, and communities by improving access
to HHS programs and activities.

HIPAA Medical Privacy

From FY 2001 through FY 2003, OCR has been preparing for implementation
of a new compliance, policy development, public education, outreach, and
technical assistance responsibility for protecting the privacy of
medical information under HIPAA. OCR is developing policy guidance,
public education, and technical assistance materials for health
providers, health plans, and clearing houses that maintain individuals'
medical information. The HIPAA privacy rule takes effect April 14, 2003.
Through the rest of FY 2003 and in FY 2004, OCR's resources will also
support the investigative, legal, and related administrative expenses
associated with implementing compliance with and enforcement of the
HIPAA privacy rule.

New Freedom Initiative and Olmstead

A primary focus of OCR's requested FY 2004 budget increase is for
continued and expanded work related to the Olmstead decision. OCR
supports the President's New Freedom Initiative by providing expert
consultant technical assistance to States as they continue to develop
comprehensive plans consistent with the requirements of the Supreme
Court's Olmstead decision. The decision found that unnecessary
institutionalization of individuals is a violation of the Americans with
Disabilities Act, and that under appropriate circumstances

individuals have a right to receive care in the "most integrated"
setting that is appropriate for them. OCR is using a more intense
technical assistance approach that supplements its normal complaint
investigation procedures to assist States in developing system-wide
plans for moving people from costly institutional settings into
community-based care.

In addition to this, to support a June 2001 Presidential Executive Order
directing HHS to, whenever possible, use alternative dispute resolution
to resolve complaints, in FY 2003 and FY 2004 OCR will enter into a
memorandum of understanding with the Department of Justice (DOJ) to use
alternative dispute resolution and mediation techniques for Olmstead
complaints. OCR will also work with DOJ and others to review, identify,
and disseminate best practices in "most integrated setting" cases in
which alternative dispute resolution has been used successfully.

Other FY 2004 Priorities

In FY 2004, OCR will continue to focus on traditional civil rights
priorities, such as quality access improvements designed to eliminate
racial disparities and improve the quality of health care for racial and
ethnic minorities. OCR also will focus on improving access to the
Medicaid and SCHIP programs by removing possible discriminatory
barriers.

# Office of Inspector General

  ---------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ----------------------------------
                                                                                                 **[2002]{.underline}**   **[2003]{.underline}**   **[2004]{.underline}**   ** 2004 [+/- 2003]{.underline}**
                                                                                                                                                                            
                                                                                                                                                                            
  Program Level \\1\...\...\...\...\...\...\...\...\...\...                                      \$180                    \$200                    \$200                    \$0
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
  FTE \...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...                           1,569                    1,640                    1,559                    -81
                                                                                                                                                                            
                                                                                                                                                                            
  1/ The FY 2004 level assumes \$160 million for Medicare and Medicaid related fraud and abuse                                                                              
                                                                                                                                                                            
  activities, the maximum allowed under the Health Care Fraud and Abuse Control program.                                                                                    
                                                                                                                                                                            
  ---------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------ ----------------------------------

For FY 2004, the Office of Inspector General (OIG) requests a
discretionary appropriation of \$39 million, level funding from the FY
2003 discretionary level. OIG will also receive between \$150 and \$160
million in FY 2004 from the Health Care Fraud and Abuse Control (HCFAC)
Account for Medicare and Medicaid related fraud and abuse activities. In
the FY 2003-FY 2004 period, OIG will use its discretionary funding to
continue its work across the non- Medicare and non-Medicaid areas of
HHS, which are public health, children and families, aging, and
Department-wide activities.

Child Support Enforcement Program

OIG will continue its coverage of all 50 States by its multi-agency task
forces that identify, investigate, and prosecute individuals who
willfully avoid payment of their child support obligations under the
Child Support Recovery Act. These task forces bring together State and
local law enforcement and prosecutors, United States Attorneys' Offices,
the OIG, U.S. Marshals Service personnel, the Federal Bureau of
Investigation, State and county child support personnel, and all other
interested parties. From 1998 to December 15, 2002, OIG has opened 1,859
child support cases nationwide resulting in 624 Federal convictions and
court-ordered restitution of \$30.1 million. The Child Support Task
Forces have resulted in an additional 280

convictions at the State level and \$10.9 million in restitution.

Oversight of grants

OIG plans to review Departmental grant programs to determine whether
they are appropriately monitored and managed throughout the grant life
cycle. We will assess mechanisms in place to ensure that proper
procedures are used to award grants, fund them, account for
expenditures, and verify that they are used only for authorized
purposes. Our work will include review of performance measures used to
determine the nature and value of the product of the grants, as well as
the methods used to evaluate the individual grants and grant programs as
a whole. Our reviews will cover internal controls, accounting controls,
performance measurements, and program evaluation. Examples of upcoming
work include: recipient capability audits of new organizations having
little or no experience managing Federal funds; grants management and
oversight at the National Institutes of Health; oversight of HIV/AIDS
grants at the Centers for Disease Control and Prevention; and oversight
and monitoring of grants to Community Health Centers, to name a few.

Health Care Fraud and Abuse

Through the Health Insurance Portability and Accountability Act (HIPAA),
OIG receives mandatory funding for its activities that focus on fraud,
abuse, and efficiency improvements in the Medicare and Medicaid
programs. The Act provides for minimum and maximum amounts of funding
that are decided each year by the Secretary of HHS and the Attorney
General. OIG works with the Centers for Medicare & Medicaid Services
(CMS), other HHS agencies, and the Department of Justice to ensure that
funds due to the Medicare Trust Fund or CMS are recovered through audits
and investigations, and provides recommendations for statutory,
regulatory, and program changes that could strengthen program integrity.

**Program Support Center**

+-------------+-------------+-------------+-------------+-------------+
|             | **[2002]{.u | **[2003]{.u | **[2004]{.u | **Request** |
|             | nderline}** | nderline}** | nderline}** |             |
|             |             |             |             | **[+/-      |
|             |             |             |             | Enacted]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Expenses\   | \$414       | \$449       | \$459       | +\$10       |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| FT          | 1,151       | 1,151       | 1,151       | 0           |
| E\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

The Program Support Center (PSC) was created to streamline and minimize
duplication of traditional administrative services. The PSC provides
services on a competitive, fee-for-service basis to customers throughout
HHS, as well as to at least 14 other Executive departments and 20
independent Federal agencies. The activities and services of the PSC are
supported through the HHS Service and Supply Fund, a revolving fund. The
Fund does not receive appropriated resources, but is funded entirely
through charging its customers for their use of services and products.
Services are provided in five broad areas: human resources, commissioned
corps personnel, financial management, administrative operations, and
Federal occupational health. The PSC's customers include HHS agencies
and other Federal agencies and organizations, such as components of the
Departments of Agriculture, Commerce, Defense, Education, Energy,
Housing and Urban Development, Interior, Justice, Labor, State,
Transportation, Treasury, Veterans Affairs, and the U.S. Postal Service.

Human Resources Service

The FY 2004 estimated expenses for the Human Resources Service (HRS) are
\$52 million, representing level funding from the FY 2003 level. HRS
provides a full range of human resources services, including automated
personnel and payroll systems support, personnel and payroll processing,
staffing and classification, and employee and labor relations.

Commissioned Personnel Service

The FY 2004 estimated expenses are \$19 million, which is at the same
level as FY 2003 estimated expenses, with minor adjustments for pay and
inflationary increases. The Commissioned Personnel Service integrates
the development, implementation, and evaluation of a comprehensive
program for personnel management, medical support systems, and pay
administration for the U.S. Public Health Service (PHS) Commissioned
Corps. CPS provides a full range of personnel services and activities to
the Department of Health and Human Services and non-HHS agencies that
employ the PHS Commissioned Corps officers and to the active-duty,
inactive, and retired officers' populations.

Financial Management Service

The FY 2004 estimated expenses for the Financial Management Service
(FMS) are \$56 million, an decrease of \$1 million below the FY 2003
level. The decrease includes Information Technology (IT) reductions for
the PSC's accounting (-\$.6 million), grants payment

(-\$.5 million), and other administrative cost reductions (\$.7
million), as well as increases for the FY 2004 pay raise and other costs
(+\$.9 million). FMS supports the financial operations of HHS and other
departments through the provision of payment management services for
Departmental and other Federal grant and program activities; accounting
and fiscal services; debt management services; and the review,
negotiation and approval of rates, including indirect cost rates,
research patient care rates, and fringe benefit rates. The FMS also
provides specialized ADP systems development in the area of workforce
management.

Administrative Operations Service

The FY 2004 estimated expenses for the Administrative Operations Service
(AOS) are \$194 million, an increase of \$2 million above the FY 2003
level. This increase is for pay and other costs (+\$2 million),
replenishment of the pharmaceutical supply inventory at the Supply
Service Center (+\$8 million), and IT reductions for telecommunications
improvement (-\$4 million), regions (-\$2 million), reprographics (-\$1
million), and other administrative cost reductions (-\$1 million). AOS
provides a wide array of administrative management services within the
Department, both in headquarters and in the regions, and to customers
throughout the Federal Government. The major areas of service are
property and materiel management, acquisitions management, and support
services ranging from commercial graphics to mail distribution and
telecommunications services. The Telecommunications Improvement Project
consolidated telephone services under one contract with substantial
savings in telephone bills to HHS agencies located in Maryland.

Federal Occupational Health

The FY 2004 estimated expenses for the Federal Occupational Health (FOH)
are \$138 million, an increase of \$9 million above the FY 2003 level.
This increase is comprised of \$9 million in anticipated increased
reimbursements from other Federal agencies. The FOH provides
occupational health services, including health, wellness, employee
assistance, work/life, safety, environmental and industrial
hygiene-related services to more than 160 Federal components across the
country. The FOH services are provided through interagency agreements as
authorized under the Government Management Reform Act and the Economy
Act.

**Retirement Pay and Medical Benefits**

+-------------+-------------+-------------+-------------+-------------+
|             | **[2002]{.u | **[2003]{.u | **[2004]{.u | **Request** |
|             | nderline}** | nderline}** | nderline}** |             |
|             |             |             |             | **[+/-      |
|             |             |             |             | Enacted]{.u |
|             |             |             |             | nderline}** |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Retirement  | \$204       | \$219       | \$234       | +\$15       |
| Payment     |             |             |             |             |
| s\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Survivor\'s | 13          | 14          | 15          | +\$1        |
| B           |             |             |             |             |
| enefits\... |             |             |             |             |
| \...\...\.. |             |             |             |             |
| .\...\...\. |             |             |             |             |
| ..\...\.... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Medical     | [56         | [52         | [54         | [+\$2       |
| Care\...    | ]{          | ]{          | ]{          | ]{          |
| \...\...\.. | .underline} | .underline} | .underline} | .underline} |
| .\...\...\. |             |             |             |             |
| ..\...\...\ |             |             |             |             |
| ...\...\... |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| **Total,    | **\$273 **  | **\$285 **  | **\$303 **  | **\$18 **   |
| Budget      |             |             |             |             |
| Author      |             |             |             |             |
| ity\...\... |             |             |             |             |
| \...\....** |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| /1 The FY   |             |             |             |             |
| 2004 Budget |             |             |             |             |
| proposes    |             |             |             |             |
| extension   |             |             |             |             |
| of accrual  |             |             |             |             |
| financing   |             |             |             |             |
| to          |             |             |             |             |
| n           |             |             |             |             |
| on-Medicare |             |             |             |             |
| eligible    |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| uniformed   |             |             |             |             |
| services    |             |             |             |             |
| retirees.   |             |             |             |             |
| Current law |             |             |             |             |
| provides    |             |             |             |             |
| for accrual |             |             |             |             |
| of health   |             |             |             |             |
| costs       |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| of          |             |             |             |             |
| Medica      |             |             |             |             |
| re-eligible |             |             |             |             |
| uniformed   |             |             |             |             |
| services    |             |             |             |             |
| retirees    |             |             |             |             |
| and         |             |             |             |             |
| ben         |             |             |             |             |
| eficiaries. |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

This appropriation provides for annuities of retired Public Health
Service (PHS) Commissioned Officers, payment to survivors of deceased
retired officers, and medical care to active duty PHS commissioned
officers, retirees, and dependents of members and retirees of the PHS
Commissioned Corps.

Beginning in FY 2003, the accrued costs of medical benefits for those
aged 65 and over are paid by HHS agencies to the DoD's Uniformed
Services Retiree Health Care Fund under P.L. 107- 107. Contributions for
these medical care benefits are reflected in OPDIV budget

presentations. Monthly contributions to the Uniformed Services Retiree
Health Care Fund are based upon the number of active duty Commissioned
Officers, as applied to the DoD's actuarially determined cost of medical
benefits for those officers and beneficiaries at the age of 65 and
above.

New legislation is being proposed to allow for the adjustment of accrual
amounts that uniformed services currently pay into the Department of
Defense Uniformed Services Retiree Health Care Fund for
Medicare-eligible beneficiaries. The adjustment would allow accrual
rates to reflect more accurately the all-officer composition of the
Public Health Service Commissioned Corps. The FY 2004 budget includes
\$13 million for the difference between the rate under existing law and
the rate that would result from the proposal.

The FY 2004 request of \$303,392,000 is a net increase of \$17,906,000
over the FY 2003 level. This amount reflects increased retirement
payments of \$15 million, increased survivor benefits of \$.9 million,
and increased medical benefits costs of \$2 million.