welcome time hearing today and thank you for coming the purpose of the hearings today is to discuss the president's budget request for the department of which you are the chief executive department of health and human services we give our committee members the budget that has been sent to us medicare for expansion cut over ten years cost reduction call it what you will of two hundred fifty two billion dollars medicaid at least twenty nine billion dollars over the same redeployed are reinvested in other health care programs that gaping needs in the realm of health care and we are dismayed to see that these cuts if they are taken will not be used to shore up other problems with other programs minis tells us that big program cuts and that's fair because in title when spending is growing at a fast clip we know that we understand that our population is aging it's going to put empress name pressure on our health care and time as we need to be looking for solutions no question about it bouncing the budget interest on the national debt by our calculation by c b s calculation would be two hundred eighty five billion dollars a substantial sum of money as a consequence these are dollars that are squeezed out of the budget that could otherwise be used for medicare medicaid or children's health insurance or social security little healthcare spending in this not exist in a vacuum we all know that one of the problems w looking for among other things or holistic solutions and not nickel and dime case by case piece by piece allusions that connection we are concerned we want to hear more about the pull of the administration for a puzzle to remove the manner in which employer provided health insurance is now extended to their employees such that it is dr one employer and excluded from income by the employee and its price will be a standard deduction of fifteen thousand dollars for a family panel of hearings and nearly all of us have largely focused on the need for media substantive reforms to our nation's largest entitlements considering that two of the most financially troubled entitlement programs medicare and medicaid ar part of the great society he created them on a pay as you go basis and certainly most americans and most in congress for that matter agree with the mission of these programs that's not the question the question is is there a better way to accomplish the mission of these programs without bankrupting our children because according to g a o by the year two thousand and forty when my kids are my age we will have to pay twice as much in federal taxes as we do now just to keep our largest entitlements going in the same form as they are today no new spending no new benefits double the taxes just to pay the status quo for my kids when they're my age clearly we cannot let this happen how do we prevent it that's the key question how do we meet the mission of these programs and prevent that from happening to my kids and your kids and your grandkids the president proposes a particular set of reforms in these programs to help get on a path towards long term sussed sustainability and we can and should debate whether these are the right combination of reforms or not but i don't think there's an honest debate to be had on whether or not congress should act on this we simply must i was simply and with one quote from i think the first witness we had which was the comptroller general david walker who spoke to this committee few weeks ago where he said quote health care is the number one fiscal challenge for federal and state governments number two it is the number one competitiveness challenge for american businesses number three it is a growing challenge for american families let me just tell you if there is one thing that can bankrupt america is health care we need dramatic in fundamentals reform and quote i clearly agree with that statement that assessment this is the budget committee and the budget buster for america today and for sure tomorrow is health care that's why my statement as part of the record and i would like to summarize just to give our kids question some context this is a big budget as you've indicated and it has required hundreds of people  the better part of a year there are tens of thousands of individual decisions made i found it best to have these discussions in the context of the guidance that i have given those who have prepared it i think that might be helpful for you to know and i'll try to answer your question in the context of those the guidance i gave them make no mistake about it this is a budget aimed at read reducing the deficit and looking to balance the budget by two thousand and twelve any time you're developing a budget no one knows better than this committee you're faced with making decisions about competing noble ideas i have little question that the decisions i made  some of those ten thousand or tens of thousands of decisions won't be the same ones that you would i'm here to explain to us best i can the basis on which those were made i'd like to just tell you in billboard phrases if i could the guidance that i gave the budget prepares h h s i pointed out first of all it is a deficit reduction budget second i indicated to them that would be some new things that we needed to add add to the budget but i wanted them to be truly critical  d gave them four examples one would be high demand highly effective programs give you an example of that and the indian health service or head start i wanted to protect that presidential initiatives a good example would be the community health centers are pressing new problems i was concerned and continue to be about drug efficacy and safety in the speed with which we're able to approve new generic drugs you'll also see some things that have been here before help i t i'm anxious to see progress made there fraud and abuse in medicare subject that i feel some passion about right now so those are new things then i said to them we're going to have to make these decisions with respect to ongoing problems i'd like you to look for six or seven things in particular one if you find any one time funds that we've finished the project let's not repeat them the second i said i want to have a bias toward actually providing services not just having infrastructure for a future now we all know that you need infrastructure and you need services but when you're working to devise a budget to balance i wanted to emphasize direct services the next would be looking for grant programs where the activities have been completed i see a lot of these and i age and in order to continue to focus on new science and to get the  of the best rather than allow grants just to continually perpetually when they reach the end of their term i have asked for them not to automatically be renewed and to put more new grant programs that they compete for and that's an example of the kind of thing and sometimes that comes out looking like it's a reduction but the reality is you're getting more new grants than you were before underperforming programs will be disagreement on what's underperforming we've tried to find programs that we could measure and if we can't measure it then we've got to have some method of demonstrating that it's a performing program and what we haven't it's been a candidate for abduction we've also looked for you'll see some things that i've been back to this committee and others for a couple of years now one would be there of all medical equipment some old controversies and i still feel some passion about you meant and mentioned the medicare and the entitlements there's no question that that's what we need to focus and  i have gone through medicare as carefully as i can and look for every component piece of it and ask the question is there some way we can begin to turn the line down a little i made the point to them and i will tell you today that i've been looking at this is weight reduction not amputation but you'll see a whole series of very small changes and when i say small there there are individual components that when you add them all up it gets to a big number over time if you went out ten years it is a much bigger number than that and if you were not twenty it would be start in the trillions the point is there's a life time in the life of every problem when there are the changes are big enough you can see they need to be made but still small enough you can make them and right now we need to be focused on them the changes that i have recommended in this budget if we did them all would still only keep the medicare trust fund solvent from for four more years so it's a start and you may not agree with all of them but i'm prepared to defend them and if you want to talk about them individually i'd be delighted to do it and why don't we go directly to questions mr chairman let's start with all right that's a particular case where you're adding funds but unfortunately one of the children's health insurance program as we understand the projections in order just to keep the kids covered who are now covered we need about thirteen to fifteen billion dollars over and above the baseline funding five years twenty five billion dollars does that enthusiastically endorse it's it's it's renewal we see it as being valuable in the same way others do we would however like to focus it on children we recognize that some states have included adults and we will follow a policy that will allow existing adult populations to continue however we would like the parents for the most part or for the most part they are adult and there are three states who have substantially more adults and they do children on the program and we it ought to be focused on children we also believe that if we're going to be subsidizing states in pursuit of populations over two hundred percent of the poverty line that we should limit our match to be the same match that would be available to them under medicaid in other words we want to continue the enhanced match up to two hundred percent but would limit our match to the regular f map or match that we pay each state will have four point seven million children covered today as i understand it and  in congress see below this committee saying elsewhere that the amount of money you're providing is going to be enough over a five year period of time we've already got what sixteen states in about two weeks run dry that will simply the changes knowledge pothier even cover that for point six million kids now cover is not a concern we believe that the budget we have proposed is adequate to meet the policy guidelines that i have just articulated we're prepared to engage in a conversation about what it takes to do that but we believe our budget proposal to be adequate a concern as you look through this budget looks like kids take it on the chin repeatedly the childcare develop chip program was pacifically created for children i would agree with you without knowing more about the issue that it should be confined to children it was clear in one nine hundred ninety seven is part of the balanced budget agreement mclendon ministration said we're going to make some tough hard decisions some big substantial contradictions american medicare but out of our intelligence and for burns we're going to do a few things that are positive as well and one of them was children's health insurance oh covered is that your understanding also ajahn chah i'm not able to validate that statistic i will say to you mr chairman that we do believe it's been a very positive program as do you we believe that it should be our aspiration as a country to assure that every american children and adult have access to an affordable basic insurance policy we see ship being an important role but not as the vehicle to provide it for everyone or for that matter even all children it certainly should be the vehicle we use to cover those who are in specific financial need but we i was in a state yesterday where they are working to create as many states are a plan that would give everyone in their state access to an affordable policy i had discussions with the governor about ways we could use s chip to connect to other policies that are being provided in the marketplace so that we could keep families together but not have to start using s chip as a vehicle to bring all adults there are ways to use this program efficiently to target a population who needs help but we ought not to view it as the way in which we cover every child or any person under eighteen or other ways to accomplish that that we think our spirit or would you submit for the record please you to now so short a promise announces of how many shown are likely to be covered and provided for on the chip program at the appropriate the level of funding you're requesting will be pleased it gets into the trillions how would we make up the rest you have any ideas about how we can in addition to what this budget is proposing take care of the rest and try and bend the curve even more to get more savings so we don't have still a you know twenty plus trillion dollar unfunded liability as you pointed out the proposal that we're making today in this budget would reduce the growth rate from six point five percent down to five point six percent so medicare spending even if every one of your recommended policies occurs would still continue to grow at five point six percent instead of six point that's right the impact of that going out is substantial the sooner we start making these changes the better the result will be in the long term as i indicated we have attempted in every case to make these weight loss not amputation we worked to find ways that we would not affect beneficiaries but that we could deliver good basic health care to our seniors at a sustainable way in a sustainable way given that medicare medicaid essentially sort of pay for today's health care for the targeted populations that medicare medicaid want to help the road sort of leads back to getting at the root cause of health care itself can you walk through the thinking the methodology and basically the strategy for going after high health care inflation and how your proposal deals with sort of bending the curve on  medical inflation by more rationally getting benefits distributed by you know having the uninsured care for those things how do you think health care so that you can fix these entitlements and what is the ministrations plan to do that that's basically my question mr ryan i would argue that we don't actually have in this country a health care system what we have is a large robust rapidly growing health care sector that employs millions of people but there's nothing that connects it into an economic system there are lots of economic systems in our lives our banks for example i have a bank card you have one other members of the committee have them banks competed for our business on the basis of interest rates and service but they all use the same system to optimize the value that they provide us the same is true with many other systems the internet itself is the economic system that is built with a group of standards that connect us all together we believe the first step is to move health care from a large robust and disciplined sector to a system to build that system we believe that there are five components the first is electronic connectedness we have to connect them with electronic health records second there is a need for us to have quality measures independently so that people know what they're buying and how good it is they can compare it the third would be what i refer to as episodes of care or buckets of care that you can compare so that you can take comparable cost and comparable quality and make a decision as to value so real transparency in price and quality i'm talking about a system of compound petition based on value and the ability to compare the market actually works or other prospects to it but that would give you a summary and how does the how does the administration's plan advance this well i will tell you that my april of this year we will have sixty percent of the health care marketplace that we'll have have committed including the federal government to use our purchasing power to adopt the four cornerstones i mentioned health records for example it is now the policy of the federal government that if you're going to do business with us in the future you have to have connected electronic health records if you're going to do business with us you have to have  fireball quality measures that have been developed by the medical community community and use them if you're going to do business with us you have to have comparable costs and you need to know we're going to use these to create incentives to drive quality  and cost down we've been joined by the largest payers in the country in doing that including states including the largest employers and we will have sixty percent of the entire marketplace committed to making that a criteria of selection for their vendors by april and by two thousand and eight you will see this begin to unfold within two years you'll see competition based on value beginning to turn up in markets around the country in five years you'll see this as value being a very important part of the market generally and in ten years this will be ubiquitous we believe that in fact competition based on value will will begin to moderate that curve and give us the relief that we saw desperately need to maintain a prosperous economy ok so if we take a given market and use the payors in a given market the let's take the private payers take a couple big companies like blue cross and united and that now big payers but the biggest being you the medicare one hundred percent file that gives us enough of a data sample to measure the price of a good and to get into measuring quality as as defined by the providers and that will give us enough data to basically be able to make this value equation is that kind of what your sense sensually think is you properly point out that because there is no national market for health care this has to be done regionally i was in detroit for example two weeks ago and i had the big three automakers join with the federal government and states in that region and the largest other payers and we all committed ourselves to pursue this as a policy of selection when we buy health care this is what we're going to ask for now in detroit in that area very soon you'll begin to see hip replacements knee replacements other things comparable cost and comparable quality based on standards that the medical family have developed and this will be made available to the public not just those who buy through the different networks not just necessarily federal employees or or people who are in the networks of the other payers your life this information is available it will find its way into the purchase of health care in many different ways employers will provide it health plans will provide it i'm sure they'll be travel health care that will begin to develop people will begin to have the capacity to make comparable purchases and we've all had experiences like this we know how effective this would be competition works in health care a compliant claims file that you have you do have the ability do you not to release that data in any given market so that  patients can use your data as along with other data samples to get this measurement you can and are you releasing that hundred percent file i have authority to do that under certain conditions and we are preparing a process by which  can be released in coordination with all the other activities we're doing that's what i'm trying to get to the extent that you can simplify and make more much easier the ability to release that medicare hundred percent file which is hipaa compliant the all to the better to get this transparency on thing off the ground and that would be very helpful thank you mr cooper thank you mr chairman and thank mr secretary my five minutes i'd like to focus on the health care tax expenditure reform proposing and also a couple medicaid issues first this may be a private thing to you but i'd like to praise you in the administration for your efforts to reform the largest individual tax expenditure in america one that congress never passed into law and one that is horribly regressive you're the first i'm a stray ssion to have the courage to face this issue i hope that you succeed and i like to give some of my democratic colleagues a little bit of confidence here because it's a liberal figure than andy stern of the as you has proposed the sensually abandoning the employer based health insurance system bob greene noted expert on budget issues and health issues from the center for budget policy priorities says positive things about your tax proposal on his web site and a liberal senators like ron wyden have put forward health plans that make substantial change ages and what many americans assume to be the only health system we have so there are many good pictures your proposal a lot of us are worried that the deduction is too meager if you're going to open us up you might as well turn it into a tax credit so that lower income people are  benefited a little bit more than a new administration's proposal in the hours just urge you to be open to modifications like that so that we can both reform our tax code and have a more efficient health care system at the same time thank you mr cooper we do have a commitment to take this issue one because it is a prerequisite to many states who are currently striving to create opportunities for every resident of their state to have an affordable basic policy i'm meeting over the next one hundred days with every  governor and having a discussion with their legislature and with them about how what tools they need and without exception they always run into one dilemma and it's the dilemma of the school aid that doesn't work enough hours to get benefits married to a construction worker between the two of them they make pretty good money but they don't have enough money to pay their taxes and buy health care and they are discriminated against and as you say there is defensible policy that would cause us to give one group of citizens a tax benefit to help them by and not the other and we're anxious and willing to have these conversations we believe the proposal we've made  has the impact that we're open to to talk to the secretary while you're talking with the governors in your upcoming meeting it seems that the federal state tensions are at an all time high in terms of reimbursement battles over medicaid the a report i thought recently from a state sponsored think tank said that the states are essentially playing a game of catch me if you can as they use provider donations provider taxes dish payments you p l z every possible acronym you can think up to to game the match but as we're looking at the states there were one element of your budget proposal the word me that i've been told that you try to eliminate the best price for medicaid drug reimbursement and we just had a hearing in the government reform committee last friday that said states and the federal government could be saving for five billion dollars a year if we just had a better more efficient comparing the best price among the states because some states are still using antique average wholesale prices they're not bargaining they're not using their medicaid rebate like they should and they're leaving billions of dollars on the table and we're scrapping for pennies to cover children that seems to be a terrible problem and i  hope that abandonment of best price is not part of the most recent budget our strategy is to deal with the issue because medicaid right now is the highest payer of prescription drugs in the market and there's clear evidence of that we want to give states the ability to deal with large prescription drug benefit managers the same way that health care plans do so that they can get the benefit of competition and we believe that will have a positive impact on those costs how about your efforts to persuade your former fellow governors to behave a little bit better and if they have a for example the average medicaid matches both be fifty seven percent some states are higher some are lower but a lot of states again this so they get eighty percent federal dollars ninety percent federal dollars there are many instances in medicaid nancy that  could use a purification the reality is a lot of that has happened and all i think we should look to have is a true partnership where we're both putting up our share of the money in real dollars and there's nothing inherently wrong with an intergovernmental transfer so long as it isn't a scheme to take federal dollars and to put them up as match for other federal dollars and begin that cycle cornerstones of health have helped i t quality assessment price packaging into into identifiable episodes of care and the use of incentives and we have created i was actually the government created the h r officers of the country and in cooperation with the medical community created a series of questions that could be provided to those who are procuring health insurance to use as a criteria for their purchase and it has been done with the guidance of counsel in all of those that would not just on government counsel but you can bet that  the major purchasers of the country have in fact scrutinized our purpose isn't to create any kind of effort other than to begin creating some standards upon which we could go from a sector to a system but the one sector that we do  set the price at and that is physician reimbursements for those who are in the medicare system doesn't seen that that current system works very well costly ratcheting down physician reimburse me they are at the same level they were at two thousand and one it's now six years later you know pick a number for inflation and that i don't think that's a sustainable model where you've got the government setting that price and doing that to these positions the impact is we've got evidence that the number of physicians who are accepting new medicare patients has dropped in texas from in the seventy percent range to sixty two percent and falling so as we go through this process most don't kill the goose that laid the golden egg and that is the ability of folks to feed their families the make money at the system the broader question i guess is if we talk about government keeping its promises what have we promised in regards to medicare medicaid what is it that was it was his promise that we can look at and said are can we afford the promise we get thirty two trillion dollars of unfunded promises out there right now can we afford this from what does it look like what level of care what should be covered in that that we do we have a good idea of what that promise ought to look like this government's making day in and day out when there's constant review in terms of how we're delivering on the promise there be lots of people in this government who would in this country who would articulate the promise differently but we do know is that we need to provide those who are elderly those who are poor those who are disabled those that are children who need protection we know that we need to provide for mothers who are expected to protect their children we need to provide them with basic health insurance and we need to pay for most of it we've made that commitment we also need to do it in a way that sufficient enough that we can keep it and right now i think the evidence is we're not doing it efficiently and we're not doing it in a way that will allow anyone in the future generation to maintain that promise you made when your comic she said that we're going to do this in a way that we don't affect beneficiaries called doc fix and and then moving on i would argue that the system of competition based on value that i described obama really has to be part of the solution we ultimately beginning to been begin to reward those who provide medical services for the highest possible quality at the best price and if we do they will have an economic model they can sustain and our country will have a capacity to keep the promise for future generations  the salan of mine secretary thank you for being here i couldn't help but think that if charlie charlie norwood and i had a number of lively debates on health care policy in the commerce committee and i wish he were here he would  enjoy the conversation with you you know when i differ on the issue of illegal abortion but i believe that people can work across that division because to the extent we can reduce unintended pregnancies i think we're in search of a common goal i have two simple questions and then a more difficult one i think you agree i assume that that  the correct and consistent use of condoms and other methods of contraception is an effective way to prevent unintended unintended pregnancies as you know this is ministration supports the a b c approach and to the degree that that's consistent yes and are you prepared to work to prevent unintended unintended pregnancies by supporting sex education programs that offer young people medically accurate information about both contraception and abstinence it's my belief that those programs are best determined at the local level with the involvement of parents and to the degree that we are supporting programs then yes we need to work for medical accuracy  maine my state has now rejected abstinence only money from the federal government because our experience has been that more comprehensive programs turn out to be more effective at reducing unintended unintended pregnancies and i'm looking at your budget it looks to me like funding for abstinence only programs was expected to be about one hundred seventy six million fiscal year zero seven but in the end in the budget request the president is proposing increasing that to two hundred four million dollars but title ten money is flat funded and so you know where i come from we see the title ten money as more scientifically based more likely to reduce unintended pregnancies why why not an increase for it for title ten i respect what you have suggested and also the state of maine and obviously their decision as to whether or not they pursue those monies title ten is substantially larger by as a matter of absolute dollars than the two hundred four million dollars but it has been the belief this administration that those dollars pay off and that we want to increase them in some proportion  though it is small by parents of the other dollars that are invested by this government so it's so it's a choice let me turn to one other issue i want to raise with the i have well a number of issues with the  president's health care proposal that go to the problem of what happens when you an enhanced the individual market i'm afraid that if you will wind up leaving people who are older and sicker without the opportunity to get health coverage but but the question i have for you is as i understand the president's proposal it diverts medicaid disproportionate share hospital payments away from hospitals and other health care providers in order to fund this new program but there is about  medicaid dish payments today or about seventeen billion dollars a year and that money goes through to have a riot if hospitals that are providing uncompensated care to people who simply walk in and need the service what in your in your proposal do you propose to do for those hospitals the issue of uncompensated care isn't going to go away that people aren't going to go away have you thought through what happens when you divert that much money yes let me speak on both of those matters with respect to the end employer market and employer market is the vast majority of the market today will likely continue to be that way for perpetually and it needs to be protected because it's such an important delivery system however there are many people for one reason or another who end up having to leave the employer market go out on their own of the their jobs changes in such a way and it's that problem we have to create a viable alternative for and because the goal here has to be to give every american access to an affordable basic policy there are certain parts of that problem that the states cannot solve on their own one part is the issue of the tax deductibility in the indefensible of the of the policy that we currently have have evolved to no one voted for it if we just devolve to it now with respect to the matter of u compensated care funds there are some thirty billion dollars that we currently sand from the federal government into states for the providing of essential e three important ongoing needs the first  would be to have uncompensated care and there is no question that we will continue to have people who don't have insurance and there needs to be a means by which those hospitals can meet those obligations it's something we all feel committed to the second purpose would be to assure that public hospitals are able to remain open and viable the third area is in a in helping sustain the overhead of of various hospitals the question the principle at play here is rather than perpetually paying the bills of people who are uninsured doesn't it make sense that we use at least some portion of that to help them get insurance suggesting we take all of that money we're saying let's look at this in order of magnitude and figure out how best to get them insured because they're better off and so is the system if they have insurance because they get preventative care they get regular primary care right now they get it in the emergency room and it's and not it's that it's not a healthy system so the president has asked that i actually go out and sit with the states and i've been in i think a leaven of them since the state of the union and i'll be in another ten or eleven in the next two weeks and i'm sitting with the governor i'm sitting with the legislators i'm sitting with the people who run their health system and saying to them how can we use this money better to meet those three needs and if in fact we could actually get everybody insured wouldn't it make sense that we wouldn't need to spend all of that money perpetually paying their bills there is no specific proposal on the table except to sit down and collaboratively come up with a better way to do what we all intend which is to provide high quality care to people and to have everyone have access to an affordable basic policy thank you my my tanks expired we could go on for a while but i appreciate your comm with that issue down there but again thank you my question was about nursing homes the person homes are provide skill nursing care or looking at a pretty sizable reduction  a cut but a reduction in growth of their program as we look at a freezing of the market basket the first year and then a reduction in the next five years the question more market basket and inflation synonymous and if not how are they different as you look at them this is a very good illustration that i think will help members of the committee understand the way i went about dealing with this and other medicare issues skilled nursing is a we get a med pac recommendation  all so give that give us an analysis of the marketplace they told us for example that the skilled nursing facilities now have a nine point seven percent margin in zero six and then eleven percent in zero seven they recommended that we have a zero update in zero eight they also we also concluded by looking at med pac that they that there would be a one point three percent productivity well frankly i look at those margins i look at the fact that we're seeing an increase in the market and i said we've got to do something to turn that line down a little bit it looks to me like here's a place we could afford to do it now frankly i would prefer as we cocked to have a more market based system but given the fact that we set prices essentially here and that's my job that's the rationale i use let's just take the productivity gains give half of it to them we'll put half of it into the into tax payers and they're still having substantial operating margins and we're seeing an increase in the in the number that tells me that the market in fact if it could find its way to a level would likely find its way to a level that i've suggested and it's you know it's not perfect but it's the best logic given what i have to work with that i could come up with thank you so so  this is really about the proposals around the additional coverage for the uninsured as you see it in some of the as the tax provisions and again i'm going to try and do this in a in a survey yes now and see if we can get to it and just to be clear what some of your intentions are on the administration's intentions aren't there may be ways for us to find some common ground for us to move forward and i certainly hope there are cause we have a shared agreement that we need to get more people insured in this country i think you'd start out by agreeing that there are currently about forty six forty seven million uninsured americans is about our ongoing insurance in this country and about one hundred sixty million americans rely on employer sponsored coverage so that those are numbers i think we agree to and that the president's tax scheme that according to your own estimates would still leave about ninety percent of those who are not insured now on insured it's important to look at the two proposals the president has made together because as i go out to work with the state of pennsylvania in the state of new jersey in the state all of the states that are currently working on proposals to increase the number of of insured it's evident to me that they have this tax problem that they have to solve and if they have the tax problem solved and then combined it with their own access the number of people who would actually gain coverage would be very high that if we just had a tax program there will be a limited number of people who will better be able to afford it and will but if you combine that with a basic affordable plan you're going to see lots of people get insurance well let's let's flesh that out if we if we may there are you using numbers like lots of people and i think your own estimate is and that sounds like lots of people actually if you want to talk about two three four million people will get some tax advantages that you know and that is the bat six percent though of the number of  d so you're saying that's a great goal that we can afford to do this all we can do what sort of well how many with governor rendell was proposal in in pennsylvania cover well it's interesting as you as you know he is relying on and some things that you're going to take away one of them is the enhanced s chip reimbursement an egg and working with the federal government to be able to use the chip program you're you're taking away with one hand what you're offering with the reduced benefits to those who get health insurance through their employer and i think that you've stated yourself that one of the intentions here is that the president believes you do that that people are getting too much health care that the it's too comprehensive you want to make sure that people get a basic coverage but that you are going to reduce the tax advantages for a very comprehensive plan one two you can put the people who are in the individual marketplace are going to have to find insurance on their own rather than in a in a group and while you've said that the marketplace may respond to that we don't in fact know that it's a very expensive way to to buy health insurance now and for families that have family incomes of maybe fifty thousand dollars even sixty or seventy thousand dollars before tax dollars to find seven eight ten twelve thousand dollars out of pocket to buy health insurance the expectation of maybe getting a tax deduction or a tax credit later it's really not realistic so the number of people who will actually be helped by your proposal even in pennsylvania where our governor is hopeful that they can do through waivers and a whole other combination of factors cover more people were in fact you're not helping him anywhere near as much as you might if you actually didn't have to take away with one hand in order to give to another give to another group it won't surprise the gentlewoman from pennsylvania that i disagree with a number of your conclude ok the principle here is that what we're discussing is what will government do to subsidize those in need and the question is is there more virtue in a thousand people having a basic affordable plan or five hundred people having a comprehensive plan and five hundred of them having nothing i  it's a good thing is to help those who are the poorest may be able to get get in the most and say i represent a lot of middle lower middle income folks who are struggling to be able to meet all their expenses to pay health insurance if they can they value their employer based health insurance not even to buy it in the individual marketplace the fact is that you are really driving this just the those who are really you're not really helping that let me just end it they're not really helping them enough to truly make a difference matt point out that the president's proposal his tax proposal alone would benefit eighty percent of those of your constituents and every person in this country who's on an employer sponsored insurance plan and it would benefit one hundred percent of those who have nothing now that sounds like serious help to me and i would also point out that there are a lot of people in this country who end up leaving the employer sponsored health insurance plans because of changes in their employment because of changes in their circumstances and they have nowhere to go and this is about creating pooling where they have the ability to buy it in the individual market they have to go let me just interrupt i'm sorry there is no i did not see any proposal around basic affordable plan for everyone in the state and that would require states to choose a method of developing a funding for those that are chronically and seriously ill that's why these two proposals have to be done together can't just say here's one proposal here's another the value of the plan is that we're working collaboratively the states to actually get at solving the problem and having every american have a basic affordable policy mr smith from russia thank you mr chairman mr secretary i appreciate this opportunity i will begin by saying that when the proposal was was newly released i wasn't as big of a fan as i am now after learning more and i do have to say that in many cases even some employer provided pooling of health care right now adverse selection is taking place based on the generosity of some plans and i don't say we should take that away and i certainly as we should use more market based principles with that so i appreciate that and look forward to learning even more about it that being said within the context of  public health in general and the programs that states and federal government offer i hear concerns from the front lines of health care that many beneficiaries not utilizing the appropriate channels of benefits perhaps what is being done perhaps to delineate the difference in services say emergency room versus the clinic or walk in urgent care whatever the case might be are we able to provide the state the flexibility to address those so that consumers and beneficiaries can take advantage of what's most appropriate utilizing the the most cost effective manner your seatmate mr alexander spoke some of louisiana in louisiana forty three percent almost double the number of people almost triple the number of people go to emergency rooms to get the most basic of care because they don't have the existence of those facilities there they have a two tiered system where if you are employed and have insurance you go to one system if you're not employed and go to and poor you go to another and the quality of care that they receive is not what it would be if they had access to preventative medicine and this is a good example medic in louisiana the federal government sends them about a billion dollars a year we could provide as a government assistance for virtually every person under one hundred fifty percent of the poverty line to have a basic affordable policy have almost three hundred million dollars left over to pay for uncompensated care to support hospitals and those people would have access to preventative care so our policies do impact that and that's one of the reasons that the president's got so still so strongly about having twelve hundred new community health centers that's where we can provide assistance but it would be those would be so much more viable financially if people walked in with an insurance card instead of to the community health center or to a you are discussion about the plan that you and president bush have to raise taxes provide more coverage for the uninsured we discussed this last week you said diminish warts here as you told me last week  what you thought were the purported benefits of your plan in terms of the reported cost there are as you said twenty to twenty five percent of the people believe that's a little over thirty million people as i described to you last week who receive insurance through an employer who will pay more taxes if your proposal is adopted on that day the chairman of the committee asked me if the president's tax cuts were not made permanent when i see that  a tax increase i said if the federal government raises more taxes as a result seems like to me that might be considered well i'm glad you don like you know take that up with him i'm asking you the light of your question and if your proposal is adopted won't there be thirty million people more cross in this country who receive insurance today through an employer plan who will pay more taxes the the year after your plan is adopted there will be three who receive benefit and one that will and they will average very infinite pru under your estimates under the written documents that you proposed under all the assumptions that you have outlined that over thirty million people you can call it twenty percent you call it one in four you call it one in five but thirty million plus people will pay more insurance or pay more income taxes after your plan is and opted then do today i'm prepared to stipulate to that to that you do you agree with that if you will understand and stipulate that one hundred twenty million people will all the people for you all to propose a tax increase on you're proposing a tax increase on that person because they i have to have a decent health insurance policy that and it is not well to do it you are just you just quote stipulated that you're going to raise taxes on thirty million people mr market you continue to make that assertion i would like to be clear that you believe that i would like it clear i do not will you just stipulate you don't want to say that it's a tax increase because you claim it's revenue neutral that's exactly what it is but if i'm the person paying the tax bill it sure heck that's a tax bill on me if i have that kind of insurance policy i'm going to be paying more taxes and i'm and so are thirty million people and indeed the numbers actually go up now that i've had a chance to look at your tenure figures because they show that by the end of the ten years forty percent twice as many will not be within the deduction area and that's because you've chosen to treat people with good insurance differently than you treat the medicare advantage plans that you want to benefit under part d you let them adjust their benefits according to the c p i for medical expenses but on these health insurance plans you limit it to the just the cost of living don't you well i would assume then by your physician that you think it's a good idea for us to continue to have people who have to buy it i'm going to answer questions from you after this hearing but my question to you sir is isn't that true that you go up to forty percent of the plans that are not within the standard deduction because you've applied a different and discriminatory cost of living index here different from what you do for the medicare advantage program there is it is true that we believe that by targeting those increases at a lower rate that we can have a positive impact on medical but we don't want to do that for medicare advantage programs in fact the commonwealth fund came out with a study within the last couple of months that i'm sure your office is f with that in year two thousand and five under medicare part d you paid the medicare advantage programs almost a thousand dollars per beneficiary more than it cost us under traditional medicare you don't have any disagreement with that study do you what i do have a disagreement with is that it is not about paying more it's about getting integrated care and establishing a policy where we can have more you think you're getting value for your thousand dollars more per person we do and we are also of the understanding when i say understand we also have established policies in the law that over time would begin to reduce that difference it was done as a deliberate policy matter to assure that with our integrated could i continue that we just ask you to respond at the same time since my time is expiring  would you be in favor of applying the same cost of living index there that you now propose for these this new tax on health insurance policies we are working to establish a policy with medicare advantage that allows for beneficiaries to have integrated health care and we want to be available in every part of the country because we believe that part of stablish ing this long term benefit is integrated care and when you have integrated care and not just fee for service medicine where we're paying providers for how much they provide as opposed to the benefit we think in the long term and evidence bears this out that the medicare trust fund benefits and that those who are the beneficiaries is that a yes or no on whether you would treat the medicare advantage program the same way you propose we would not alter insurance tax you want to keep you going to keep giving them more benefit the law is what it is and we support the current line governor thank you for being here today last week after the budget was introduced by the administration predictably i saw headline after headline claiming that there were deep cuts in medicare and the cuts in medicaid in particular upon closer look it appeared to me that every year in the budget there are actually there's actually growth in both medicare and medicaid spending can you comment on that  medicare rate of growth right now is six point five percent a year if we made every change that we have proposed we would reduce the growth rate from six point five percent down to five point six  percent it would sustain the viability or the the solvency of the medicare trust fund by just four years but it's an important start which is not my follow up question heard a lot over the last year about entitlement spending and particularly medicare and social security when you look at those programs particularly under your jurisdiction medicare and medicaid what is your biggest fear over the next two years if we don't begin to tackle the the problem of those the growth of those programs i am a trustee as well as the medicare trust fund as well as of health and human services we now measure medicare as a percentage of the entire gross domestic product i have a grandson was born last year when he reaches his father's age it will have gone from three point two percent to eight point one percent when he gets to be my age it'll be fourteen percent and i'm not talking about the federal budget i'm talking about the gross domestic product of the entire country my biggest fear is that we won't make the logical small changes now that could prevent that from happening because we all know that won't occur we will either have been eliminated from the economic playing field as a country or we will have changed it and let's hope we don't change it too late one of the sector one of the programs that i support and initially opposed to the medicare drug benefit i have those initially because the cost i supported after meeting with two surgeons in my district heart surgeons who convinced me that the way that the medicare system was structured we were incentivizing the wrong way rather than preventive care in focusing on preventive care we were paying them to do opening just cavities and repairing heart the the number of the dollars that were told us that were going to be spent on the drug benefit had been significantly lower it had come and sniff were lower than we were what we were told i believe after talking to physicians in my district that prevention does work how do we as policy makers here put more of the focus on preventive costs and upfront so we can save in the long term cost both in our regular health care system and with respect to medicare medicaid prevention is the key frankly prescription drug benefit was an important step that direction i'm sure as your cardiologist friends with tell you medicare reimbursed heart operations that would cost one hundred fifty or two hundred thousand dollars a piece that we could have prevented for a thousand dollars and we're now changing and i'll tell you another very important change in that is beginning to gradually gravitate away from the fee for service reimbursement and moving toward an integrated care you walk into a hospital you ask you ask hospital administrator what's the most expensive like a hospital administrator asked me this he said what do you think the most expensive medical device is in this hospital i don't know is it a cat scan and he said no it's a ballpoint pen in the hand of the physician we don't know in many cases the degree or cost that we're that each individual physician put five people who are being charged or being treated for the same thing a wind up with radically different treatment patterns and the result is much higher costs so having integrated care what you have that we talked earlier before you came about quality measurement cost measurement begins to create a market of competition based on quality when we do that we'll begin to see quality go up and costs go down thank you mr chair it is nice to have you in front of committee up it's interesting because the questions i'm going to ask you are all bits and pieces of our health care system because as you stated earlier and i totally agree with you we do  health care system it is very much a piecemeal system but i'm going to since that's what we currently have i'm going to ask you those piecemeal questions this budget  gives rural health care initiatives it's one hundred forty two million dollars cut and leave seventeen million for real health care that is going to be difficult because that for many of our rural communities that's the only health care they have very hard to get doctors out there it's very hard for the rural communities to get health care and i know you've increased funding for community based health centers i'm happy about that i think that's a very good thing to do again it's nice for being a people in all areas to be able to go into the community health center so i'm happy about that but those community health centers i find it unacceptable so i don't know if you want to comment on that or not but i mentioned the other day at the ways and means committee that i governed a state for eleven years that had areas that were so rural you had to order a haircut out of the catalogue little known health and delivering health care in those areas i understand the difficulties of it we have made a substantial investment through the medicare modernization act increased by twenty five billion dollars the amount going into rural health care there are as a result of that areas where in this budget i felt like we could we had other ways of reaching the same this is the same goal and so we have chosen to do it that way but i am sensitive to the problem you're talking  administrators and this is a nonprofit hospital and he was worried about the c m s is proposed rule released on january eighteenth that will cut three point nine billion dollars in medicaid funding over the next five years the rule is designed to cut funding for public five writers but you know and i know that those cuts are going to be felt by all providers including the not for profit hospitals those cuts are in addition to across the board cuts to hospital hospice ambulance providers then you include the budgets failure to fund medicare physician payment reform which well result in a payment kind of ten percent for physicians next year and all of that adds up to pretty dire situation for safety net providers they're getting hard hit hard by this budget and again i want to tell you i think it's particularly difficult for rural providers have you done anything specific to examine how these cuts are going to impact patient access to care if more providers stop accepting medicare and medicaid patients and let me just talk to you a little bit about that i had some of my communities that literally they will not accept any more medicare patients and they can't there for a lot or they can't afford to accept any more with the cuts what are we going to do about that i mean i'm worried about our whole system because the reimbursement rate where our system is currently congresswoman i worry about that too it's one of the reasons that i'm so passionate about making certain that there are medicare advantage plans available in every part of our country because they provide an integrated care with the assurance that there will be physicians who are in fact able to treat medicare like to see a system that's different than that that so i worry about the same thing as you said we have what we have we need to migrate towards something better but in the meantime that's one way we can do it  signed a physician after a visit physician has told me they just simply can't afford to accept medicare patients any longer so i i jokingly tell them this but i'm dead serious when i tell some of my friends who are my age make sure when you get a new physician before you retire that you get a young physician because if yours retires i need your never find another physician to go to and i think that's actually a really horrible message to give to people but that's what i tell people it's i mentioned earlier that i i'm very anxious to see us find ways to make the business model of physicians particularly small practice physicians viable and part of that will be in developing a system that can gather information and reward high quality and and at the best price and if we if we do that both physicians will be sound and able to make their businesses work and we can provide care and you know i would say that there are a few people with more to worry about in this area than me i have forty three million beneficiaries including my parents who depend on that and we will do all we can but we've got to deal with this a lot how we finance this system in the long term we've got it we've got to work on this because it  we can't go on just every six or eight months trying to figure out how to keep it together for the next six or eight months thank you this sounds really thank you mr chairman or than mr secretary thank you just as a point of clarification since we continue to hear the word cut used over and over and over is the administration proposing to spend less money on medicare we list budget or less we will spend five point six percent  more over that per year going over the course of about medicaid saint's seven point one percent and how about over the life of the admin and stray ssion have you spent more money on medicare and medicaid each and every year of the administration each year it's what i thought i missed some of this hearing i walked in i must admit i was a little incredulous by what i was hearing i heard nothing from the other side except how tax relief has been the source of all of our problems and that we must increase taxes on the american people and now i hear voices from the other side of the aisle castigating the administration for what they view as a tax increase i'm having a little hard time seeing how they can have it both ways how do you say we need tax increases and then when you purport to have a tax increase all of a sudden you're being criticized for them or as i understand it if there are people who will see a short term increase in their tax liability is it the poorest of americans that might see such would be the upper twenty percent of income this would perhaps be the most progressive tax policy move that we will have seen in decades so you might be said to be taxing the rich is that correct well it is not a tax increase because it doesn't gather any additional revenue goes i fact i agree with you mr secretary i understand that this i might add a neutral i might add that those who are in that situation have options very well indeed if there is a way that they can align their affairs such that they don't have any increase in their tax liability is that correct that is correct well i for one want to congratulate you in the administration for this policy i certainly reserve the right of final judgment until i see all the details but i would hope that what we would do as a congress is try to come together work on a bipartisan fashion to find ways to make health care more affordable more portable more accessible of high quality and with patient choice and yet we've had this odd cork in federal policy where we essential e have third parties via our health insurance for you to the best of my knowledge we don't have an analogous program for letting enviro homes our automobiles are you aware of any other federal policy that i am not i will again i'd like to congratulate you for taking a very bold step forward that would empower millions of self employed people and not to mention people who are now for all intents and purposes forced to take the health insurance of their employers choice in empower them to go out and buy the health insurance that's best for them and their families it's a very empowering thing and it puts them in control of their health care on frankly think it's one of the greatest steps forward i've seen to improve health care not only its quality but its affordability mr secretary prior to you coming to our committee we've heard from the head of c b s the head of o m b and i believe the secretary of treasury and i don't care put words in their mouth but i think they've all said something along the lines of the number one fiscal challenge of this nation is to find out ways to reform entitlement spending because if we don't within a generation some models different we're looking at either a having no federal government to speak of except medicare medicaid social security or a tax increase of somewhere between fifty and one hundred percent on the future of future generations if you had that if people refuse to embrace entitlement reforms in entitlement spending a magine if you would for me please what does the world look like if the next year ration is saddled with a new tax burden of between a fifteen hundred percent increase and what does that do to their health care i mentioned a little earlier today but there's repeating that i have a grandson who today lives in a world where three point two percent of the gross domestic product is medicare alone if you add medicaid to that about doubles when he becomes his father's age it will be eight percent of the gross domestic product when it becomes he becomes my age it'll be fourteen percent of the entire economy doesn't take a lot of imagination to recognize that you cannot sustain a competitive economy with that kind of expenditure going into one sector thank you sector i see my thank you very much mr chairman thank you mr secretary i want to ask you about the allocation of the benefit that you're proposing with respect to covering the uninsured with health care  first of all do we have any data on the i think you use the phrase twenty percent of those whose health insurance plans have a value of more than fifteen thousand dollars for a family who therefore would pay taxes on the value of the health care benefit that exceeds fifty thousand dollars to have any income distribution data about who those people are we get that tax increase we do what does it look like if you divide the economic spectrum into five parts they are the upper twenty percent is everyone in the upper twenty percent well just like any other statistic there are those that are not but on balance they are in the upper eighty percent could you supplement the record with a written answer that question for c good show us what i'm specifically interested in is the income distribution by either adjusted gross income or gross income apartment treasury has that information if you would supply that so i'm going to ask you is recess recent study forty one percent of people's incomes are between twenty thousand and forty thousand so if someone has an income of thirty thousand dollars a year their gross income neverwinter so there and they said they have two children and they're just a gross income with exemptions and whatnot is down at about twenty three thousand tell me how this proposal affects them it's clear that the benefits of this proposal alone w benefit them so they get nothing that's right so in my state roughing up all of that's right in my state a family health insurance policy may cost twelve thirteen fourteen thousand dollars a year on the average so the value of this tax benefit to someone who can afford to buy the family policy is really nothing as you will recall earlier i mentioned that you cannot look at this as one proposal there are two proposals the second would be to have the federal government assist the states  closing the affordability gap how much money certainly that one and how much money put into that proposal just like the ones you've described i understand we're working now with the states to develop a proposal we'd like to work with the congress in the same way it's clear to us that we have to first polished sure that there are basic plans available and second that they're affordable an important part of making them affordable would be to have this tax equalisation it in and defensible and how much how much is budgeted toward that  that has not been budgeted yet because we want to work with the congress and with the states to determine how it should be developed well you say yes i mean is there a placeholder is a but is it correct to say that in the proposal before us the amount of zero right now for th yet been made but it's very clear from what the president says he wants to work with the congress to do two things one is to provide supplement to states to close the affordability gap to be able to help exactly the person you're talking about be able to afford policy and then close the gap on the on the tax issue my understanding is that the revenue loss your projection for the first five years of this twenty plan is one hundred twenty six point four billion dollars why don't we take the hundred  twenty six point four billion dollars and put into ass chip when that have been a more rational way to try to get to the people who are uninsured we don't think so because we think it is the responsibility of the federal government to assure that if a person is elderly  disabled if they're if they are poor if they are a woman needing with who is pregnant if their child needing protection that's responsibility the federal government to assure that they have health insurance and we do that through medicare medicaid and s chip everyone else we believe that it is better for the states to assure that there is a marketplace that will provide a basic affordable policy and that we should do two things in the federal government one is to resolve the indefensible position that we currently have which i assume you said no value whatsoever wouldn't they have no insurance they have to buy insurance as a condition to get the benefit ok but their tax benefit would be because this is this refund this is the doctor but the docs have the direction applies to fica taxes as well correct it does but they would have to buy insurance and his can his his example ok so they don't have an ok ok so they buy insurance then the deduction in that person's case would basically just surprise at what they are paying fica taxes correct that would be true if there are adjusted income was what  you said you would have a life you know you wouldn't have an income tax liability at that a g i an income tax would have an fica tax liability and so it be the deduction would just be the value of the deduction on fica taxes if then you bought insurance you would reduce the cost by that amount is that correct  campaigns i heard to free wheat from seniors how the medicare prescription drug benefit was going to damage their their current health plans with frontal thousands of phone calls so of course funded by political action groups signed up a lot has to do with your efforts and many of course volunteers helping in nevada but i get calls frequently from the seniors that really appreciate the programs i want to say something very positive almost ninety some thousand those seniors are in my district and certainly it's not perfect and certainly has challenges but i want to send that message maybe those folks that were complaining are now telling us it's working and they appreciate it on the child welfare side we've had a chat in the last week and your staff has been very responsive to a very serious emergency in the vat child welfare and i want to thank you now i guess back to forty thousand feet for a moment a few weeks ago we heard that in this committee that close to six hundred billion dollars i could be off on the numbers but close to six hundred billion dollars is being spent a year on child welfare programs now there is a course variation a number of children that are in welfare and i realize every one of these children has a name and a family and a challenge so i don't mean to discount them individually are somewhere between twelve and twenty some million children a year that are in poverty if you divide those kids into six hundred billion that's almost thirty to fifty thousand dollars a child a year is being spent currently by the federal government now i can say facetiously we should give each child a check for fifty thousand dollars a year but we know that's never going to happen nor should it but what can we do to make sure that this twenty to fifty thousand and it's appalling to me that that much money is being spent and not reaching the child what can we do to help cut through the red tape through all the bureaucracy so these kids can benefit from this massive budget this isn't a question of we need more money there's a lot of programs that we do it looks like we need to make sure that that child gets that money is there anything else that we can be doing to make sure these kids reap the benefit without validating a specific number absolutely let me just acknowledge that having served as governor for eleven years and manage these programs we have done remarkably well in this country by with a change of direction we concluded that we ought to turn the responsibility for management of the programs over to the state we allowed them to have the flexibility we began to create requirements that would require people to work and begin to integrate in a way that would provide the building of lives and they fostering a sufferer lions as opposed to the perpetual maintenance  i believe that that was a sound policy i think it is as sound application in the area of health care as well as welfare and again not to discount that the child is in the his or her trauma we looked at government agencies last year and we have six or seven agencies looking at frozen pizzas you know one looks a pepperoni one looks at cheese one looks at sausage i just hope there's some way that we're there isn't duplications overlapping of the services and i appreciate what you're doing to try to give the states more control but the fact remains is that money is still not getting to the child and i appreciate your efforts in making sure that we can we can channel those monies for the right place and not duplicate services and i know you're  unique situation that you suggest any kind of cut anywhere it sounds like you're cutting essential program i'm assuming some of these things that you're making an adjustment to are because overlaps and because of duplication is that not correct are one of the guidelines i gave the preparers of the individual decisions that need to be made was that we ought to look for places in the federal government and there are many where because of siloed budgets because of siloed approaches there are more and more agencies  government dealing with the same problem than one and it happens a lot and so there are instances where where we have eliminated programs because they were being covered by other and there will be those who champion the program that's being reduced or eliminated but there are if you're going to have a deficit reduction budget you've got to deal with  hundred forty seven million the hospitals a loss of one hundred twenty seven million in zero five the h m o s had a profit of one point one billion hospitals lost only ninety five million and over that same period of time the h m o s increased their premiums on an annual by about ten percent so my question is why when we are looking to bend the rate of growth in the medicare program and as i understand it there will be some sixty six billion dollars worth of  payments over the next five years and that that those payments will be principally taken out of the providers why is it that we are taking the medicare payments out of the providers and keeping in place the subsidies to the h i am not an expert mr bishop on the york hospital but i know enough because of my interaction with governor pataki and now it's are on on new york hospitals to know that there were too many of them and that their business model was floundering as a result and that you've been through a so called brac commission like process and we've helped in being able to reduce the number of beds and hopefully they increase the profit profitability i would argue that there may be difference in the cases of the hospitals in  o s because the the care has been managed more carefully and we all aspire for that to happen with the hospitals more and more to the point of my question though why do we continue to subsidize entities that have such a healthy profit margin at the expense of entities that even if they are exceptionally well run at full capacity are are struggling to operate in a breakeven first of all not every i don't i'm not able to validate the statistic all assume that you got it from a credible source but the principle obviously here is that we desire to see integrated care and we want to see it everywhere we want to see it in the rural areas that we've just spoken of and this system was established with a over time working our way starting with the subsidy and then moving out the way we do and we're having success with over seven million people now that are on that a caravan age and they're very happy with it and they're receiving excellent care and they're not having any trouble getting it but they don't i don't think medicare advantage plans cost us more than traditional fee for service medicare recipients we believe that having integrated care and having them available in every part of the country ultimately provides our system with an advantage we hope to achieve that we hope to preserve over time built into the law is the ability to normalize those payments in a fashion that will assure we have a robust system of integrated care ok let me switch the subject headstart arguably the central domestic public policy initiative of this administration has been no child left behind there's a fairly substantial body of evidence that suggests that if you get kids started right the chances of them succeeding as they go through the system is increase over those who do not have been in this case early childhood education or pre k education why is that if that's the case and if we are all agreed that we all want students performing at grade level we all i want to  eliminate the achievement gap between rich kids and poor kids and white kids and african american kids why is it that we would not be increasing our investment in a proven success story like head start i mean you talked before and i don't mean to be disrespectful you talked before about silo decision making is this a case of silo decision making where we have where we have one program that has a set of goals and another program that might contribute to those kind of goals but because of some financial imperative we're not funding it t extent that it should be funded it is a good example of so i will be making that up perhaps in the same way you've thought about it would be in my judgment a lot better if we had the ability to coordinate what goes on and head start with what goes on and in our in our schools our public schools much closer and there are clearly silos there we look we we send headstart about eight billion dollars a year it's a very important program do we believe it could be more efficient we  do and i did protect it from any significant cuts but in a deficit reduction budget we concluded that we could reach greater efficiency there and then we're going to work with them to achieve it  secretary for being here for all this time even when some of us were don't appreciate it and i appreciate the efforts that you in the administration are making in a difficult area as previously indicated we have a number of people coming  earlier testifying to the dire situation that we may face or will face when it comes to mandatory spending and i would hope that we have bipartisan agreement that we are facing that although at times i'm not quite sure that we're even yet to that point of agreeing that if we don't do something then the road we will face that problem he does make this one observation as when these proposals come down from the administrations what happens then as you're probably aware is the health care community in general gets whipped up if you will about the dire warnings right or wrong that may be coming down the track whether it's the hospital community or the provider community and then we as members hear from them in our office part of that is because while i get employed the attempts to make some overall structural changes that you haven't hear you address the subsidies upper income retirees for services under medicare part d and also you talked about the standard health care deduction  part of the savings that does come with i'll use a word tinkering around the edges with regard to provider services i come from the state of new jersey where the high cost of healthcare high cost of living in  general hospital funding is an issue obviously you can appreciate is difficult in our area the nonpartizan medicare payment advisory committee had recently voted in recommended to congress the hospital receive a full inflation update in two thousand and eight stating that the medicare margins were at the lowest levels recorded likewise we can hear from other providers in the state and they would look at these things and say we should be tinkering around the edge i guess they would suggest that we may need to make some more broad  changes than just addressing that so that would be my first question is whether we should be going in that direction and secondly it's hard to get around some of these numbers and get your hands around the my understanding is it's going to medicare trustees the unfunded liability medicare totals thirty five trillion dollars over the next seventy five years i have a hard time quite honestly getting my hands around a billion dollars by never get my hands around a billion dollars but if i could ten thousand thousand dollar bills stacked up in front of us with a billion dollars and we're talking about an unfunded liability of thirty five trillion dollars are we good doing anough i guess is the equation for the question to the equation of addressing it with this legislation or to be doing even more and  the last question goes to the suggestion to come from the other side of the aisle and that is could we just simply maybe use some of the savings that you're talking about in here and throw them into programs like increased funding for s jets or increased funding for some of these other programs that are already on the books but if we did that would that actually bring us to the solution that we see in the charts and that is addressing the long term dire predictions that we have congressman the health care financing system is i referred to it earlier as a sort of witch's brew that nobody fully understands i've spent a lot of time studying it as have others there are those who believe that there just isn't enough political will in the world to change health care in the way it's financed i would argue that the inverse of that may be true there is just too much political will because every time a proposal like the one that i'm making today comes on the table everybody just on holsters their political will and aims at each other and there is an ongoing proprietary ideologic the bait that just keeps us from making any change i am of the belief that the only power strong enough to begin to reshape the financing of our health care system is a market where people are able to make decisions based on quality and cost comparisons and that when competition based on value begins to happen it begins to allow the hospitals that are efficient to emerge it allows those that that are not we can make the liberal overt decisions about whether or not we ought to subsidize them as opposed to the covert subsidies that we currently have in place no one understands that no one accounts for that no one's in a position to predict the outcomes whenever there's a proposal like this one comes on the table with the the outcome is  predictable i'm of the belief that if if we construct a system of health care that is based on competition on value that will begin to see it rationalize it won't happen overnight but you know we have this you ask about med pac i made a recommendation that we take the full so called market basket and we cut it by point six five percent i had a rationale for doing that i'm not sure if the market would have guessed that exactly but i believe strongly that if there were productivity there that other people would begin to and we would begin to mirror that and we'd see that to be a pretty good estimation and i'm saying a lot more than you ask  hunger amongst america's children and this is as you know a very serious issue the very real issue all throughout our country there's not a community in america that is hungry free with the richest nation in the world and i think that's something that every one of us  in this congress and i want to see government should be ashamed of if we want to make sure that no child left behind we need to make sure that all of our children are fed to specially our youngest children who are going to make sure that we have  ready and able to wear on that we must be much more serious about eliminating child hunger and malnutrition in america yet when i look at this budget to be honest with you i don't i don't see that kind of bold commitment that i think is called for  and it's a challenge for you and it's a challenge for this congressman my colleague mr bishop talk about head start well the matter is has started been basically flat funded since f y two thousand and three and in the f y two thousand and eight budgets actually cut by hundred million dollars now you said to beginning that that you protected the program i would just respectfully differ with you on that the house committee on education and the workforce estimates this year's budget means head start early childhood education programs would experience a thirteen percent cut in funding in real terms in terms since two thousand and two and you know we can argue about the efficiency the program and that's a nice argument for us to have here but the impact you know for many of the children's served by these programs of head start head start provides the only meals that they will receive on any given day and for low income and poor families a head start an early start is the only access to child care and you can say well we're not really targeting food and feeding these kids but when you know when we have stories here from people all across the country or involved in these programs cutting back on the days of service or they're cutting back on transportation well if you cut back on the days of service or you cut back on transportation so a child can't get to one of these programs then you're literally taking food out of that child's mouth and that's where our senior citizens there's been a lot of questions already here a lot of discussion  about the proposal on medicare and medicaid but we all know that one of the most fundamental issues facing the low income elderly is making sure that they are adequately fed now from our own experience with our elderly family members everyone of this committee knows that many prescription drugs do not work correctly if they're taken on an empty stomach and and some drugs will actually do you great harm we also know that many senior citizens require special diets in massachusetts yesterday i was talking to some doctors who work in an emergency room at one of our major hospitals who was telling me about the number of senior citizens that they treat in emergency rooms who have severe illnesses because they're taking the prescription drugs on an empty stomach because they don't have the food they're making choices and they don't have enough to to be able to the haven't they have the meals that they need to remain healthy yet when i look at the budget between h h s and u s d a this budget eliminates or reduces or further restrict eligibility and nearly every one of the cornerstone programs or provide food meals nutrition or income support to senior citizens i guess my point is that we all talk about the numbers here about how we're trying to consolidate programs and be fiscally responsible but a hungry child most likely will end up being an unhealthy adult a hungry child will not be able to learn in school a senior citizen who is shortchanged on their food and it is taking prescription drugs and that the stomach gets all these other illnesses that we end up all paying for it's this is the societal costs are great and i guess i think would troubles me about about what is before us here i mean that the cuts in head start the older americans that title three programs some of the social services and other income support programs where children elderly i mean the reduction in the cuts or whatever you however you want to call them i think in the long run will end up costing us more and i'm just trying to figure out you know what does it take i mean for the administration or for the congress here for that matter i mean to  deal with the issue of hunger head on i mean it is a huge problem not a community in america or is hunger free and yet it how to get any discussion and this budget i think makes the situation worse i just be interested in your response  mr mcgovern i'm not for hunger and i know nobody a marriage i mean i can tell you i will offer this as governor and as secretary of health and human services you brought up head start i've been in a lot of head start programs i believe it's a good program however i believe we could do better with the program if we were coordinating it closely with children and with rather with with schools with our public schools and with the school lunch programs and all of the other programs that go into we we don't and i answered the question earlier i believe we can do better with what we have we're making a substantial investment in head start we are reducing budgets we are in a position of having to make hard decisions between different competing priorities and this is the way i made them and and i respect what you said no and i appreciate your answer secretary  guess my point is that you know as we have this debate about how we can better run head start there are head start programs that are cutting back on services and there are children who cannot take advantage of those programs and there are children going without food and i would think great but you know if you see your citizens are going without food and we're not providing them the necessary safety net to be fed properly or to be able to support themselves and we have a problem and one of the real privileges that my service in the public and the federal government has provided was an opportunity for almost a year to travel all but two states hawaii and alaska and most of them many times and to go into senior centers to go into church to go into that i saw the fabric of compassion that's available or is stablished for people because we care about our neighbors we care about our family members and the federal government plays an important part in that but we're not the only part of it and the question of before us today is what is the right thing for us to do with the limited number of dollars we have in order to weave it into that other the fabric of our community and could we do more yes with the avail monies that we're dealing with here this is what i would propose to do that i appreciate your your answer to secretary i just like i would just close with you know i appreciate your your statement that you're not for hunger but the said nobody is it's a real problems a growing problem wonderful whatever whatever reason we don't want to address i just say one last thing and that is you go to a food bank in any state in this country what you will see is the number one group there in terms of growing clientele to be careful with my questions to does i'm sure you've probably had two or three times at the apple but one that if you could repeat the answer if you have been asked it it seems that was we are constantly putting a ban physician reimbursement issue and i was wondering if you could share one more time is there a permanent fix out there so that we don't have to at the end of each year copple together an agreement that basically teach physicians at a level playing field does not allow them to flexibility to grow and take advantage of the technology that's out there today i believe there is one and we need to find because this doing it every six months is a exercise that need not happen i don't have a formula for you today but i will tell you that the future needs to include the capacity for us to compensate physicians and hospitals at least in some measure on the basis of not just the quantity of services they provide but the outcomes and the quality of the services they provide  physicians want to provide quality they what they want is to be measured fairly i've spoken at length today about a system of health care i don't believe we have a system of health care we have a sector of health care we've got to shape it into a system a system that has electronic medical records that will allow us to gather the needed information and to find quality measures and define what quality care is with the help of the metal community medical community once we begin creating a system of competition based on value then we'll we will have the capacity to solve the so called doc fix on a more permanent basis frankly there are parts of that we're not very good at yet but we're getting better at it and we're spending a lot of time and energy not just in government but within the medical community within the technology community within the large payers i reported before you came that we will have sixty percent of the entire healthcare marketplace by april have committed themselves to four important cornerstones of shaping a system once that systems in place and i don't believe we're a long ways off we will start to see its early manifestations we can not only solve the s g r problem but w program quick assessment on your feelings i know we had some bumps early in the journey but the folks in my district by and large the calls i get are very appreciative of the new program they i just say  this was a great american moment this was not just about the creation of a new program this was america rallying together i had the personal privilege of seeing as i mentioned earlier in church basements in parking lots of shopping centers and senior centers in hospitals in clinics in schools and people going door to door i saw family members who stepped up and helped in the course of a six month period we saw  ninety percent of the people in this country who are eligible sign up for a new benefit and now a year later we find that eighty percent of them are happy with the decision they've made and the good news is the twenty percent who aren't have a choice where they can go out and improve their situation we saw billions of dollars being saved over what was originally planned hundred thirteen billion dollars in this budget reduced because of the efficiencies that are being developed we saw we been able to see seniors saving for an average of twelve hundred dollars most importantly we're seeing seniors who are getting prescription drugs who didn't have them before this was a great american moment it was not simply about the victory of implementing a program well this entire country rallied together in a way that allowed this to occur and i'm not sure it could have happened in any other place in the world besides this country all right last question for me i've asked the previous witnesses cut tax increase i will ask you that question but some of the candidates running for president this year for two thousand they were already talking about the need for universal health care you said in your statement there will never be enough money to satisfy all  we had to make some tough choices do you have any idea how much money you would need the department to provide universal health care coverage to the american taxpayer in could you do it in your existing budget or would new revenue have to come into play port we spend sixteen percent of the entire gross domestic product in this country on health care earlier hearing today i saw a post indicated that's about twice what the what our economic competitors provide it is my belief that money is in the system we have the capacity to provide affordable basic health insurance policy for every american to make to get access if we were to first of all have a basic plan in most states and second of all use the tools  federal government to level the playing field so that the states can get can solve the problems there are proposals being considered right now in at least eighteen maybe more states  of they're reaching out to solve this problem there are two problems they can't solve one is the tax probably spent a lot of time talking about today and the second is that they need help and being able to close the affordability gap and we ought to do that  main agencies responsible for much of the food safety responsibilities which is in your jurisdiction it's my understanding that the budget request is about ten point six million dollars for food do you have in putting together the westerly budget and this instance we'll get to junk safety is another point but the food safety budget for f d a the f d a brings a budget to me and my budget office and we review comment on that because in your testimony today he said that you are committed to making the medicare and medicaid programs more attractive to physicians and other providers and i my you for that you  join my colleague your representative who lee and lemon in the fact that in rural areas and not just in rural is really it is nearly impossible to find a doctor who will accept medicare or medicaid yet most of the savings in your proposal come for cutting payments to hospitals and other providers i would encourage you to go back take a look at that because if you're making those cuts and we are hard to get them to move in and take our budget proposes to increase the amount of funding available through medicare by five point six percent and we're not cutting there are areas in which we are slowing the growth rate but we are proposing that continue to increase by five point six percent in talking to doctors i talk with oh i think that will be a real problem i would just say that we'll talk about that later the budget cuts public and preventive health funding that can address disease g the important cancer prevention research performed and i which is the national cancer institute is you know have a long time spans for their studies and thus need to have funding strains that are pretty predictable over a period of time i am told that all those agents running the experimental trials normally fun funded by in c r are considering halting plan trials due to the uncertainty ministration budget reduce or eliminate these priorities at a time when we may have something in the pipeline that will make a huge difference nance or the national cancer institute is a very good illustration that answer your question we made the decision to reduce the number of noncompetitive grants that had been concluded we want to keep focused on the new science this budget does reflect the fact that there is a slight reduction in the total amount but what isn't reflected in the number you see is that we'll have an increase in the number of new investigations and what i founded that over time some of the proposals just weren't producing the result that was hoped for and we designed designed a system that would put more grants make more grants available and healthy tune pretty much devastates some of the programs consider for example the social services block grant is one of the most most effective federal efforts i think the national governors association calls it the glue that whole state and local social service programs together in one nine hundred ninety nine you said further reduction in funding for s s b genies will result in cuts to vital human services for our most vulnerable citizens now that was when you were governor deficit to balance the budget by two thousand and twelve there's a substantial amount of difference in the budget circumstances of the states and the budget circumstances of the federal government today than it was in one thousand nine hundred nine and hence i feel quite  justified in having taken both positions also mentioned given the fact that i'm quite knowledgeable about what those grants go for there is an area of categorical funding for almost everything that those grants are use for governors like to get money from the federal government yes did i feel like we could continue to send it to them in the same rate that we have in the past given their financial situation and ours  suggesting that we not help the most vulnerable i'm suggesting that the states are better able to do it right now than we are you're absolutely right we have to the ten year budget starting in two thousand and one we've got eight have trillion dollars less to work with than we thought we'd have so that does put a pressure and we're making choices we're talking about repealing the estate tax which would be about a billion a year this year the happen peace tax cuts will be about twenty billion a year people under one hundred thousand dollars will get no measurable better from that  accelerated the billion dollars from the zero eight budget to the zero seven budget last year and what you're seeing is a reflection of that it's clear to me that if we have a deficit there that we're prepared to step up and work with congress we have anticipated given the nature of what we've done in the past was necessary and if more is necessary will obviously step up and we will not will not reduce the amount or the number of people presently served on  additional funds to make improvements in the program we believe that we can find greater efficiency in head start and i've talked about one way we could do it we have held the budget essentially neutral and we believe we can find  mr scott we recognize that that had started a very important program we're also trying to balance the budget and we were making choices that's right and one of the things we've got to do is to keep a strong economy and because the strong economy keeps those tax dollars rolling in which makes it possible for us to fund that started the president's tax proposals have done a good job of being able to stimulate the economy and generate revenues and  the present number of children and you have substantially less than that in the budget will we be able to serve the number of children that we're now serving articulated earlier in this hearing the policy  the administration for reauthorization and we believe the budget is adequate to fund that proposal will the number of children deserve to go up or down it would be no child who is current would go up the number of children served will go up will how much would it cost to make sure that all children under two hundred percent of poverty are served with s chip right i don't know the answer to that  are pregnant women eligible in all states under medicaid through as chip could be wrong about that i don't know the answer for sure about all fifty states states have the ability to craft their programs and i don't know the answer the tax plan for under the president's plan as i understand it some people will pay more tax some people pay less tax how much more tax will people if you just took one side of the ledger how much tax increase are we talking about that we know additional taxes collected by the u s government under this proposal aggregate and aggregate yes but you'll be paying some of those who are paying more taxes how much taxes will they pay i can't give you that twenty percent i can't give you the breakout i can tell you that those who do pay will be in the upper twenty percent of their income and that it does benefit eighty percent of those who have employers insurance and one hundred percent of those who have zero right but if you just take it you don't both at the legit the same time could you give us an estimate of how much more we'd be collecting on one side before you start talking about how much less people will be paying there will never stand there will be there will be no additional dollars in any taxes just like any tax or just there are there are pluses and minuses it's right there are three winners here and we need to i can't give you the actual balance i don't know