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30–636 2006

PRESIDENT’S FISCAL YEAR 2007 BUDGET FOR 

THE U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

FEBRUARY 8, 2006 

Serial No. 109–55 

Printed for the use of the Committee on Ways and Means 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

BILL THOMAS, California, Chairman 

E. CLAY SHAW, JR., Florida 

NANCY L. JOHNSON, Connecticut 

WALLY HERGER, California 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

JIM NUSSLE, Iowa 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

J.D. HAYWORTH, Arizona 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

BOB BEAUPREZ, Colorado 

MELISSA A. HART, Pennsylvania 

CHRIS CHOCOLA, Indiana 

DEVIN NUNES, California 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

BENJAMIN L. CARDIN, Maryland 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

ALLISON H. GILES, Chief of Staff 

JANICE MAYS, Minority Chief Counsel 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

iii 

C O N T E N T S 

Page 

Advisories announcing the hearing ........................................................................ 2 

WITNESS 

U.S. Department of Health and Human Services, Hon. Michael O. Leavitt, 

Secretary ............................................................................................................... 7 

SUBMISSIONS FOR THE RECORD 

AFGE Social Security Administration, Witold Skwierczynski, letter ................. 82 

Aponte, Kim, Aurora, IL, letter .............................................................................. 83 

(1) 

PRESIDENT’S FISCAL YEAR 2007 BUDGET FOR 

THE U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

WEDNESDAY, FEBRUARY 8, 2006 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, DC. 

The Committee met, pursuant to notice, at 10:12 a.m., in room 

1100, Longworth House Office Building, Hon. Bill Thomas (Chairman of the Committee), presiding. 

[The advisory and revised advisory announcing the hearing follow:] 

2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

February 01, 2006 

FC–18 

Thomas Announces Hearing on 

President’s Fiscal Year 2007 Budget for the 

U.S. Department of Health and Human Services 

Congressman Bill Thomas (R–CA), Chairman of the Committee on Ways and 

Means, today announced that the Committee will hold a hearing on the President’s 

Fiscal Year 2007 Budget for the U.S. Department of Health and Human Services. 

The hearing will take place on Wednesday, February 8, 2006, in the main 

Committee hearing room, 1100 Longworth House Office Building, beginning at 10:30 a.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from the Honorable Michael Leavitt, Secretary, U.S. Department of 

Health and Human Services. However, any individual or organization not scheduled 

for an oral appearance may submit a written statement for consideration by the 

Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

On January 31, 2006, President George W. Bush discussed several legislative initiatives when he delivered his State of the Union Address. The President will provide further details on these proposals on February 6, 2006, in his fiscal year 2007 

budget, as submitted to the Congress. The budget for the U.S. Department of Health 

and Human Services includes important benefits and services such as those provided under Medicare, welfare (Temporary Assistance for Needy Families), child 

care, child protection, child support and other social services programs. 

In announcing the hearing, Chairman Thomas stated, ‘‘The President outlined 

several health and social service initiatives in his State of the Union Address that 

are under the jurisdiction of the Committee on Ways and Means. I look forward to 

hearing more about these proposals from Secretary Leavitt.’’ 

FOCUS OF THE HEARING: 

The focus of the hearing is to review the President’s Fiscal Year 2007 Budget proposal for the U.S. Department of Health and Human Services. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘109th Congress’’ from the menu entitled, 

‘‘Hearing Archives’’ (http://waysandmeans.house.gov/Hearings.asp?congress=17). Select the hearing for which you would like to submit, and click on the link entitled, 

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final page, an email will be sent to the address which you supply confirming your 

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and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business Wednesday, February 22, 2006. Finally, please note that due to the change in House mail policy, 

the U.S. Capitol Police will refuse sealed-package deliveries to all House Office 

3 

Buildings. For questions, or if you encounter technical problems, please call (202) 

225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

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2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

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Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

* * * CHANGE IN TIME * * * 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

February 06, 2006 

No. FC–18 Revised 

Change in Time for Hearing on 

President’s Fiscal Year 2007 Budget for the 

U.S. Department of Health and Human Services 

Congressman Bill Thomas (R–CA), Chairman of the Committee on Ways and 

Means, today announced that the Committee hearing on the President’s Fiscal Year 

2007 Budget for the U.S. Department of Health and Human Services, previously 

scheduled for 10:30 a.m. on Wednesday, February 8, 2006, in the main Committee 

hearing room, 1100 Longworth House Office Building, will now be held at 10:00 

a.m. 

All other details for the hearing remain the same. (See Full Committee Advisory 

No. FC–18, dated February 1, 2006). 

f 

4 

Chairman THOMAS. At the outset, the Chair wants to indicate 

to Members that there is a minor bit of a static problem in the 

Committee room, and the Chair would suggest that as Members sit 

at their seats, they might want to touch the metal knobs on their 

drawers prior to touching the microphones, because there is a 

chance that the microphones might short out. I will tell the gentleman from California, you can touch your mic any time you want. 

[Laughter.] 

Chairman THOMAS. This is the new and exciting technological 

age. 

Good morning. This was scheduled to be the second of a series 

of hearings on the President’s budget. We were scheduled yesterday to hear from Secretary of the Treasury, Secretary Snow. Pretty 

obviously, the funeral of Coretta Scott King, quite rightly, took 

precedent over that. We believe the Secretary will be available to 

us on the February the 15th, and so we are in the process of rescheduling that particular hearing. 

This then would have been the second in a series of hearings, but 

is therefore the first, on the President’s 2007 budget proposal, and 

the Committee welcomes the still relatively new Secretary of the 

U.S. Department of Health and Human Services (HHS), the Honorable Michael Leavitt. Thank you and we look forward to your testimony. 

In the world of health care, the Centers for Medicare and Medicaid Services (CMS) announced significant news last week. Due to 

strong and competitive forces, the average premiums paid by Medicare beneficiaries for the new prescription drug benefit are down 

30 percent. They are estimated to be reduced from $37 a month to 

$25. This comes on top of the news that 21 million Medicare beneficiaries are now receiving their prescription drugs through Medicare. 

The Chair believes that by most reasonable standards, implementation of this program has been successful. The Chair would 

refer to a quote. This one actually refers to hospitals. ‘‘Hospital 

spokesmen say the reimbursement formula does not give them 

enough return, and that the future growth, and in some cases even 

survival of their institutions may be jeopardized.’’ This comes from 

a New York Times article dated 1967. I think you will find, if you 

go back and look at the press articles in 1966 and 1967, focusing 

on the start-up of Medicare itself, there were always some difficulties in getting major programs under way, and the Medicare Modernization Act (P.L. 108–173), which included the new drug program, of course, is the largest expansion of the Medicare Program 

since its inception. 

So, we look forward to hearing from you, Mr. Secretary, about 

the progress in rolling out this program. 

The President’s budget includes a number of proposals to help reduce the growth in Medicare. These proposals support our commitment to ensure that providers are paid accurately to secure the 

best deal for taxpayers and seniors. I am pleased that the Administration relied heavily on the recommendations offered by the Medicare Payment Advisory Commission (MedPAC). 

The Chair is also concerned about the accuracy of the current 

hospital diagnosis-related group (DRG) payment system. Last year, 

5 

HHS acted on MedPAC’s recommendations to base payments on 

the health of the patient, but only for some cardiac conditions in 

which there was an argument that doctors were performing procedures based upon the payment structure, rather than in the best 

judgment of a medical decision for the patient. As a result, the 

overall payment system has now been made more accurate in the 

area of decisions on heart operations, but remains highly inaccurate in other areas. I strongly encourage you, Mr. Secretary, to 

build on the progress made last year, and continue to apply a more 

sophisticated payment adjustment structure where appropriate, so 

that payments can reflect the acuity and severity of the decision 

made in the patient’s health. 

We are going to look at a number of cost-saving provisions. There 

is going to be a lot of discussion. I do want to indicate that later 

today the President is expected to sign the Deficit Reduction Act 

(DRA) (P.L. 109–171). It reauthorizes the Nation’s welfare programs, makes a number of provisions to help more low-income parents work and support the families. I assume there will be some 

questions directed to you, Mr. Secretary, on that program as well. 

I am very interested in hearing from you, but prior to that, I 

would recognize the gentleman from New York for any remarks he 

may wish to make. 

Mr. RANGEL. Thank you. I welcome the Secretary and his father here, and want his father to know that all remarks made at 

you are not personal, and that certainly we think you are a very 

courageous man to assume this great responsibility for your country. 

Most of our questions on this side will be to verify whether or 

not your office and this Administration truly believe that the government is incompetent in providing social services to American 

citizens, and whether they believe that the private sector, with its 

competition, can do a better job. More specifically, we would like 

to know, where is Social Security? Is it different from the last proposal? Are the private accounts still on the table? Is it going to cost 

a trillion dollars or more? We would like to know more about that 

as we move forward with this year’s work. 

Health Savings Accounts (HSAs), is this another example where 

we want to get rid of entitlements, get rid of Medicare, and allow 

individuals to be more in charge of making the decisions and bolstering up the private sector to assume the responsibility that 

Medicare has. We want to know whether this philosophy has folded 

over into the way we have provided funds for the private sector and 

prescription drugs, and whether or not you think that the HSAs 

would have any better way of distributing health care as we found 

the pharmaceuticals and the Health Management Organizations 

(HMOs) in dealing with prescription drugs. 

We want to know why you are cutting money out of the budget 

for the block grants in social services, which once again, as the cuts 

that we have on the floor, will be hitting those families that have 

the aged, the disabled, the children, and how do you think that is 

going to help us? 

I hope that in your opening remarks that you could let us know 

philosophically where the Administration is going because people 

are suffering, and if we are going to depend on the private sector, 

6 

as opposed to the employers, for health care, or the Medicare system, then we will know what our work is cut out for. I would like 

to yield whatever time is left to the Ranking Member of the Subcommittee on Health, Peter Stark. 

Mr. STARK. Thank you, Mr. Rangel, and welcome, Secretary 

Leavitt. In this budget and in the Administration’s strategy, I have 

yet to find a Republican who would deny that the overall goal of 

the Republicans is to privatize not only Social Security but Medicare, and do away with Medicaid, and turn the health care system, 

Medicare in particular, into a voucher system, which would possibly protect low income, but certainly do nothing but make it more 

difficult, more costly, and less opportune for senior citizens to get 

the medical care that they deserve, and which they now get quite 

adequately under the fee-for-service part of Medicare. 

I want to look at Part D as the poster child of what happens 

when people get obsessed with the free market. Particularly, I am 

impressed that the people who talk most loudly about the free market have really never held a job in private enterprise or know much 

about the free market, but they can spout about it a good bit. 

We talk about the number of people in Part D, and we know— 

and by the way, I would not vote to repeal it. It was a lousy bill. 

I voted against it, but it is there, and I believe we should fix it. 

We have written to you, written to the Chairman, asking for oversight and an opportunity to work together to make it a Medicare 

benefit and not a gift to the private prescription drug industry. 

Twenty million people who signed up already had prescription coverage, and it was a lot better than what they got in the new plan. 

We are hearing reports now of the benefit manager, after people 

have signed up, in the first month of the operation of the plan, 

dropping drugs and raising prices on people who can’t change. So, 

they are in, and all of a sudden they either have a higher cost for 

drugs they need or their drugs have disappeared. I think that we 

are treating the most vulnerable, sick, poor people in this country 

in an obscene manner, and those are the dual-eligibles who are 

being harmed the most. 

I hope you can explain to us why privatization for these programs, which have heretofore been entitlements, will be better for 

the American public. 

Chairman THOMAS. Thank the gentleman. Time has expired. 

For the record, the gentleman from New York mentioned that Secretary Leavitt’s father, Dixie Leavitt, is here. The Chair also wants 

to indicate that his brother, Mark Leavitt, and his cousins Wade 

and Rod Leavitt are here as well. 

Mr. RANGEL. It is not going to be that rough. He has the whole 

family? 

[Laughter.] 

Chairman THOMAS. They believe in strength in numbers where 

they come from. 

[Laughter.] 

Chairman THOMAS. He has quantity and quality going for him. 

Let me say that any Member who has a written statement who 

wishes to place it in the record may do so without objection. Mr. 

Secretary, your written testimony will be made a part of the record, 

7 

and you can address us during your time as you see fit. The time 

is yours. 

STATEMENT OF THE HONORABLE MICHAEL O. LEAVITT, 

SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN 

SERVICES 

Secretary LEAVITT. Thank you, Mr. Chairman. I must say that 

I heard it was bring your father to work day. 

[Laughter.] 

Secretary LEAVITT. Hence, I brought my father, and I am delighted he is here, as well as my brother—— 

Chairman THOMAS. Let me tell you, speaking for all of us who 

are no longer able to do that, I think it is a wonderful thing. 

Secretary LEAVITT. Thank you. I am pleased to have him here. The budget that the President has put forward is nearly $700 billion. It is a significant part of the effort of the U.S. government to 

meet the needs of our taxpayers. 

Roughly, broken into two categories you are well familiar with, 

one is the entitlement programs and the second would be the discretionary budget. The entitlement programs, over which this Committee has broad jurisdiction, I am sure will be the subject of much 

of our discussion. With respect to the discretionary budget, it 

makes up about $75.5 billion in the 2006 budget. We are in a period of time where deficit reduction is necessary, and you will see 

that budget that the President has put forward contains a $1–1/2 

billion reduction of the discretionary budget. 

I would like to spend just a few minutes, Mr. Chairman, in talking about the way I went about putting the budget together within 

the Department. I think rather than try to take a handful of specifics, the philosophy, as Mr. Rangel suggested, might be helpful in 

terms of understanding. As I respond to your questions today, I 

will try to refer back to the underpinnings of how I went about it. 

Let me first acknowledge I was Governor for 11 years of my 

State, and I put together 11 balanced budgets. I know many of 

those years were good years where we had growth in revenues; 

other years were years where we did not. I came to understand 

fully that reducing deficits is hard work, and it is difficult because 

almost every program that finds its way into a budget is there for 

a good reason, and there are people who feel passionately about it. 

Consequently, difficult decisions have to be made. I want to acknowledge that the decisions I have made will not be the same that 

some on the Committee would make, and that is why I am here, 

to let you know basically what decisions were made in the proposal 

and why they were made that way, and, obviously, you will then 

have an opportunity to exercise your judgment as well. 

The instructions I gave to those who assemble budgets in HHS 

were fairly straightforward I believe. The first was to tell them 

there are some new initiatives that need to be undertaken that will 

have a profound impact on the future of the Department and our 

citizens. For example, Health Information Technology is an example of such a new initiative. The new HIV/AIDS Initiative that you 

will see in the budget is an example. 

There were some commitments that the President has made that 

need to be filled. An example of that would be community health 

8 

centers, expanding those dramatically, a commitment that we have 

to keep. The commitment that was made on access to recovery and 

faith-based initiatives. There are some threats that we have responsibility for—bioterrorism and the concern about pandemics— 

they are relatively growing or new threats that we have been responding to. 

Then there are some high demand and highly effective programs, 

that despite the fact that we are in the process of deficit reduction, 

I felt, and the President felt, needed to be funded and either new 

or in greater terms that we needed to set aside. 

So, I asked my colleagues to go through a series of principles, 

and hold the existing budgets up against them. One, I needed to 

find new money for those particular items, and I said, let’s find if 

there are any one-time funds that we could apply that are not 

being repeated. Let’s look for programs whose purposes have been 

addressed already, either in some other place or have concluded. 

Let’s look for funds that are carrying over that haven’t been used, 

and apply those against those priorities, or let’s look for programs 

where we offered a cut last year, and they weren’t enacted. If we 

still feel the same way, let’s put them forward. So, that is essentially how we went about developing money for the new initiatives. 

I then asked them to begin looking at all of the investments 

across the entire Department. I believe there are a set of principles 

that can be put forward, and I asked them to compare each expenditure against those principles, and I would like to just enumerate those quickly for you. 

First is the need for our investments to be targeted. I asked them 

to look for programs where there was good done on a general basis, 

but where the more specific need was apparent. Therefore, let’s 

begin to target. In some cases you will see examples of where we 

have funded fewer people, but the ones we have funded have been 

funded better, so target expenditures. 

The second would be looking for prevention programs. If we can 

prevent illness, we ought to prevent it instead of just paying for the 

treatment, so you will see an emphasis placed on prevention programs. 

You will also see, in a budget that is reflecting deficit reduction, 

I want to provide services and not always just build infrastructure. 

Infrastructure is important, but in a time of declining revenues, or 

at a time when we have fewer revenues, I want to make sure that 

people are served and not just bolster the infrastructure all the 

time. 

Fourth, I do believe that market-based choices or systems that 

allow markets to drive various investments to their most logical 

and their most efficient form are better than circumstances where 

we have ‘‘Government does it all’’ philosophy. 

Fifth, individual choice. I think if there are places where individuals can choose. Again, I think that is better than just the government always making choices. 

Sixth, I would point to the need for new research to be done, and 

if there are areas where research has basically worked its way 

through, then we need to discontinue our funding in that area and 

begin to find the new technologies. 

9 

I have also asked them to look across the entire Department and 

to avoid siloed investments. Look for ways in which we can leverage investment across the entire Department. You will also find a 

very high standard was placed on looking for performance measures. If we can’t measure it, I am suspicious of that. I want to be 

able to see how investments we have made are making a positive 

impact. If I can’t measure it, it is a candidate for reduction. 

Mr. Chairman, that is an introduction to the principles, and I am 

happy to respond to questions from the Committee. 

[The prepared statement of Secretary Leavitt follows:] 

Statement of The Honorable Michael O. Leavitt, Secretary, U.S. Department 

of Health and Human Services 

Good morning, Mr. Chairman, Representative Rangel, and Members of the Committee. I am honored to be here today to present to you the President’s FY 2007 

budget for the Department of Health and Human Services (HHS). 

Over the past five years, the Department of Health and Human Services has 

worked to make America healthier and safer. Today, we look forward to building 

on that record of achievement. For that is what budgets are—investments in the future. The President and I are setting out a hopeful agenda for the upcoming fiscal 

year, one that strengthens America against potential threats, heeds the call of compassion, follows wise fiscal stewardship and advances our Nation’s health. 

In his January 31st State of the Union Address, the President stressed that keeping America competitive requires us to be good stewards of tax dollars. I believe 

that the President’s FY 2007 budget takes important strides forward on national 

priorities while keeping us on track to cut the deficit in half by 2009. It protects 

the health of Americans against the threats of both bioterrorism and a possible influenza pandemic; provides care for those most in need; protects life, family and 

human dignity; enhances the long-term health of our citizens; and improves the 

human condition around the world. I would like to quickly highlight some key points 

of this budget. 

We are proposing new initiatives, such as expanded Health Information Technology and domestic HIV/AIDS testing and treatment that hold the promise for improving health care for all Americans. We are continuing funding for high-performing Presidential initiatives, including Health Centers, Access to Recovery, bioterrorism and pandemic influenza; and we are also maintaining effective programs 

such as Indian Health Services, Head Start, and NIH medical research. 

We are a nation at war. That must not be forgotten. We have seen the harm that 

can be caused by a single anthrax-laced letter and we must be ready to respond to 

a similar emergency—or something even worse. To this end, the President’s budget 

calls for a four percent increase in bioterrorism spending in FY 2007. That will 

bring the total budget up to $4.4 billion, an increase of nearly $178 million over last 

year’s level. 

This increase will enable us to accomplish a number of important tasks. We will 

improve our medical surge capacity; increase the medicines and supplies in the 

Strategic National Stockpile; support a mass casualty care initiative; and promote 

the advanced development of biodefense countermeasures through NIH to a stage 

of development so they can be considered for procurement under Project BioShield. 

We must also continue to prepare against a possible pandemic influenza outbreak. 

This budget includes a $2.3 billion allowance for the second year of the President’s 

Pandemic Influenza plan. These funds will enable us to meet several important 

goals, including providing pandemic influenza vaccine to every man, woman and 

child within six months of detection of sustained human-to-human transmission of 

a bird flu virus; ensuring access to enough antiviral treatment courses sufficient for 

25 percent of the U.S. population; and enhancing Federal, state and local as well 

as international public health infrastructure and preparedness. 

The President’s FY 2007 budget provides more than $350 million for important 

ongoing activities such as safeguarding the Nation’s food supply (FDA), global disease surveillance (CDC), and accelerating the development of vaccines, drugs and 

diagnostics (NIH). 

The budget includes a new initiative of $188 million to fight HIV/AIDS. These 

funds support the objective of testing for three million additional Americans for 

HIV/AIDS and providing treatment for those people who are on state waiting lists 

10 

for AIDS medicine. This initiative will enhance ongoing efforts through HHS that 

total $16.7 billion for HIV/AIDS research, prevention, and treatment this year. 

The budget maintains the President’s commitment to the doubling of NIH, and 

includes new funding at NIH for important cross-cutting initiatives that will move 

us forward in our battle to treat and prevent disease—such as an additional $49 

million for the Genes, Environment and Health Initiative and an additional $113 

million for the Director’s Roadmap. In addition, it contains an additional $10 million 

at the Food and Drug Administration to lead the way forward in the area of personalized medicine. 

One of the most important themes in our budget is that it increases funding for 

initiatives that are designed to enhance the health of Americans for a long time to 

come. For instance, the President’s budget calls for an increase of nearly $60 million 

in the Health Information Technology Initiative. Among other things, these funds 

support the development of electronic health records (to help meet President Bush’s 

goal for most Americans to have interoperable electronic health records by 2014); 

consumer empowerment; chronic care management; and Biosurveillance. 

The Budget also includes several initiatives to protect life, family and human dignity. These include, for example, $100 million in competitive matching grants to 

States for family formation and healthy marriage activities in TANF. And it promotes independence and choice for individuals through vouchers that increase access to substance abuse treatment. 

In the area of entitlements programs, I want to begin by congratulating you and 

other Members of Congress for having successfully enacted many needed reforms by 

passing the Deficit Reduction Act (DRA). DRA supports our commitment to sustainable growth rates in our important Medicare and Medicaid programs. It also 

strengthens the Child Support Enforcement program. 

The Deficit Reduction Act also achieves the notable accomplishment of reauthorizing Temporary Assistance for Needy Families (TANF), which has operated under 

a series of short-term extensions since the program expired in September 2002. 

Medicaid has a compassionate goal to which we are committed. Part of our obligation to the beneficiaries of this program is ensuring it remains available well into 

the future to provide the high-quality care they deserve. Last year when I made my 

statement before this Committee, I said that the growth in Medicaid spending is 

unsustainable. With its action on many of our proposals from last year in the Deficit 

Reduction Act, the Congress has made Medicaid a more sustainable program while 

improving care for beneficiaries. The President’s Budget proposals build on the DRA 

and include a modest number of legislative proposals which improve care and will 

save $1.5 billion over five years in Medicaid and S–CHIP and several administrative 

proposals saving $12.2 billion over five years. 

This Administration has also pursued a steady course toward Medicare modernization. In just the past three years, we have brought Medicare into the 21st century by adding a prescription drug benefit and offering beneficiaries more health 

plan choices. 

Medicare’s new prescription drug benefit provides seniors and people with disabilities with comprehensive prescription drug coverage, the most significant improvement to senior health care in 40 years. Millions of seniors and people with disabilities are already using this benefit to save money, stay healthy, and gain peace of 

mind. According to CMS’ Office of the Actuary, Medicare’s drug coverage will have 

significantly lower premiums and lower costs to federal taxpayers and states, as a 

result of stronger than expected competition in the prescription drug market. Moreover, beneficiary premiums are now expected to average $25 a month—down from 

the $37 projected in last July’s budget estimates. The Federal government is now 

projected to spend about 20 percent less per person in 2006 and, over the next five 

years, payments are projected to be more than ten percent lower than first estimated. So taxpayers will see significant savings. And state contributions for a portion of Medicare drug costs for beneficiaries who are in both Medicaid and Medicare 

will be about 25 percent lower over the next decade. All these savings result from 

lower expected costs per beneficiary; projected enrollment in the drug benefit has 

not changed significantly. 

Our work to modernize Medicare is not done. Rapid growth in Medicare spending 

over the long-term will place a substantial burden on future budgets and the economy. The President’s FY 2007 Budget includes a package of proposals that will save 

$36 billion over 5 years and continue Medicare’s steady course toward financial security, higher quality, and greater efficiency. 

Along with the sustainability of Medicaid, our budget takes steps to improve the 

long-term fiscal health of Medicare. We are proposing a number of adjustments that 

will produce a substantial savings. 

11 

The bulk of these Medicare savings will come from proposals to adjust yearly payment updates for providers in an effort to recognize and encourage greater productivity. These proposals are consistent with the most recent recommendations of the 

Medicare Payment Advisory Commission. To ensure more appropriate Medicare 

payments, the Budget proposes changes to wheelchair and oxygen reimbursement, 

phase-out of bad debt payments, enhancing Medicare Secondary Payer provisions, 

and expanding competitive bidding to laboratory services. Building on initial steps 

in the Medicare Modernization Act, the Budget proposes to broaden the application 

of reduced premium subsidies for higher income beneficiaries. Finally, the President’s Budget proposes to strengthen the Medicare Modernization Act provision that 

requires Trustees to issue a warning if the share of Medicare funded by general revenue exceeds 45 percent. The Budget would add a failsafe mechanism to protect 

Medicare’s finances in the event that action is not taken to address the Trustees’ 

warning. If legislation to address the Trustees’ warning is not enacted, the Budget 

proposes to require automatic across-the-board cuts in Medicare payments. The Administration’s proposal would ensure that action is taken to improve Medicare’s sustainability. President Bush proposes total outlays of nearly $700 billion for Health and Human Services. That is an increase of more than $58 billion from 2006, or more 

than 9.1 percent. 

While overall spending will increase, HHS will also make its contribution to keeping America competitive. To meet the President’s goal of cutting the deficit in half 

by 2009, we are decreasing HHS discretionary spending by about $1.5 billion in the 

next fiscal year. 

I recognize that every program is important to someone. But we had to make hard 

choices about well-intentioned programs. I understand that reasonable people can 

come to different conclusions about which programs are essential and which ones 

are not. That has been true with every budget I’ve ever been involved with. It remains true today. There is a tendency to assume that any reduction reflects a lack 

of caring. But cutting a program does not imply an absence of compassion. When 

there are fewer resources available, someone has to decide that it is better to do 

one thing rather than another, or to put more resources toward one goal instead 

of another. 

Government is very good at working toward some goals, but it is less efficient at 

pursuing others. Our budget reflects the areas that have the highest pay-off potential. 

To meet our goals, we have reduced or eliminated funding for programs whose 

purposes are duplicative of those addressed in other agencies. One example of this 

is Rural Health where we have proposed to reduce this program in the Health Resources and Services Administration, given that HHS administers 225 health and 

social services programs that provide resources to rural areas. In addition, the Medicare Modernization Act contained several provisions to support rural health, including increased spending in rural America by $25 billion over ten years. For example, 

it increases Medicare Critical Access Hospitals (CAH) payments to 101 percent of 

costs and broadens eligibility criteria for CAHs. Moreover, recognizing that Congress 

adopted many of our saving proposals last year, we are continuing to make performance-based reductions. 

Our programs can work even more effectively than they do today. We expect to 

be held accountable for spending the taxpayers’ money more efficiently and effectively every year. To assist you, the Administration launched ExpectMore.gov, a 

website that provides candid information about programs that are successful and 

programs that fall short, and in both situations, what they are doing to improve 

their performance next year. I encourage the Members of this Committee and those 

interested in our programs to visit ExpectMore.gov, see how we are doing, and hold 

us accountable for improving. 

President Bush and I believe that America’s best days are still before her. We are 

confident that we can continue to help Americans become healthier and more hopeful, live longer and better lives. Our FY 2007 budget is forward-looking and reflects 

that hopeful outlook. 

Thank you for the opportunity to testify. I will be happy to answer your questions. 

f 

Chairman THOMAS. Thank you very much, Mr. Secretary. I 

know that today’s hearing is designed to focus on the President’s 

Fiscal Year 2007 budget, so we are talking about today and principally tomorrow in the area of HHS. I do want to underscore, so 

12 

if someone wonders why we aren’t going to spend a lot of time on 

Social Security, notwithstanding the initial statement, Social Security was made independent from HHS in 1995, and that will be the 

subject of other hearings that will come before us. 

So, mindful of the fact that we are supposed to look at today and 

tomorrow, I think, nevertheless, a brief comment from you, Mr. 

Secretary, about yesterday. Last year we went through some very 

unprecedented natural occurrences. It was kind of headlined by 

Katrina, but clearly, it was hurricanes in the plural that we had 

to deal with, and your responsibilities were important in making 

sure that people were comforted. I will provide you with a brief period of time if you so choose to make some comments about that 

prior to our examining the 2007 budget, which is the purpose of the 

hearing. Mr. Secretary? 

Secretary LEAVITT. Mr. Chairman, that period of time was a 

profound moment in human service history. It was a point in time 

where literally millions of our citizens were displaced and found 

themselves in need of human services in a way that most of them 

had never experienced and never thought they would experience. 

I spent a good share of the month of September and October 

traveling to shelters where people were making temporary homes, 

where we were delivering health and human services to literally 

hundreds of thousands of people, including medical care, including 

all of the array of human services that our society has established 

to create that kind of safety net for people in need. 

One of the things I believe Hurricane Katrina taught us is that 

once the disaster has concluded, that helping people put their lives 

back together is a very important part of recovery. The Congress 

saw fit to allocate $550 million to go to the Social Services Block 

Grant, for example, to the affected States. I am happy to announce 

today that we have allocated the funds to the States, and that they 

will be going to the States immediately. We have allocated it based 

on a percentage of the Federal Emergency Management Agency 

(FEMA) registrants for each of the three hurricanes, Katrina, Rita 

and Wilma. 

In recognition of the severity of Hurricane Katrina, registrants 

from that hurricane are double weighted under the formula. Each 

Katrina registrant is counted twice, whereas each registrant from 

Rita and Wilma will be counted once. The allocation formula also 

weighs total FEMA registrants by the percentage of individuals in 

poverty in each State. That is to say, that the total number of 

FEMA registrants from Mississippi, for example, is multiplied by 

the percentage of individuals in poverty in Mississippi. 

The Department believes that the allocation formula directs 

funds to the States in a manner that is effective, and that it realizes the President’s commitment to ensure that no State will be unfairly disadvantaged for providing aid and for providing services to 

affected individuals. 

I would like to acknowledge as well that in the course of all of 

the recovery, little note came about the fact that the States provided benefits to nearly 500,000 people. It was almost unspoken. It 

just happened. They stepped up. They provided the benefits, and 

have taken care of people in a time of need, in many cases people 

who were not from their States. They did it without hesitation. 

13 

Chairman THOMAS. Thank you very much. Earlier, the Chair 

mentioned briefly a quote, and I have a series of quotes which I 

think are going to be useful as we talk about the phasing in of the 

single biggest expansion of the program in its history. I have a 

quote from the Fresno Bee, July 1, 1966, and it is an editorial saying, ‘‘Medicare is here and there will be problems, but society has 

determined it is needed in the name of compassion. It is this spirit 

which must guide all who have anything to do with putting it in 

practice.’’ 

More to the point, the Waltham, Massachusetts News Tribune, 

on July 2nd, 1966 said, ‘‘The most persistent problems occurred 

when hospitals ran out of government forms or patients forgot to 

bring their Medicare identification card. ’If we are by the worst of 

it, I think this thing is going to work. If Medicare grows over the 

next 6 to 10 months, we’ll be able to grow with it and handle any 

problems that come up,’ a hospital spokesman indicated.’’ 

I notice you have charts showing clearly that from the beginning 

of January until now, in anticipating the continued ability to deal 

with the unprecedented numbers since the inception of the program. The Chair looks forward to the Secretary making those presentations when such questions are asked. 

The Chair sees that his time is up, and the Chair will hold all 

Members to 5 minutes, including himself, and the Chair recognizes 

the gentleman from New York for any questions he may have. 

Mr. RANGEL. Thank you, Mr. Chairman, and thank you again, 

Mr. Secretary. 

In getting back to the philosophical deal of the Administration, 

and it is your position, as a trustee on the Social Security Trust 

Fund, do you believe the time has come where the Social Security 

system should shift more responsibility of retirement to the recipient, and that the private accounts would be a better way to do this 

rather than the Social Security as we see it today? 

Secretary LEAVITT. Mr. Rangel, as the Chair indicated, while I 

am a trustee—and I will answer in that capacity—it is not a direct 

responsibility of the Secretary of Health and Human Services beyond its trusteeship, but I take the responsibility as a trustee very 

seriously. 

Mr. RANGEL. I thought I mentioned—I described you as that. 

Secretary LEAVITT. You did it perfectly, sir. 

Mr. RANGEL. Thank you. 

Secretary LEAVITT. There is little question that Social Security 

is a problem. There comes a time in the life of every problem when 

it is big enough you can see it, but still small enough you can solve 

it. Social Security—and I would add the other two or three other 

major entitlements—are clearly in that window. It is my view that 

there are innovations that we can use that will in fact improve the 

long-term viability and the sustainability of not just Social Security 

but for Medicare and Medicaid. 

Mr. RANGEL. You do believe that there is a role for government 

to play, and that the entire responsibility for health and pensions 

should not be left entirely to the private sector? 

Secretary LEAVITT. Clearly, government has a role both in establishing, maintaining, regulating and assuring their success. 

14 

Mr. RANGEL. Would you make an exception to prescription 

drugs, as you turn that over to the private sector, that that was 

either a tremendous mistake or a lot of corrections would have to 

be made? 

Secretary LEAVITT. Actually, I am very supportive of what has 

been done on prescription drugs. First of all, we have a prescription 

drug program for the first time for millions, and the prescription 

drug coverage that millions more had is now more secure. So, the 

government—— 

Mr. RANGEL. So, that means that we as Members of Congress 

can go to our constituents and say that the Federal Government is 

proud of Medicare Part D, we are proud of what we have done, and 

if we had to do it again, we would do it the same way? 

Secretary LEAVITT. We are 38 days into the biggest change in 

Medicare’s history. We are 38 days into what may be the most significant long-term change in our health care system in some 40 

years. Let me just give you an overview of the big picture. 

Mr. RANGEL. Mr. Secretary, we are here for the short term; the 

elections are in November. The answer to your question is, if we 

had to do it again, the Administration would do it the same way, 

and that they are very proud of the way we have taken over the 

prescription drug program. Then we need, for reelection purposes, 

the rest of the follow up, but basically at the end of the day at the 

townhall meeting, we are proud of the money that we have given 

to the private sector and how they have handled it in providing 

prescription drugs to our older people. 

Secretary LEAVITT. This country will feel more than satisfied. 

I think they will be very pleased as this program has a chance to 

take legs and to operate—— 

Mr. RANGEL. Just give us the literature and that is all we got 

to run with anyway. Having said that, would we be just as proud 

of the HSAs, because it seems to be—and I hope you would agree— 

that having the HSAs takes the risk from the employer and shifts 

it really to the employees to take care of its own health needs, the 

same way the 401(k)s were supposed to take care of the employees’ 

pension needs. Do you see an analogy between the two? 

Secretary LEAVITT. Let me respond by saying I think the country will be quite unpleased if we continue to have health care costs 

that escalate beyond what they are—— 

Mr. RANGEL. I agree with you there. 

Secretary LEAVITT. —sixteen percent of the gross domestic 

product. Unless we are able to find some way—— 

Mr. RANGEL. We are talking about the solution, Mr. Secretary. 

Everything that the President has decided—how he wants it 

done—has been a real problem, whether it is getting out of Iraq, 

cutting back the deficit, trying to provide for the poor and Katrina. 

So, we know the problem and we aren’t working in a bipartisan 

way, unfortunately, toward the solution. Playing the cards that we 

do have, I am just asking—we know the problem of the soaring cost 

of health care, what the cost the employers have. I am asking, will 

the HSAs shift that risk more to the employee rather than the employer? 

Secretary LEAVITT. The HSAs will make cost-conscious consumers of all of us, and it will in fact, I believe, have a positive 

15 

impact of connecting people to their health care decisions. When 

that—— 

Mr. RANGEL. Will that lessen the cost to the employer? 

Secretary LEAVITT. It will lessen the cost of health care to all 

of us, and assure that we can provide health care to more and more 

people. 

Mr. RANGEL. The answer is yes. 

Secretary LEAVITT. The answer is it will lessen the cost of 

health care to all of us, and that—— 

Mr. RANGEL. Including the employer. 

Secretary LEAVITT. That is correct, including the employer, 

which is an important part of keeping the American economic 

equation competitive, so that people can have jobs and that they 

can pay for health care. 

Mr. RANGEL. There are figures in the budget to justify how 

HSAs will be costing us less in health care, the cost of the HSAs 

compared to the current cost. Do you have any numbers anywhere 

to say that it will be less costly? 

Secretary LEAVITT. What is clear is that if we are able to take 

the expenditures that we make currently and use them more efficiently, we can provide health care to far more people. Currently 

there are far too many, somewhere between 35 and 45 million in 

America who have no health insurance. That is something we 

would all like to change, and HSAs is a very good part—— 

Mr. RANGEL. I agree with what you said, but we don’t have figures that justify saying this is going to cut the cost as it relates 

to the Federal Government. 

Secretary LEAVITT. I think it is very clear that it will help constrain the cost of health care, and then we all benefit when the cost 

of health care, the Federal Government, State governments and individual consumers, employers, our economy generally. 

Mr. RANGEL. I may agree with you, but it is not in the budget. 

That is all, it is not in the budget. 

Secretary LEAVITT. It hasn’t been implemented yet, Mr. Rangel. 

I don’t know how—— 

Mr. RANGEL. So, there are no estimates, right? 

Secretary LEAVITT. I think economists have been very clear 

that, in fact, making cost-conscious consumers creates a downward 

pressure on health care, and if we are all paying less, we are all 

happier. 

Mr. RANGEL. Thank you, Mr. Chairman. I tried. 

Mr. SHAW. [Presiding.] The time of the gentleman has expired. 

Mr. Secretary, I would like to add my welcome to you to the 

Committee. We have been holding, in my congressional district, a 

number of Medicare meetings, townhall types meetings in order to 

familiarize my constituents with the new drug bill. There has been 

a lot of enthusiasm, the attendance has been high; but there is also 

some confusion, and I would like to direct you to one specific issue, 

which I think is probably—I think my constituents are—really, politics is getting into this more than anything else, and I would like 

for you to try to clear this up this morning. 

One of the specific issues that my seniors continue to raise is a 

concern about the bait and switch issue of Part D plans dropping 

coverage of a particular prescription drug mid year. I think Mr. 

16 

Stark made comment to that in his opening statement. Would you 

explain to me what is being done to prevent this? Is there any way 

that the program can be amended or should it be amended to prevent this mid year switch? 

Secretary LEAVITT. This is a subject where people express concern. To my knowledge, no plan has yet amended their formulary 

to do that. There is a process. They cannot do it independently. 

They cannot do it on their own. They have to go to CMS, make an 

application, demonstrate that it is in the best interest of the plan. 

In many cases they may be shifting in a way that will make their 

plan either more competitive or will provide greater choices, but 

they can’t do it without going through a significant process to demonstrate why it is being done, and have regulatory approval to do 

it. Those who suggest that it has happened misstate the facts. It 

has not. There is a process through which the plans can amend it, 

but it is not going to be done in a large number of cases, nor will 

it be done without oversight. 

Mr. SHAW. In my congressional district there are over 40 plans 

for the seniors to choose from. What is currently being done to improve the way the seniors navigate through all this information, 

and what advice would you give the average senior who is very 

frustrated with the entire enrollment process? 

Secretary LEAVITT. I have been at the site of many enrollments. 

My father is here. I helped him enroll. I helped my wife’s mother 

enroll. I have some experience with this, and I have some specific 

suggestions, but primarily it involves just getting drugs together, 

sitting down with someone who can help them if they need help. 

If you go on the 1–800–Medicare line, which has a less than oneminute wait now, they will talk people through it. Or if they like 

to use the Internet or have a family who does, they can do it from 

start to finish in less than one-half hour. 

I was in Oklahoma this week, and I sat down with a woman 

named Dorothy. She had just walked up to an enrollment fair, had 

not thought she would line up. Called the drug store, got the list 

of six medications that she took. She was paying $300 a month. In 

less than a half an hour at an enrollment fair, she was able to 

come up with a plan that cost her $36 a month including her 

copay. She will save $3,000. People are having that experience all 

over America. 

We are signing up 250,000 new enrollments a week. If that 

wasn’t a good plan, if people weren’t saying to their neighbors, ‘‘I 

saved money,’’ if they weren’t saying to their neighbors, ‘‘I got my 

prescriptions filled just fine,’’ we wouldn’t be having 250,000 new 

enrollments a week. This is a good deal for seniors. 

Some require assistance. Health care is not without complication, 

and for that reason we have established 10,000 partnerships at 

drug stores. Pharmacists are helping people in heroic ways. This is 

a huge transition but we are working our way through it. We have 

over 24 million people who are now participants, and it goes up 

every day. 

Mr. SHAW. In the time I have left, I want to get into another 

area. As you know, the issue of cancer treatment, early detection 

and prevention is near and dear to me. I owe my very life to early 

detection. I am actively supporting the National Cancer Institute’s 

17 

goal of ending the suffering and death due to cancer by 2015. I am 

extremely disappointed and discouraged to see that the President’s 

proposed budget cuts 40 million in funding from the National Cancer Institute. I also understand that if we want to reach the 2015 

goal, the key does not lie solely in the appropriation process. I will 

soon be introducing legislation strengthening the amended Medicare Program in the area of cancer treatment and detection. With 

the baby-boomers approaching Medicare age, we will have a major 

crisis on our hands in this program. We must lay the groundwork 

for us to provide these future beneficiaries with adequate cancer 

care. 

What specific improvements to the Medicare Program would you 

like to see in the area of cancer screening, treatment and prevention, and how can the Committee on Ways and Means help achieve 

this 2015 goal? We are so close to finding a cure, and this falls in, 

I think to No. 7 in your opening statement, that it is effective, what 

we are doing. When you are in a foot race, you see the finish line, 

you don’t jog, you sprint, and I think we can do a better job. If you 

would address that, I would be most grateful. 

Secretary LEAVITT. Mr. Shaw, your question is asked both, as 

you suggest, with personal experience and conviction, as well as 

wisdom. It deserves a lengthy response and one I would be happy 

to give you either privately or submit for the record. I see that time 

is out, and therefore, don’t want to shortcut the answer. 

Mr. SHAW. I would very much appreciate hearing that, and I 

would like for it also to be part of the record. 

[The information was not received at time of printing.] 

Mr. SHAW. Mr. Stark? 

Mr. STARK. Thank you, Mr. Chairman. I want to submit for the 

record a letter that was sent to Dr. McClennan on February 2nd. 

It was a study of five ZIP code districts, taking prices from the 

Medicare.gov website, and it shows that, for instance, in New York, 

the plans in the first month, 38 of the 47 plans increased the cost 

of a five-drug package which generally covers drugs used by senior 

citizens for a variety of common ailments. The average cost increase was $155.80 a year. The increases range between a dollar 

and $400 annually. This is in the first month of the plan, and it 

was studied across the country, New York, California, Florida, Illinois and Texas. 

Mr. Secretary, if you haven’t seen it, I would ask you to look at 

a copy of it. I would like to make it part of the record, Mr. Chairman, which defines that these companies are kicking up prices, and 

the seniors will have until May, I understand, to switch, but I 

think that in the program of Part D, one would presume that when 

the benefit managers get a contract for a prescription drug they 

would have assurance that they could hold the price for at least a 

year, and I hope that your office would look into it. 

Then further, we wrote to Dr. McClennan and Mr. Levinson—I 

hate to be tattling on your subordinates here, Mr. Secretary—there 

are some plans that are violating the law, and I am sure as a 

former insurance broker, you are aware of this idea of coercing people or low-balling them into a drug plan, and then an attempt to 

sell them on the managed care plan, which may also be operated 

by the benefit manager. That is against the law. It is on page 131 

18 

of the Marketing Guidelines. Humana is one of the serious offenders. We have asked that the Inspector General look into that and 

that it be prohibited, and they should have to immediately cease 

from those practices. I hope you will look into that. I would like to 

make this letter to Dr. McClennan and Mr. Levinson part of the 

record. 

A final question then deals with MedPAC, who we have learned, 

at least, has been bipartisan, quite objective in advising all of us, 

and I want to know if you can tell me what MedPAC recommended 

with respect to Medicare Advantage payments. Are you aware of 

their recommendation there? 

Secretary LEAVITT. No. I mean I am not able to give them to 

you today. 

Mr. STARK. Okay. They did recommend that we cut back, and 

we are overpaying them. It is costing—for everybody who signs up 

for one of these plans, it costs the government more, increases adverse selection against either Medicare or other plans, and there 

seems to be no reason why we couldn’t save perhaps $50 billion 

over 10 years by reducing the overpayments that we are now making to these Medicare Advantage plans. 

Would you assume for a moment that I am right, that for everybody who signs up into one of these plans, they cost the government more, they create adverse selection against the fee-for-service 

part. Would you think that perhaps it would be a good idea to review and lower the payments to these Medicare Advantage plans, 

at least to the price that we pay for fee for service Medicare? 

Secretary LEAVITT. Would you like me to respond to all three 

of your questions or—— 

Mr. STARK. Should we—if in fact, MedPAC is correct, don’t you 

think that we should lower the price that we pay to these managed 

care plans? 

Secretary LEAVITT. The managed care plans ought to operate 

under the same price structure that other providers do, and if they 

are able to find ways of creating efficiency, they ought to realize 

the benefit of that. 

Mr. STARK. Should they be paid more, which to say, paid about 

115 percent of what we pay even standard fee-for-service Medicare? 

Does that sound fair to you? 

Secretary LEAVITT. The objective is very clearly to give consumers a choice. If they choose and find the services better, they 

should have the capacity to do so. You raised the issues on prescription drug plans. We are without question now seeing 

prices—— 

Mr. STARK. Should the taxpayers have to pay that, Mr. Secretary, or should the plans—because the plans can provide better 

care. In my district, Kaiser Permanente is one of the best managed 

care plans in the country, but my question is, should they be overpaid, or should they be able to operate in the market like everybody else? 

Secretary LEAVITT. In the long run the objective is to find uniformity and to find efficiency, and I know that there have been 

phase-ins that ultimately will end. The Congress did that for a reason. I suspect it was a good reason, and over time those will phase 

19 

out, and they should be allowed to find efficiency, and where they 

do, they should be rewarded. 

Mr. STARK. There is no savings from these managed care advantage plans, so it might be something to look at. 

Mr. SHAW. The time of the gentleman has expired. Without objection, the two letters referred to will be made a part of the record. 

[The information follows:] 

February 2, 2006 

The Honorable Mark McClellan, Administrator 

Centers for Medicare and Medicaid Services 

Washington, DC 

Dear Dr. McClellan: 

In addition to other startup problems with the new Medicare Part D drug benefit, 

a consumer issue appears to be developing that has serious long-range implications 

and, unless corrected, could seriously harm consumer confidence in the program. A 

cursory sample of various drug plans (see below) conducted by Consumers Union 

has revealed that the cost of some prescriptions has dramatically increased in just 

1 month; in the many plans with cost increases, the average increase in annual cost 

was about 5 percent. 

While by no means a true representative sample, these initial numbers may serve 

as a ominous warning sign that consumers cannot count on price stability in these 

drug plans, stability which is so vital to seniors on a fixed budget. 

Our small sampling of drug prices in five Zip Codes throughout the country from 

the Medicare.gov Web site (which states that it cannot guarantee the accuracy of 

company data) included an examination of the popular drug Lipitor, as well as a 

bundle of five drugs for various common ailments. The prices were sampled at the 

end of December 2005 before the benefit began, and at the end of January—1 month 

into the program. 

A majority of plans sampled showed an increase in annual costs to consumers. These increases ranged from as little as $1 to, in some cases, over $400 annually. 

Several companies did reduce annual costs (and one Texas plan had a major downward correction). But overwhelmingly, the annual cost of plans for this sample package of drugs was upward. In the New York survey, for example, 38 of 47 plans increased the cost of the five-drug package, with an average increase of $155.80. 

With the 2004–2005 prescription drug discount card program, prices of drugs 

moved up and down, but a majority trended downward—which was great news for 

consumers, but begs the question why prices are up so sharply on these five drugs 

in most Medicare Part D plans in the first month. 

Is CMS tracking all drug prices in all plans? And if so, are you finding this general trend upward? Should consumers be warned of this development and review 

their choice while they still have the opportunity to switch plans before May 15, 

2006? 

We had assumed that when a Prescription Drug Plan (PDP) negotiated discounts 

with a drug manufacturer, it would lock in that price for a contract year to provide 

price stability to the Medicare beneficiaries who elect to join that plan. That assumption appears not to be accurate. Is there information on whether any PDPs 

have negotiated such price stability? If so, could that information be made public 

so that the consumer would know which plans offer some stability, and which are 

likely to be more price volatile? 

Our nation’s seniors have been going to a great deal of work to pick a plan that 

is best for them, with the understanding that they will pay a set premium for the 

year for a reasonably defined benefit package. While this first initial enrollment period permits non-Medicare/Medicaid (dual eligible) consumers to make one switch in 

plans, after May 15th they are locked into their plan through the end of the year. 

Consumers Union’s initial data shows—at least for the sampled drugs—that a consumer’s thoughtful shopping choice can be diminished or perhaps even negated by 

changes in the plan’s charge for one or more drugs. In some cases, the price increases are so large, they smell of a bait-and-switch. 

If CMS is detecting the same trend of price increases, we hope you will immediately and publicly urge the drug plans to halt these price increases. We also urge 

CMS to publicly report on the full range of price movements so that consumers can 

avoid plans that are showing this type of bad faith at the very beginning of this 

vital health program. Right now there are more than enough plans for Medicare 

beneficiaries to choose from—but seniors need to be made aware of those plans with 

20 

poor startup service and bait-and-switch pricing behavior to make informed decisions about their health care. 

Sincerely, 

William Vaughan 

Senior Policy Analyst 

Consumers Union, publisher of Consumer Reports 

Changes in Annual Cost to Medicare Beneficiaries for selected prescription drugs between December 28, 2005 and January 30–31, 

2006 as reported on www.Medicare.gov 

State and 

zip code Drug 

# of PDPs that 

increased 

annual cost 

# of PDPs that 

decreased 

annual cost 

# of PDPs that 

had no price 

change in the 

month 

New York Lipitor,1 10 mg 12 0 35 

Package of 5 drugs 38 3 5 

California Lipitor 10 0 38 

Package of 5 drugs 36 7 5 

Florida Lipitor 7 0 36 

Package of 5 drugs 34 5 4 

Illinois Lipitor 9 0 34 

Package of 5 drugs 35 5 2 

Texas Lipitor 10 1 36 

Package of 5 drugs 37 8 2 

1The Lipitor increases were all minor, generally about $10 increase in annual cost. 

In using the Medicare.gov Website, only PDPs were selected (no MA–PDs), no 

preference was given to pharmacy, and all plans serving that Zip Code were reviewed. 

The package of 5 drugs includes one medicine from each of five major classes of 

drugs: it is not meant to be a package of drugs that anyone individual would take. 

It consists of Altace 10 mg capsules (an ACE inhibitor for high blood pressure); 

Celebrex 200 mg capsules (for joint pain, etc.); Lipitor 10 mg tabs (for cholesterol 

adjustment); Nifedipine 30 mg extended release tabs (for chest pain and high blood 

pressure); and Zoloft 100 mg tabs (for anti-depression). 

The Zip Codes are 00501, Long Island, NY; 32425, Bonifay, FL; 60406, Chicago, 

IL; 75135, Caddo Mills, Texas; 94246, rural Northern California. 

January 26, 2005 

The Honorable Mark McClellan, M.D., Ph.D. 

Administrator 

Centers for Medicare and Medicaid Services 

200 Independence Ave, S.W. 

Washington, DC 20201 

Daniel R. Levinson 

Inspector General 

Health and Human Services 

330 Independence Avenue 

Washington, DC 20201 

Dear Dr. McClellan and Mr. Levinson: 

I am writing to bring your attention to a very disturbing article that appears in 

BusinessWeek online (see enclosure). According to this article Humana is violating 

CMS regulations by paying higher commissions to sales representatives enrolling 

21 

people in Medicare Advantage (MA) plans rather than stand alone Prescription 

Drug Plans (PDP). An article in yesterday’s Wall Street Journal (also enclosed) also 

references Humana’s strategy on enrollment and implies that it may be widespread 

among organizations that offer both MA and PDP plans. 

Coercing beneficiaries to join the Medicare Advantage plan when they attempt to 

join a stand-alone drug plan is a direct violation of the Medicare Marketing Guidelines issued August 15, 2005: ‘‘The commission rate (i.e., the percentage per enrollment) should not vary based on the value of the business generated for the Plan 

Sponsor paying the commission (e.g., profitability of the book of business).’’ (page 

131) 

Given the overpayments to MA plans, it is clear from these articles that Humana 

and perhaps other plans are steering plan enrollees into MA products to further 

their financial interests. I request the Inspector General open an immediate investigation into the marketing practices of Humana and all contractors who offer both 

stand-alone PDPs and MA–PDs to identify which plans are using these illegal marketing schemes. 

Furthermore, CMS must immediately direct plans to cease and desist this deceptive marketing, and impose appropriate sanctions for breaking the marketing guidelines. Plans that continue to violate the guidelines should have their contracts terminated. 

Beneficiaries are already overwhelmed trying to navigate the new law. They 

should not be subject to bait-and-switch tactics or other misleading marketing ploys 

once they have made a decision to enroll in a plan. Beneficiaries who express interest in MA offerings should be mailed information so that they have time to make 

an informed choice by evaluating the new plan and checking whether their providers are in its network. They are unable to make a properly informed choice when 

presented with the option over the phone. 

It is imperative that CMS and the Office of Inspector General hold Part D plans 

accountable for their misdeeds. If the law does not grant sufficient authority to 

allow the Administration to protect Medicare beneficiaries from these predatory 

practices, I ask that you work with me as soon as possible to enhance your enforcement capabilities under the statute. 

Sincerely, 

Pete Stark 

Ranking Member 

f 

Ways and Means Subcommittee on Health 

Mr. SHAW. Mr. McCrery. 

Mr. MCCRERY. Thank you, Mr. Chairman. Secretary Leavitt, 

welcome. On the question of the managed care plans, the President, I believe, is signing today a piece of legislation, the Spending 

Reconciliation Bill, which Congress just passed. Does it contain a 

reduction in expenditures for Medicare managed care plans over 

the next 5 years? 

Secretary LEAVITT. I don’t know the answer to that, Congressman. 

Mr. MCCRERY. It contains $6.5 billion. So, we have taken to 

heart Mr. Stark’s suggestions—at least to that extent, and I agree 

with him we need to continue to monitor that, and make sure that 

that sector of the Medicare program is not unduly reimbursed. 

I also agree with him that we need to closely monitor the actions 

of participating private sector plans and Medicare Part D. I am not 

familiar with the reports that he cited, but I would like to review 

those. I also know though of a number of other reports that have 

been issued recently that show that out of the top 25 pharmaceuticals most often purchased by seniors, there are discounts 

ranging from 35 percent on average at retail pharmacies, to a 46 

percent discount with the mail order plans that are available under 

Medicare. Obviously, those studies, while not in conflict, may not 

give different impressions. So, it appears to me that at least from 

22 

some studies that have been published, the private sector is doing 

a very good job through competition of lowering the price that the 

pharmaceutical—— 

Mr. STARK. Would the gentleman yield for a second? There were 

several plans, although only about 10 percent that actually lowered 

cost, but the predominance was not. There were some that lowered. 

Mr. MCCRERY. Yes, but I think on average this refers to prices 

under the plans compared to over-the-counter prices before the 

plans were instituted, and that is certainly an improvement for 

seniors. We do need to continue to monitor that. 

Mr. Secretary, you recently visited my home State of Louisiana, 

and I very much appreciate your taking the time to visit the health 

care providers in the New Orleans area. I don’t represent New Orleans, as I am from Shreveport, as far away from New Orleans as 

one can get and still be in Louisiana, but New Orleans and the surrounding area is extremely important to our State, to the economy 

of my State, and so I certainly am concerned about that. Louisiana 

faces significant challenges as we try to rebuild the health care system in that part of our State. I am just interested in hearing from 

you firsthand what your impressions were, what you took away 

from that visit, and what plans HHS might have to further assist 

getting the health care system in that region of my State up and 

running again? 

Secretary LEAVITT. Congressman, my first visit to pursue the 

goal you have discussed, the rebuilding of the health care system, 

actually took place in week two, where I met at the New Orleans 

Airport with hospital administrators to begin essentially a triage of 

the health care system. I have since met regularly with them, and 

I was in New Orleans about 3 weeks ago for an entire day, where 

I met with all of the major hospital administrators, the insurance 

plans, the Members of Congress from the State, various legislators. 

We had a very large group and met for an entire day to begin developing a collaborative approach to the rebuilding of the medical 

infrastructure in the greater New Orleans area. 

It is clear to me as well that the State of Louisiana sees this as 

an opportunity to begin to make dramatic changes for the better 

in their health care system generally. There is an opportunity in 

the greater New Orleans area brought about by this devastating 

catastrophe to build the medical system of the future. 

Frankly, I was in New Orleans the week before Katrina. I was 

told by the head of the Department of Health there that if you 

were to go to any hospital in the New Orleans area on an emergency, you would have a 24-hour wait. That is unacceptable. The 

system was not working. The opportunity here is to create a new 

system that provides outreach, not just in tertiary hospital emergency rooms, but in community health centers, and having a system that literally is driven by electronic medical records and where 

everyone has access to health care. There is a very exciting opportunity, and, frankly, there is available resources to do that, because 

once we take the money that is being spent on Medicaid and disproportionate share payments and Medicare and all of the other 

grants available, and the generosity of the Congress, there is an opportunity that is unsurpassed right now in the Gulf region to build 

23 

a health care system of the future, and I think there is a good 

sense of interest in doing it. 

Mr. MCCRERY. Thank you for your interest, and I am hopeful 

that you will direct the Federal Government’s effort to be a partner 

with Louisiana in building that new, more modern, progressive 

health care system in that region. We badly need it. 

I want to ask you about the Intravenous Immune Globulin 

(IVIG). I did get your letter today. Appreciate that, and appreciate 

the efforts to make sure that patients have access to the IVIG 

products. Thank you. Thank you, Mr. Chairman. 

Mr. SHAW. Mr. Levin? 

Mr. LEVIN. Thank you very much. Welcome, Mr. Secretary, and 

your family. 

Secretary LEAVITT. Thank you. 

Mr. LEVIN. We are going to discuss Social Security some other 

time. I just want everybody to understand—and you are a trustee—what is in the President’s budget. For the first time there are 

actual figures representing the effect of privatization of these private accounts. There is also spelling out the proposals which are 

essentially the same as they were when the President presented 

them last year. The cost is $81 billion plus over the years 2007 to 

2011, and $712,144,000,000 in a 10-year period. 

I raise this because you mentioned your philosophy, and Mr. 

Rangel raised it, and it is clear, it seems to me, when you put this 

all together, that what this Administration is proposing to people, 

whether it is health care, whether it is Social Security—and I want 

to come back to other issues—more and more you are going to be 

on your own. 

On the HSAs, for example, I was reading a recent article in the 

Wall Street Journal, and they quote people who make clear that 

that is the impact. This is one quote from a health care analyst: 

‘‘The risk is being transferred without the consumer really realizing that.’’ It is being moved from the employer to the individual. 

You also mentioned the subsidization—MedPAC has suggested a 

major change in the subsidization. We are subsidizing the HMOs 

in major amounts. Mr. McCrery mentioned a reduction, but most 

of the subsidization remained, and it was left in, in a conference 

where no Democrat participated. So, essentially, we have a movement here from a system with an assured health benefit and assured pension benefit, to everybody being on their own. I don’t 

think that should be masked. I think it should be said straight out. 

I wasn’t sure I was going to talk about the cancer, the National 

Institute of Health (NIH), but Mr. Shaw mentioned it, and so I do 

want to come back to it, Mr. Secretary, because I read from this 

op-ed that was put in on Monday by people at Johns Hopkins, and 

here is what they say: On an inflation-adjusted basis—and I 

quote—‘‘the current NIH appropriation is smaller than it was 4 

years ago in constant NIH funding dollars. The NIH funding has 

declined by more than $1 billion since 2003.’’ 

Now, I know you are given a number and you have to work with 

that number, but I don’t think we should mask—and you are not 

doing that—you should say straight out what the impact likely is, 

for example, on cancer research and other research, because this 

op-ed spells out the kind of negative impact that could occur on 

24 

cancer research at Johns Hopkins. So, you said you would like to 

provide something more detailed. Give us a straight answer on the 

impact of straight-lining NIH for a number of years on cancer research and other vital research. 

Secretary LEAVITT. Congressman, I don’t think we should move forward without acknowledging that we are investing $4.8 billion 

a year in this type of research. I would also like to make clear that 

I view the future of medicine to be much different than the past. 

The future of medicine is about finding ways to highly personalize 

therapies, to find ways that are preventative and preemptive, and 

much of the research that is being done to do that is at the National Cancer Institute, but much of the research is not. Much of 

it is at other institutes that are at the NIH. One of the most exciting is a new venture that we are instigating in a different area of 

NIH on genes and the environment, recognizing that we can identify the genetic makeup of the top 10 most socially costly diseases, 

cancer being one of them, and finding ways that we personalize our 

therapies. Now, that is not represented in the budget at NCI, but 

it is clearly benefiting from it. We are making a substantial investment. 

Would we all like to do more? The answer is yes. Will we do 

more in the future? The answer is yes. Are we contributing to finding the solution to cancer in other institutes? The answer to that 

is also yes. 

Mr. SHAW. The time of the gentleman has expired. Mr. Nunes? 

Mr. NUNES. Thank you, Mr. Chairman. Welcome, Mr. Secretary. 

I want to start off talking about—I basically have one question for 

you, but I do want to go back to some of the quotes that the Chairman was outlining in his opening statement, and when you go back 

to 1966 and 1967, many of the newspapers editorialized—and here 

is a quote from the New York Times. ‘‘This great new experiment 

must be given ample time to get over its growing pains.’’ That is 

a common theme that runs throughout most of the editorials when 

you go back to that time when the first parts of Medicare were first 

put into law. 

As negative as the press has been and that most Democrats have 

been on this new law, I, for the most part, believe that it is working pretty well, as evidenced by—in my district I don’t receive very 

many calls on Medicare Part D, and when we do recommend people 

over to automated phone service that CMS has provided, it has 

been very successful. Recently CMS has found that the net cost to 

the Federal Government is expected to be $30 billion, down from 

a previously estimated $38 billion. 

So, as we are moving through this process, Mr. Secretary, do you 

think that this new competition that has been added to Part D is 

going to continue this projected savings? I know that these are just 

your estimates, early estimates, but I want to know your thoughts 

on how competition among prescription drug plans is affecting the 

Federal budget as it relates to Medicare Part D. 

Secretary LEAVITT. Congressman, there is no question that 

competition is driving the cost of pharmaceutical products to consumers down. When we started this program the estimated cost 

was $37 a month. It is now $25 a month, almost a third savings. 

Not only are we seeing a couple hundred thousand people a week 

25 

enroll in this benefit, but we are seeing millions of prescriptions 

filled every day, and we are seeing costs fall, and we are 38 days 

into it. This was the most significant change in Medicare in 40 

years. No realist would expect that we would go through a change 

that is that profound, that large, without having some unexpected 

problems. We make no excuses. There were things that had to be 

fixed, but we found them, we fixed them and we are finishing 

them. Every day we are seeing the program work more smoothly. 

This is a good deal for seniors. The program is smoothing out in 

a way that I believe is going to benefit consumers on an ongoing 

basis. 

Mr. NUNES. I agree with you, Mr. Secretary, and furthermore, 

I think it is important to point out that, as you said, we are only 

38 days into this program. It was 40 years old, and I hope that you 

will continue to work with this Committee to make sure that we 

can smooth out these bumps in the road because the American people expect us to. This Committee has an important job. You have 

an important job. We don’t need to be continuing this constant 

badgering that the press and others have given you, that is, I 

think, totally unacceptable in this day and age. The American people expect us to make this program work. They asked for it. We 

have given it to them, and now we should work through the bumps. 

I thank you for your time here. 

Mr. Chairman, I yield back. 

Mr. SHAW. The gentleman yields back the balance of his time. 

Mr. Cardin? 

Mr. CARDIN. Thank you, Mr. Chairman. Behind each of these 

numbers and statistics is a person in this country who is struggling 

to meet their health care needs and deal with their own individual 

issues, and there are families that are concerned about it. 

So, Mr. Secretary, I just want to give you an example of one person who lives in my district. Her name is Barbara Waters. She suffers from epilepsy. Prior to January 1st, the medicines that she 

needs, $100 a month, was paid for under governmental programs, 

so she paid a small copayment. Because this drug is a 

benzodiazepine, it has been excluded from the Medicare Part D. 

She now has to pay $100 a month for this prescription. She asked 

me a very direct question. She said to me, ‘‘The President said that 

this program’s going to help people, that it won’t hurt any of us. 

I can’t afford $100 a month.’’ She has to get help from friends right 

now in order to buy her medicine. If she doesn’t buy it, she is subject to seizure. 

I guess my question to you is, will you support legislation that 

Mr. Ramstad and I have introduced, so that these drugs will be 

covered under Medicare Part D and we can live up to the commitment made to Barbara Waters and many, many other people when 

we said that this legislation would not harm those who are the 

most vulnerable, but would add additional benefits within the 

Medicare system? 

Secretary LEAVITT. Congressman, there are plans that can help 

people in your constituent’s situation. The Congress chose to exclude some drugs from coverage. You are right, every single person 

who has a problem, it is a very serious problem to them, and this 

26 

particular person you have talked about, I would like to see if we 

are in a position to be helpful to her. 

Mr. CARDIN. I thank you for that, because it is affecting her 

life, and I think we need to deal with it. She was protected before 

this law became effective, and now she is not. 

Let me move on to the second point. I must tell you, I am disappointed. I think you are the first Secretary in a budget appearance before our Committee not to mention the health disparity 

issues among minority populations and outcome, and life expectancy, and survivor rates from cancer, and from access to health 

care. I am concerned that the budget that you are presenting, 

which is going to flat fund NIH and cut dramatically from the professional education assistance, which, as I understand it, you are 

concerned as to how effective it has been in bringing minority professionals into health. 

I can tell you in my conversation with health care professionals, 

cutting the money, $120 million from this program, is certainly not 

going to be helpful in trying to attract more minority health professionals to gain access for minority populations and the NIH flat 

funding. So, what strategy do you have in order to bring more access of care to our minority populations? 

Secretary LEAVITT. I mentioned, Congressman, that I thought 

there were a number of programs where targeted strategy would 

be more efficient and better. This is a very good example. The idea 

is that currently we are funding a broad array of programs to assist in the recruitment of physicians and nurses and other health 

care workers. In many segments, we don’t have a shortage. We do 

have a significant shortage in the area that you have spoken of, 

and the idea is to say let’s have fewer programs that are funded, 

but let’s fund them better. 

Mr. CARDIN. My concern is if you cut the money, it would be 

one thing if you were going to put the money into a new program, 

but as I understand it, you are just cutting the funds. 

Secretary LEAVITT. If we just kept funding the program in the 

same way, and we weren’t more selective and more targeted, that 

would be an appropriate conclusion, but what I am suggesting to 

you is that there is a way for us to target our funds and have an 

impact in the areas where there are serious deficits that will be 

more profound than we have done in the past. It does mean that 

there are people who have been getting money from the Federal 

Government who won’t, but the areas that you have spoken of, 

there would be no reasons for us not to fund them more intensely, 

not less intensely. 

Mr. CARDIN. Thank you. Let me just ask a last question, and 

that is about the therapy caps that went into effect on January 1st. 

I personally have been working with 200 plus Members of Congress 

to get rid of the therapy caps because it is not good health care policy. The law allows you to issue regulations so that there could be 

exceptions to the therapy cap. Do you know the status of those regulations as to when they are going to be issued? 

Secretary LEAVITT. I don’t know the exact date. I have been involved in some discussions. I know, in fact, that they are under 

consideration. 

27 

Mr. CARDIN. If you could make sure that our Committee is kept 

aware of that, I would appreciate that. 

Secretary LEAVITT. I will get back with that. 

Mr. CARDIN. I would hope that you would also consider legislation to get rid of that therapy cap once and for all. 

Secretary LEAVITT. If I could get the name of the person that 

you were talking about, I would like to make certain that we are 

responsive to her need. 

Mr. CARDIN. I will get you Barbara Waters’ information. Thank 

you. 

Mr. SHAW. Mr. Ryan? 

Mr. RYAN. Thank you, Chairman. Thank you, Secretary Leavitt, 

for coming today. We have heard some talk about HSAs, which was 

a very important component of the Medicare law. I wanted to ask 

you a couple questions along that theme. I think it is important to 

note what HSAs are and what they have done. They have only 

been in law for about 3 years, and really in practice for a little over 

2 years. 

Some have said that HSAs are not working, they are not a good 

policy. If you take a look at the data, I think it speaks for itself. 

Number one, HSAs went from one million people using them a year 

ago to 3 million people using them now. Thirty seven percent of the 

people who have HSAs are people who did not have health insurance before. So, what HSAs have already done is priced health insurance within reach for 37 percent of those 3 million people who 

otherwise did not have health insurance. 

As far as the notion that there is adverse selection, the opposite 

has rung true. When you take a look at the data, over 30 percent 

of the people earn less than $50,000. Fourty five percent of the people who have HSAs are over 45 years of age. So, what we are finding is that HSAs have become a good tool for people with risky 

health profiles; for people with lower incomes; for people who are 

older; to get health insurance that they could otherwise not have 

afforded. 

The question is this. HSAs get the consumer back in the game 

because we believe the current third-party payment system where 

you really don’t care what things cost because somebody else is 

paying the bills, and you are not allowed to shop around on things 

like price and quality because you are either told who and where 

you have to go to by your HMO, or you don’t get that information 

in the first place. 

So, now that we have this insurance product in place to 

incentivize consumers to actually care what things cost, we don’t 

have the information necessary to make those kinds of decisions. 

That is the question I want to get to you. We have made progress 

on quality initiatives. The Medicare law put together a good quality 

initiative for hospitals. The DRA, which is being signed into law 

today, makes strides to improve dissemination of quality metrics 

for physicians. Where we don’t have much transparency is in price. 

This is the question, Mr. Secretary. In the President’s State of 

the Union address, he proposed a comprehensive agenda to make 

health care more affordable and more transparent. We have very 

little price information. Often when we get price information from 

physicians or hospitals, they are charged prices, not the actual paid 

28 

prices. There is a huge gulf between what is actually charged and 

what is paid, and they vary among payers, just within certain regional areas. 

In 2003, the Office of Inspector General proposed a rule to redefine charges to be the average negotiated market price. Number 

one, when does the Department intend to finalize this rule, and 

number two, what other steps is HHS taking to improve price 

transparency, actual price transparency, so people who are beginning to shop for health care can actually do so with real information? 

Secretary LEAVITT. Congressman, I don’t have to go any further 

than myself to find an example of where an HSA has improved my 

consciousness of decisions being made about my health and my 

purchases. 

After having an indemnity plan for a long time, I got an HSA, 

and for the first time I found out what my prescription drug costs 

were. It surprised me. I found that there was a generic, and for the 

first time it mattered to me, and I changed to the generic. The 

same thing happened with my spouse. 

I had a medical device I needed to buy. I found that the place 

I was going to be buying it through my health plan was far too expensive. It is kind of a colorful story—I won’t take the time to tell 

you—but I found I could buy it for less than a third if I made a 

purchase myself. I suddenly had a reason to care, and I concluded 

for myself, and it meant something to me. 

It is happening. It is happening across the country. The point 

you have made about 37 percent of those who subscribe to HSAs 

who have no insurance at all is a very clear indication to me that 

we are pricing health insurance outside the reach. If we were to 

do the same thing with car insurance, where it paid for your oil filter and your gasoline, like we do health insurance, it would be a 

very difficult thing to buy car insurance as well. So, I believe what 

we are doing is the right thing, and that there will be more and 

more who see the virtue of it. 

Mr. RYAN. What is HHS doing—— 

Secretary LEAVITT. What are we doing at the Department? I 

would suggest something you didn’t mention that is very important 

to this. It is health information technology, the capacity to gather 

information and to provide it to consumers in a way that they can 

use it. 

Secondly, people need to be able to go to a health care provider 

and know what they are charging for things. Now it will be difficult 

in the near term to make that transparent on everything, but there 

are some very common procedures that could be listed by providers. 

A second thing is the need to bundle at times on a procedure 

basis. If I go in for a hip replacement, or a knee or an appendectomy, I get a hospital bill that has 42 different things on it. I don’t 

know what is part of the charge, what isn’t. It would be nice if I 

could say to a hospital or provider, ‘‘What is it going to cost for this 

common procedure,’’ and be able to know, and that the providers 

would have to live up with that price. We can have an impact on 

that at HHS by making information known as to what we are paying so that there are cost comparisons and there is the capacity to 

have cost transparency. 

29 

Mr. RYAN. The proposed rules? 

Secretary LEAVITT. The proposed rules are in the works, and I 

am not able to give you a date, but I can tell you that they are in 

the works. 

Mr. RYAN. Okay, thank you. 

Secretary LEAVITT. Thank you. 

Mr. SHAW. Thank you. Mr. McDermott? 

Mr. MCDERMOTT. Thank you, Mr. Chairman. Governor Leavitt, 

it is good to have you here, and I am sure you remember your days 

as a Governor. 

Secretary LEAVITT. Indeed. 

Mr. MCDERMOTT. You are now operating in a place where the 

principle of this budget is that we pit one group of poor people 

against another for less money while we give tax holidays to the 

rich. I assert that on the basis of what I see in this budget. Seattle 

has the best urban Indian health program in the country. The 

budget put here today cuts it by 40 percent, and the assertion in 

the budget is, well, what you will do is you will just go to a community clinic. Now, you are going to go from a culturally sensitive 

clinic that has been dealing with Indian urban problems, and you 

are going to throw them out into the rest to compete with the other 

uninsured in the community. There is no justice in that. The problems that have been dealt with through that kind of program absolutely are going to be shattered. 

The same thing with your Social Security block grant. That Social Security block grant in Louisiana covers 36 percent of the children’s welfare costs in that State, and you are cutting half a billion 

dollars—excuse me, $500 billion out of that program. 

Now, I guess what you are saying is we are going to recoup the 

money from the rest of the country to pay for the problems of 

Katrina and the problems of Louisiana. This example you just gave 

about your cost-conscious stuff, what you are doing is pitting consumers, that is, patients, against insurance companies. 

Now, when you are going out to buy food or contact lenses or 

whatever, that is like buying tile or buying a refrigerator. The 

other day—I am glad you have your father here today, and I certainly wish I could have my son here today. He would tell you that 

the other day when his wife had an emergency C-section for a baby 

in distress, he did not go to his computer and look for where the 

cheapest hospital in Los Angeles was. It probably would have been 

Los Angeles County, about 30 miles away. Instead he went to the 

hospital 6 miles away where the doctor was that had taken care 

of his wife. 

Now, when you say that you are going to—if people got skin in 

the game, as they say, this is when they make these judgments. 

They will kind of sit there and be cost-conscious. My son was not 

cost-conscious. I did not want him to be cost-conscious. You would 

not have wanted him to be cost-conscious. 

Now, Governor Leavitt wrote us a letter on October 15, 1999, and 

he said—this is 1999. Now, this is a long time ago. ‘‘Further reductions in funding for Social Security Block Grant (SSBG) will result 

in cuts to vital human services for our most vulnerable citizens.’’ 

You went on to identify them as low-income children, families, and 

elderly and the disabled. 

30 

Now, you tell me what is the justice in this budget. How do you 

defend cutting programs that you yourself, when you were on the 

receiving end, said would hurt you? Do you think the 50 Governors 

are not going to be hurt by this budget? I would like to hear your 

response in justifying how you can cut programs where you know 

from your own experience—you had to deal with it. I had to deal 

with it in the State legislature, what goes on up here. So, I would 

like to hear you justify it. 

Secretary LEAVITT. Congressman, let me start back with the 

issue of the Indian health centers and the community health centers. One of the things I learned as Governor is that if you have 

two facilities and they are across the street from each other, while 

they may be sponsored by different organizations, that is a function 

of silos, and that you can likely have one and have it serve people 

better because you can have better facilities than if you have two 

and they are sponsored by different organizations and that somehow those barriers—and that is what we are doing in this situation, is we are saying we have already got community health centers, why should we have two facilities in one area as opposed to 

having one excellent facility. 

Mr. MCDERMOTT. So, you are cutting out the Indian health 

service clinics by design in order to shove those Indians into the 

community? Is that it? 

Secretary LEAVITT. I hadn’t thought of it as ‘‘shove them,’’ but 

we certainly invite them to have good quality care at community—— 

Mr. MCDERMOTT. You give them no alternative. 

Secretary LEAVITT. Where we, I might add, serve already about 

14 million people in a program that people love, compete and 

scramble to get one. Now, I would also like to talk a little bit about 

the use of funds to cover more people. One of the reasons that we 

are looking to have more efficient systems is because it allows us 

to cover more people. It is a lot better for everyone to have access 

to basic quality care than it is for a few to have unlimited care. 

That is the reason we have to be cost-conscious. 

I would like to respond to the block grant issue. There is no question that your view is based on where you sit, and I have now sat 

in both places, and I can tell you why it is that Governors like 

those grants. First of all, it is very flexible money. By flexible, it 

is also very difficult to know where it is having an impact and 

where it is not having an impact. 

Mr. MCDERMOTT. We set it up that way because you asked for 

a block grant—— 

Secretary LEAVITT. There is no question—— 

Mr. MCDERMOTT. —we had specific programs, and we lumped 

them all together and said here is the money, do it flexibly. 

Secretary LEAVITT. If we were not in deficit reduction, I would 

be suggesting that that would be a fine place to put that money, 

but I can tell you that my colleagues in the States are in a much, 

much different position than they were in 1999. There are many 

States who are doing extraordinarily well with their revenues. The 

State where I was Governor when that letter was written, at the 

time, was looking at budgets that had dramatically less money 

than they had dealt with the year before. They now have a billion 

31 

dollars of new money, and I am delighted for them. We are in the 

position where we are reducing deficits. If we had the money, it 

would be great. 

Mr. MCDERMOTT. What about Louisiana? 

Secretary LEAVITT. We don’t—— 

Mr. MCDERMOTT. What about Louisiana? They lost their tax 

base—— 

Mr. SHAW. The time—— 

Mr. MCDERMOTT. —and you are saying to their Governor, 

hey—— 

Mr. SHAW. —of the gentleman has expired. 

Secretary LEAVITT. We are watching Louisiana, as well we 

should. 

Mr. SHAW. The time of the gentleman has expired. Mr. Weller? 

Mr. WELLER. Thank you, Mr. Chairman. Mr. Secretary, welcome to the Committee. Good to have you here, and I appreciate 

the opportunity to talk with you this morning. The subject of community health centers, I appreciate my colleague from Washington 

State drawing attention to them, and first I just want to thank you 

as well as your predecessor, Secretary Thompson, for implementing 

the President’s goal of expanding community health centers. Certainly in the last 5 years, I think the numbers I have seen, there 

are 777 new health centers that have been established and expanded, and 3.7 million more Americans, particularly low-income 

Americans who previously had limited access to quality health 

care, are now being served because of that expansion, and I have 

enjoyed working with Secretary Thompson and others in this goal. 

Let me direct my question, I guess, as we look at the President’s 

budget as it addresses community health centers. The President’s 

budget states that he wants to increase access to health care, particularly for low-income Americans, through adding 300 new and 

expanded health care sites, and including within those 300 new 

and expanded health care center sites 80 new sites in counties with 

a high prevalence of poverty. How will that be achieved in the 

President’s budget? Can you give us more specifics on how they 

would achieve that goal? 

Secretary LEAVITT. The funding is there, and you have the statistics right. We are looking to add 302 new centers, which will 

continue the movement toward the President’s goal of 1,200. He 

now has a new matter that has been proposed, and that is to add 

80 of those in low-income or high-poverty areas. That is just one 

part of the way the President proposes to expand the kind of access 

that people have. It is a goal on which the President has some passion, and I think you have expressed it. 

As we indicated, these are sites that communities love to have 

and compete to have, and I have regular calls from Members of 

Congress saying, ‘‘We would like to have one of these in our area. 

We think we should qualify, but we have not been approved.’’ I 

wish we had more money to do it because we could expand them 

in an almost unlimited—— 

Mr. WELLER. The county community health center located in 

Joliet, Illinois, in my district, I have been a supporter of that. 

When I visit it—and I visit at least once a year—I see not only lowincome families, but also immigrants, minorities, and a lot of mothVerDate Aug 31 2005 02:00 Jan 04, 2007 Jkt 030636 PO 00000 Frm 00035 Fmt 6633 Sfmt 6602 E:\HR\OC\30636.XXX 30636
32 

ers with children that are utilizing the health care that is available 

through the community health center. Specifically, Mr. Secretary, 

can you tell us, in the President’s budget that he has submitted to 

the Congress, what he proposes in funding for community health 

centers and how that compares to past year? Secretary LEAVITT. There is an increase of $181 million that 

has been proposed in this budget for that purpose. 

Mr. WELLER. How does that compare to previous years? 

Secretary LEAVITT. I am not sure. I am not sure of the answer 

to that in terms of the actual dollars. 

Mr. WELLER. Was that a $181 million increase? 

Secretary LEAVITT. We have 4,000 centers in all, in total. The 

President set a goal to improve or add 1,200 new ones. 

Mr. WELLER. Right. 

Secretary LEAVITT. You have cited the fact that we had already 

done so with 700-plus, and we now want to have another 302, and 

82 of those will be in areas that, of course, will be targeted—— Mr. WELLER. You are saying the President proposes a $181 million increase over previous funding. 

Secretary LEAVITT. That is correct. 

Mr. WELLER. I would note, having worked on this issue with 

your predecessor and with the Bush Administration, that every 

year the President has proposed a record increase in funding for 

community health centers, and I applaud that as we set priorities. 

As you know, we are in a deficit reduction mode. We have got to 

get spending under control. The President has made this a priority. 

One note, and I consider this a serious note, an area where I 

hope, Mr. Secretary, that we can work together, and that is the 

issue of the per visit payment limit, otherwise known as the Medicare payment cap. Studies have shown that a large majority of 

community health centers have experienced losses totaling over 

$51 million as a result of this payment cap, the average loss being 

about $75,000 on average for each community health center. We 

often think from Washington terms that is not that much money, 

but for a local community health center, that can have a big impact 

on a health center, and obviously reimbursement issues—and as a 

Governor, you dealt with them as a Governor and know how they 

affect the quality of care. I would note that the payment cap methodology has not been reviewed or adjusted since its conception in 

1992, and the payment cap itself is adjusted for inflation only for 

physician services. 

That is why, Mr. Secretary, I want to ask you to examine the 

payment cap and look at how that can be part of the President’s 

strategy to improve health care that would be available through 

community health centers. I have worked with my friend and colleague, Mr. Lewis of Georgia. I know he is interested in this issue, 

and I was wondering what your thoughts are on the payment cap. 

Is this something you feel deserves review, and is this something 

that we can work together to improve upon so we can help achieve 

the President’s goal of improving health care through community 

health centers? 

Secretary LEAVITT. Congressman, I have been in dozens and 

dozens of community health centers. Every one of them is unique. 

Every one of them is a community that has in some way come toVerDate Aug 31 2005 02:00 Jan 04, 2007 Jkt 030636 PO 00000 Frm 00036 Fmt 6633 Sfmt 6602 E:\HR\OC\30636.XXX 30636
33 

gether to put together a formula that works for them. There are 

some consistencies not only in the formulas they come up with, but 

the problems and challenges. The one that you mentioned of the 

payment cap is one that is universally cited as I go around and 

speak with them. We would be very pleased to have a conversation 

about the way that barrier could be overcome. 

Mr. SHAW. The time of the gentleman has expired. 

Mr. WELLER. Thank you, Mr. Secretary. I look forward to working with you on this. 

Mr. SHAW. Mr. Becerra? 

Mr. BECERRA. Thank you, Mr. Chairman. Mr. Secretary, thank 

you very much for being with us, and thanks again for the patience. We know it takes a while to get through all the questions, 

but we appreciate that you are willing to stay with us. 

Secretary LEAVITT. Thank you. 

Mr. BECERRA. I have a couple of questions. First I would like 

to touch on this whole issue of the prescription drug implementation, because in my State of California, as you are aware, not only 

the Governor and our four legislative leaders in the Senate and Assembly, Republican and Democrat, have written to you and the 

President saying we need some help, but I think throughout this 

country Governors and State legislators are saying this is not going 

well. The implementation has begun disastrously. You have millions of seniors who are wondering what to do. Now, I am looking 

at a letter—and I would like to submit this for the record, Mr. 

Chairman—dated January 13 from Governor Schwarzenegger in 

California and the four legislative leaders, Republican and Democrat, in the California legislature, asking for your help—it is addressed to you directly—in making sure that this transition from 

the Medicare Programs that existed and whatever drug plans that 

seniors had in California to this new plan, that during that time 

seniors, especially what we call dual-eligible seniors, those who are 

qualified for Medicaid—in California it is called MediCAL—don’t 

lose their coverage. I will just quote a couple of passages from the 

Governor’s letter. 

‘‘Our residents are having difficulties accessing their prescription 

drugs.’’ He goes on to say, ‘‘Too many Californians are unable to 

get the prescription drugs they need to stay alive. Pharmacies are 

being overloaded with administrative responsibilities while trying 

to clarify patients’ eligibility and enrollment information so they 

can bill the drug plans for services provided. The drug plans are 

not answering the phone calls coming in and are not resolving a 

large number of the problems people are facing. In short,’’ he goes 

on, ‘‘the transition is not functioning as CMS intended.’’ He goes 

on, ‘‘As a result, beneficiaries are being denied access to life-saving 

medications they need.’’ 

He goes on to ask if the Federal Government will work with the 

States to implement a temporary automated system that can help 

manage this transition, and he makes a call for the Federal Government to ‘‘work with the State of California to ensure that the 

costs incurred by California taxpayers for this temporary expenditure are reimbursed.’’ 

So, my question first, Mr. Secretary, is: Are you prepared to say 

today that the Federal Government will reimburse my State of 

34 

California and its taxpayers and any other State that faces similar 

problems with their dual-eligible Medicaid-Medicare patients, reimburse those taxpayers for the costs incurred by the States in making sure that these seniors that qualify for prescription drugs don’t 

lose those prescription drug benefits? 

Secretary LEAVITT. Congressman, what is the date on that letter? 

Mr. BECERRA. January 13th of this year. 

Secretary LEAVITT. We are approaching a month since then, 

and I can tell you that things are dramatically different. I think 

I may have met with Governor Schwarzenegger in his office a very 

short time before or after that letter, and—— 

Mr. BECERRA. Well, I know he just held a press conference earlier this week saying that the problem is still dire, that the State 

legislature is going to move forward with an emergency plan to 

make sure that about a million seniors in California continue to 

have their coverage. So, they are still looking for reimbursement. 

They still haven’t received the answer, and I am hoping that perhaps today here you can clarify whether or not the Federal Government will reimburse States like California, California taxpayers. 

Secretary LEAVITT. I have met with Governor Schwarzenegger 

and had regular communication with his office. I will tell you that 

things are dramatically better than when that letter was written. 

I will also tell you that we have indicated a willingness to reimburse the States. We have waivers now—or had signed demonstration waivers with 30 States. California has not chosen to sign one. 

Mr. BECERRA. Mr. Secretary, the fact that you are saying you 

are willing to reimburse is probably the most important thing, and 

I think that is critical. 

Secretary LEAVITT. I am willing to reimburse, but the States 

have to do their part as well. The 30 States have done that so far, 

and we are willing to work and are working daily with California. 

Mr. BECERRA. I appreciate that. 

Secretary LEAVITT. The important thing for me to communicate 

with you, though, Congressman, is that the conditions that existed 

when that letter was written do not exist today. 

Mr. BECERRA. Then we have to talk to the Governor because, 

as I said, he held a press conference this week saying that the situation is still the same for seniors in California. 

Secretary LEAVITT. I will say that, generally speaking, in a situation like this, the enthusiasm of critics is not always tempered 

with realism. 

Mr. BECERRA. Let me move on to one other point that is of 

some concern to me. As a trustee for the Social Security program, 

you have a great deal to say about what happens with Social Security. The President’s budget includes very explicitly some $712 billion for privatization, his idea of privatizing Social Security. I have 

a difficult time understanding how it is that the President is able 

to find $712 billion in his budget for privatization of Social Security, yet the President’s budget also calls for the elimination of a 

$255 lump-sum death payment that has been part of Social Security for more than 50 years for the survivors of a Social Security 

recipient who dies. On top of that, the budget calls for a cut-off of 

monthly survivor benefits to 16- and 17-year-olds who are not in 

35 

high school, so if they had to go to work to help the family, they 

would lose their monthly survivor benefit if their parent who was 

a Social Security recipient happened to die. 

Then you look at the fact that there are numerous programs 

under your jurisdiction that are being cut. Alzheimer’s disease 

demonstration programs under the Administration of Aging, a $12 

million program is being zeroed out. Traumatic brain injury program focused on kids, a $9 million program being zeroed out. Universal newborn hearing program, a $9 million program being zeroed out. Emergency medical services for children, a $19 million 

program being zeroed out. Training in primary care medicine and 

dentistry, an $88, $89 million program being zeroed out. 

All of these wouldn’t total up to even 1 percent of the cost of the 

President’s proposal to privatize Social Security over the long term, 

and so I am wondering if you could comment as to the priorities 

that the President and this Administration has with regard to seniors, Social Security, and health care. 

Secretary LEAVITT. Regrettably, we won’t have time to respond 

to all of those. In my opening comments, I indicated that we are 

in a time of deficit reduction, and every program that you have spoken of is a program that obviously resonates with me, as it does 

you. I laid out a series of principles that we are using to do our 

best to meet the needs of the American people, all of them. 

Mr. BECERRA. I appreciate it, Mr. Secretary. Mr. Chairman, I 

would like to make sure that included in the record is the letter 

from Governor Schwarzenegger dated January 13th, and also to 

make sure that Mr. McDermott’s reference to the October 15, 1999, 

letter of the National Governors’ Association, of which then-Governor Leavitt was a part, is also included in the record. 

Mr. SHAW. Without objection. 

[The information follows:] 

Governor Arnold Schwarzenegger 

State Capitol 

Sacramento, CA 95814 

January 13, 2006 

The Honorable Michael O. Leavitt 

Secretary of Health and Human Services 

U. S. Department of Health and Human Services 

200 Independence Avenue, S.W. 

Washington, DC 20201 

Dear Mr. Secretary, 

We write today to express our deep concern over the initial implementation of the 

new Medicare Part D prescription drug benefit. We want to work cooperatively with 

you to ensure that the nearly one million Californians who are dually eligible for 

Medicare and Medi-Cal have access to the prescription drugs that are essential to 

maintaining their health. The individuals are among the most vulnerable of MediCal beneficiaries—they are either seniors or disabled persons—many with physical 

or mental disabilities, all of whom have few resources or income. 

Our residents are having difficulties accessing their prescription drugs. As a result, we are triggering state programs to provide temporary, emergency coverage of 

prescription drug benefits for the nearly one million Californians who are dually eligible for Medi-Cal and Medicare. We recognize the difficult task facing the staff at 

the Centers for Medicare and Medicaid Services (CMS) during this initial transition. 

The creation of a new program of this size is a monumental task, but the unprecedented movement of these one million dual eligibles to the new Medicare drug program on one calendar day appears to have overwhelmed the CMS and drug plan 

systems. 

36 

As you know, CMS has been assuring states and beneficiaries that mechanisms 

were in place to ensure that during the transition no dual eligibles would go without 

their needed medications. While your staff reports that error rates have declined 

from 90 percent to 20 percent, this is still unacceptable. Too many Californians are 

unable to get the prescription drugs they need to stay alive. Pharmacies are being 

overloaded with administrative responsibilities while trying to clarify patients’ eligibility and enrollment information so they can bill the drug plans for services provided. The drug plans are not answering the phone calls coming in and are not resolving a large number of the problems people are facing. We receive daily reports 

of beneficiaries in great distress because they have been unable to obtain their 

medications or are mistakenly required to pay significant fees in order to fill a prescription. In short, the transition is not functioning as CMS intended for some of 

the dual eligible population, and as a result, beneficiaries are being denied access 

to lifesaving medications they need. 

We would like to work with the federal government so that a temporary automated system can immediately be implemented to have Medicare pay for drugs for 

dual eligibles who are unable to obtain medications due to the transition problems. 

As you can appreciate, such a process would allow pharmacies to be paid for prescription medications using their normal billing system without the need for either 

the pharmacy or the beneficiary to make calls to either Medicare or the Medicare 

drug plan. This will allow Medicare patients to continue to have access to their 

needed medications while the new program’s implementation problems are being addressed. This is critical to ensure that the burden of this implementation does not 

fall upon those patients who are least able to handle a loss of their medications. 

We intend to work closely and cooperatively with you and the Congress to ensure 

that beneficiaries receive the medications they need and the law intends. In addition, we call on the federal government to work with the State of California to ensure that the costs incurred by California taxpayers for this temporary expenditure 

are reimbursed. In the meantime, we will continue to assist your efforts to implement the Medicare Modernization Act to protect and care for our most vulnerable 

residents. 

Sincerely, 

Arnold Schwarzenegger, 

Governor 

Don Perata 

Senate President Pro Tempore 

Dick Ackerman 

Senate Republican Leader 

Fabian Nun ̃ ez 

Assembly Speaker 

Kevin McCarthy 

Assembly Republican Leader 

37 

National Governors’ Association 

Washington, DC 20001 

October 15, 1999 

The Honorable Ted Stevens 

Chairman, Senate Appropriations Committee 

S–128, The Capitol 

Washington, D.C. 20510 

The Honorable Robert C. Byrd 

Ranking Member, Senate Appropriations Committee 

S–206, The Capitol 

Washington, D.C. 20510 

The Honorable C.W. Young 

Chairman, House Appropriations Committee 

H–218, The Capitol 

Washington, D.C. 20515 

The Honorable David Obey 

Ranking Member, House Appropriations Committee 

1016 Longworth House Office Building 

Washington, D.C. 20515 

Dear Chairman Stevens, Senator Byrd, Chairman Young, and Representative Obey: 

As you begin negotiations on the fiscal 2000 Labor, Health and Human Services, 

and Education (Labor-HHS) appropriations bill, the nation’s Governors strongly 

urge to maintain your commitment to key state programs. We are adamantly opposed, as stated in the attached resolution the Governors adopted in August, to cutting funding for other vital health and human services programs such as Temporary 

Assistance for Needy Families (TANF), Title XX/Social Services Block Grant (SSBG) 

Medicaid, the Children’s Health Insurance Program (CHIP), child support, and education and training programs which would adversely affect millions of Americans— 

with the greatest impact on children and the elderly in the greatest need. 

We are especially concerned about the status of SSBG in the current versions of 

the Labor-HHS bills. Over the past few years, SSBG has taken more than its share 

of cuts in federal funding. As part of the 1996 welfare reform deal, Congress made 

a commitment to Governors that SSBG would be level funded at $2.38 billion each 

year. In fact, Governors reluctantly accepted a 15 percent cut in SSBG funds at that 

time in exchange for the commitment for stable funding in the future. However, repeated cuts in SSBG have been enacted regardless of that commitment. In fiscal 

1998, funding for SSBG was reduced to $2.299 billion. It was again reduced in fiscal 

1999 to $1.909 billion. Further reductions in funding for SSBG will result in cuts 

to vital human services for our most vulnerable citizens. 

In addition, Governors strongly support the provision from the 1996 welfare reform law that allows states to transfer up to 10 percent of their TANF block grant 

into SSBG. Both the House and Senate versions of the fiscal 2000 Labor-HHS bill 

reduce the amount states can transfer from TANF to SSBG. This restriction of flexibility is in essence an additional cut in funding for SSBG. The nation’s Governors 

strongly urge you to restore the transferability provision to the full 10 percent. 

SSBG provides services to needy populations, including low-income children and 

families, the elderly, and the disabled. While SSBG does have a strong connection 

with welfare reform efforts in states by providing valuable resources for child care 

and transportation, it also provides services to many individuals who are not considered welfare recipients. For example, in many states, SSBG funding is used to provide foster care assistance, meals on wheels for the elderly, and independent living 

services for the disabled—programs which are not allowable uses of welfare funds 

such as TANF. 

The Governors are not seeking increased federal funding; we are simply requesting that you fulfill your commitments and reject cuts in programs such as SSBG 

that would jeopardize our strong state-federal partnership. 

Sincerely, 

Governor Michael O. Leavitt 

Chairman 

Governor Parris N. Glendening 

f 

Vice Chairman 

38 

Mr. SHAW. Also without objection, I would like to put in the 

record a letter from the Department of Health and Human Services 

dated February 6th in which it shows that the reduced drug cost 

is going to save the State of California $113 million, and I think 

that bears directly upon the problem that you have related to. So, 

without objection, both letters will be put into the record. 

[The information follows:] 

DEPARTMENT OF HEALTH & HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

Administrator 

Washington, DC 20201 

Feb 6, 2006 

S. Kimberly Belshe 

Secretary 

Health and Human Services Agency 

State of California 

1600 Ninth Street 

Sacramento, California 95814 

Dear Secretary Belshe: 

Thank you and your staff for the time spent over these past several months in 

discussions regarding the implementation of the Medicare Modernization Act of 

2003 (MMA) and the Part D program. Most recently, your staff participated in the 

development of the section 402 Demonstration Application Template for Reimbursement of State Costs for Provision of Part D Drugs which was released last week. 

I am pleased that states are already applying for the Demonstration. 

Throughout the discussions and requests for data regarding the state’s net savings as a result of MMA, it has been our impression that California has consistently 

underestimated its savings in both the short-term and long-term. Moreover, California’s recent request to be repaid the difference between what Part D and what 

Medi-Cal pays in the current discussions about the transition period to Part D certainly implies that the state would have spent more on behalf of dual eligibles than 

what Medicare plans will spend. 

As the President’s Budget for 2007 is officially released today, I am able to fully 

respond to your letter of December 14,2005 in which you raised questions about the 

estimated savings to the state through federal assumption of prescription drugs 

which is then partially offset through the phased-down state contribution. 

Over the course of last year, our staffs had a number of occasions to discuss the 

state’s estimated spending and savings and your requests to use alternative accounting method for rebates. The state estimated the requested adjustment would 

‘‘drop California’s phased-down costs by $37.1 million.’’ You also requested an adjustment to the baseline to ‘‘recognize the significant Medicaid prescription drug cost 

containment we implemented in September 2004.’’ According to your letter, California’s growth rate for calculating the state contribution should be 24.66 percent rather than the federal projected growth rate of 35.54 percent. 

I am pleased to inform you that the newly updated National Health Expenditures 

(NHE) growth rate to be used for the calculation of the state contribution in the 

President’s Budget is even lower than California’s index. Nationally, the state contributions will be reduced by $37 billion in the period 2006–2015 compared to these 

costs estimated last summer in the Mid Session Review. In addition, we will apply 

the new index to recalculate the per capita amount used in the state contribution 

for CY 2006. California’s new per capita amount will be $89.02 for the January-September period compared to the old amount of $98.54, a reduction of 9.7 percent. 

According to our estimates, when comparing annual payments based on December 

actual enrollment reported by California, using the new (NHE) will mean additional 

savings of $113 million for the state in CY 2006. These savings are significantly 

larger than you have requested based on your own estimates. 

In November, your staff provided data that estimated the State General Fund cost 

of drug expenditures for 1,021,000 dual eligibles in 2006 at $1,158,368,500. In CY 

2006, the state will make only 11 payments for the state contribution. Even at the 

old per capita amount, California would have saved $52 million in CY 2006 

(1,021,000 x $98.54 x 11 months equals $1,106,702,740) which is worth even mote 

than the change to accrual methodology that you requested. Applying the new per 

39 

capita amount to California’s data, the state will save $158,584,880 (1,021,000 x 

$89.02 x 11 months equals $999,783,620). 

We had previously estimated California’s drug spending for duals in 2006 would 

have been higher than state estimates resulting in even greater savings to the state, 

but applying California’s own data, there is no reason to doubt the state will spend 

less with the state contribution than it would have if California had continued full 

coverage of the duals under Medi-Cal. 

While California has reported it has spent $18 million (including administrative 

costs) as of February 3 for the transition period to Part D, our Demonstration would 

reimburse the state for what it has spent. It is unclear to us, based on the guidance 

provided to pharmacists, whether California is being billed for the $1 or $3 Medicare copayment or whether they have been collected at the pharmacy. What is clear 

is that state would recoup nearly all of the $18 million it has spent should the state 

choose to participate. 

While economists and analysts can reasonably adopt different sets of assumptions 

and estimates are constantly updated to reflect better and more current data, we 

are pleased that even using California’s own data, the new growth rate will get savings that exceed your expectations. 

Sincerely, 

Mark McClellan, MD, PhD 

Attachment: 

Revised Clawback Comparisons 

A 

States 

B 

Annual Payments 

Old NHE w/December 

Actual Enrollment 

C 

Annual Payments 

New NHE w/December 

Actual Enrollment 

D 

ifference 

(C–B) 

Alaska $19,040,841 $17,202,153 $(1,838,687)

Alabama $65,599,530 $59,264,881 $(6,334,648)

Arkansas $33,815,887 $30,550,440 $(3,265,447)

Arizona $57,615,285 $52,051,639 $(5,563,646)

California $1,172,151,995 $1,058,962,604 $(113,189,391)

Colorado $72,876,673 $65,839,304 $(7,037,369)

Connecticut $124,059,021 $112,079,205 $(11,979,816)

District of Col. $10,975,558 $9,915,699 $(1,059,860)

Delaware $14,025,128 $12,670,785 $(1,354,343)

Florida $479,984,275 $433,634,375 $(46,349,900)

Georgia $130,993,456 $118,344,013 $(12,649,443)

Hawaii $22,175,070 $20,033,724 $(2,141,346)

Iowa $66,174,915 $59,784,704 $(6,390,211)

Idaho $18,060,946 $16,316,883 $(1,744,063)

Illinois $333,221,963 $301,044,232 $(32,177,731)

Indiana $99,283,770 $89,696,387 $(9,587,382)

Kansas $48,756,251 $44,048,082 $(4,708,170)

Kentucky $81,122,635 $73,288,990 $(7,833,644)

Louisiana $82,793,438 $74,798,452 $(7,994,986)

Massachusetts $239,970,806 $216,797,916 $(23,172,890)

Maryland $92,240,710 $83,333,444 $(8,907,266)

Maine $45,260,376 $40,889,787 $(4,370,589)

40 

Revised Clawback Comparisons—Continued 

A 

States 

B 

Annual Payments 

Old NHE w/December 

Actual Enrollment 

C 

Annual Payments 

New NHE w/December 

Actual Enrollment 

D 

ifference 

(C–B) 

Michigan $188,540,434 $170,333,941 $(18,206,493)

Minnesota $109,733,219 $99,136,780 $(10,596,438)

Missouri $191,708,376 $173,195,969 $(18,512,407)

Mississippi $76,553,279 $69,160,877 $(7,392,402)

Montana $12,238,192 $11,056,405 $(1,181,787)

North Carolina $247,898,287 $223,959,876 $(23,938,411)

North Dakota $5,458,968 $4,931,821 $(527,148)

Nebraska $41,619,392 $37,600,396 $(4,018,996)

New Hampshire $30,585,921 $27,632,378 $(2,953,543)

New Jersey $271,291,722 $245,094,314 $(26,197,409)

New Mexico $8,845,259 $17,025,458 $(1,819,801)

Nevada $22,496,284 $20,323,920 $(2,172,364)

New York $779,819,148 $704,515,557 $(75,303,591)

Ohio $230,584,176 $208,317,710 $(22,266,466)

Oklahoma $55,382,475 $50,034,441 $(5,348,034)

Oregon $63,234,635 $57,128,354 $(6,106,281)

Pennsylvania $399,667,987 $361,073,866 $(38,594,121)

Rhode Island $41,678,993 $37,654,242 $(4,024,751)

South Carolina $77,385,665 $69,912,883 $(7,472,782)

South Dakota $12,956,089 $11,704,978 $(1,251,111)

Tennessee $283,931,372 $256,513,410 $(27,417,962)

Texas $303,361,506 $274,067,264 $(29,294,242)

Utah $21,471,442 $19,398,042 $(2,073,400)

Virginia $166,965,498 $150,842,399 $(16,123,099)

Vermont $18,454,617 $16,672,538 $(1,782,078)

Washington $145,340,530 $131,305,656 $(14,034,874)

Wisconsin $145,195,338 $131,174,484 $(14,020,854)

West Virginia $30,780,689 $27,808,337 $(2,972,351)

Wyoming $8,358,727 $7,551,563 $(807,164)

Total $7,311,736,748 $6,605,675,559 $(706,061,189)

Percent Reduction –9.66%

41 

Revised Per Capita Amounts 

STATE 

Per Capita Amounts Per Capita Amounts 

Old NHE w/December Actual 

Enrollment 

New NHE w/December Actual 

Enrollment 

JAN–SEPT 

BASELINE 

OCT–DEC 

BASELINE 

JAN–SEPT 

BASELINE 

OCT–DEC 

BASELINE 

AK 145.32 142.67 131.29 128.89 

AL 61.31 62.64 55.39 56.59 

AR 48.31 49.05 43.64 44.31 

AZ 49.43 50.19 44.66 45.35 

CA 98.54 98.54 89.02 89.02 

CO 126.97 126.97 114.71 114.71 

CT 156.20 156.20 141.12 141.12 

DC 56.02 56.02 50.61 50.61 

DE 124.97 125.20 112.90 113.11 

FL 112.05 112.40 101.23 101.55 

GA 89.00 85.90 80.40 77.61 

HI 74.83 77.12 67.61 69.68 

IA 98.07 102.46 88.60 92.57 

ID 84.56 83.30 76.40 75.26 

IL 127.63 127.63 115.31 115.31 

IN 97.45 98.42 88.04 88.92 

KS 105.40 105.83 95.22 95.61 

KY 77.71 76.90 70.20 69.47 

LA 75.52 75.77 68.22 68.45 

MA 104.59 104.59 94.49 94.49 

MD 133.43 133.43 120.55 120.55 

ME 82.56 81.74 74.59 73.85 

MI 82.13 82.53 74.20 74.56 

MN 128.79 128.79 116.35 116.35 

MO 119.96 121.00 108.38 109.32 

MS 47.08 47.29 42.53 42.73 

MT 75.35 79.00 68.07 71.38 

NC 95.61 92.92 86.38 83.94 

ND 76.43 78.96 69.05 71.34 

NE 107.61 112.28 97.22 101.44 

NH 148.33 148.33 134.01 134.01 

NJ 159.59 159.59 144.18 144.18 

NM 49.94 48.59 45.12 43.90 

NV 109.35 111.35 98.79 100.60 

42 

Revised Per Capita Amounts—Continued 

STATE 

Per Capita Amounts Per Capita Amounts 

Old NHE w/December Actual 

Enrollment 

New NHE w/December Actual 

Enrollment 

JAN–SEPT 

BASELINE 

OCT–DEC 

BASELINE 

JAN–SEPT 

BASELINE 

OCT–DEC 

BASELINE 

NY 117.67 117.67 106.31 106.31 

OH 127.34 128.04 115.05 115.68 

OK 62.17 61.72 56.17 55.76 

OR 100.16 101.46 90.49 91.66 

PA 123.75 125.56 111.80 113.44 

RI 115.60 120.93 104.44 109.25 

SC 55.26 54.86 49.92 49.57 

SD 90.90 96.49 82.12 87.17 

TN 105.05 106.04 94.90 95.80 

TX 78.37 78.13 70.80 70.59 

UT 86.95 88.79 78.55 80.21 

VA 137.20 137.20 123.95 123.95 

VT 101.17 100.09 91.40 90.43 

WA 127.21 126.91 114.93 114.65 

WI 111.82 112.30 101.03 101.45 

WV 63.89 64.30 57.72 58.09 

WY 128.57 132.28 116.15 119.50 

Summary Of State Use Of IGTs And Recycling 

State 

(1) 

States that 

Do Not Use 

IGTs 

(2) 

States that 

Use IGTs 

Appropriately 

(3) 

States that 

have Revised Existing IGTs by 

Removing 

Recycling 

(4) 

CMS Identifies Potential Recycling-States 

May Disagree 

(5) 

UnknownSPAs Pending Review 

(6) 

No SPAs 

Submitted 

Alabama X(IH/DSH/ 

NF/ 

HHA)** 

X(PHYS) 

Alaska X (OP) X (IH/NF) 

Arizona* X(OP) 

Arkansas X (OP/PHYS) X (IH/NF) 

California X (NF) X(OP) X (IH/ 

DSH)** 

Colorado X (IH/NF/ 

PHYS) 

Connecticut X (IH/NF) 

Delaware X 

DC X 

Florida X (IH/OP/ 

NF/PHYS) 

Georgia X (IH/DSH/ 

NF)** 

Hawaii X (IH/NF) 

Idaho X (NF) X(IH)*** 

Illinois X (DSH)¥ 

X(NF) 

43 

Summary Of State Use Of IGTs And Recycling—Continued 

State 

(1) 

States that 

Do Not Use IGTs 

(2) 

States that 

Use IGTs 

Appropriately 

(3) 

States that 

have Revised Existing IGTs by 

Removing 

Recycling 

(4) 

CMS Identifies Potential Recycling-States 

May Disagree 

(5) 

UnknownSPAs Pending Review 

(6) 

No SPAs 

Submitted 

Indiana X (IH/PHYS/ 

OP/ 

TRANS) 

Iowa X (IH/DSH/ 

NF) 

Kansas X (DSH/NF) 

Kentucky X (OP) X(OLP) X (IH/NF) 

(PHYS)** 

Louisiana X (DSH) X (IH/OP/ 

NF) 

Maine X (NF/OP) X (IH) 

Maryland X (IH/NF/ 

PHYS) 

Massachusetts X (IH/OH/ 

NF) 

Michigan X(PHYS) X (IH/NF) 

Minnesota X (IH— 

GME) 

X (IH/DSH/ 

NF) 

Mississippi X(NF) X (DSH) 

Missouri X (IH) X (PHYS)X 

(NF) 

X (OP) 

Montana X (IH/ 

TRANS) 

X (NF) 

Nebraska X (IH) X(NF) 

Nevada X(NF) X (IH/CLINIC) X (PROF) 

New Hampshire X (IH) X (NF) 

New Jersey X(NF)** 

New Mexico X 

New York X (CLINIC) X (IH/DSH/ 

OP/NF) 

N. Carolina X (PHYS) X (DSH) 

N. Dakota X(IH) X (NF) 

Ohio X (NF) X (IH) 

Oklahoma X (NF) X (PHYS) X (IH/OP) 

Oregon X (IH/SBS) X (NF) 

Pennsylvania X (IH) X(NF) 

Rhode Island X (IH/NF) 

S. Carolina X (OP) X (DSH/NF) X (OLP) 

S. Dakota X (IH) X(NF) 

Tennessee X (NF)** 

Texas X (NF) X (IH/OP) X (OP/PHYS) 

Utah X (IH/NF/ 

PHYS) 

Vermont X (IH/NF) 

Virginia X (IH/NF/ 

OP) 

Washington X(IH/NF) 

West Virginia X (NF/IH/ 

OP) 

Wisconsin X (IH) X(NF) 

Wyoming X (IH/OP) 

Total 

States 

23 23 27 5 5 3 

*Has not submitted any IH/NF SPAs 

** Final SPAs to be submitted/approved 

*** Final documentation of procedures pending 

¥Cook County DSH 

Key: NF—Nursing Facility Services; IH—Inpatient Hospital Services; DSH—Disproportionate Share Hospital; 

OP—Outpatient Hospital Services; SBS—School Based Services; GME—Graduate Medical Education; Trans— 

Transportation; Clinic—Clinic Services; Prof—Professional Services; Phys—Physician Services; OLP—Other Licensed Practitioners; and HHA—Home Health Agency 

f 

Mr. THOMPSON. Mr. Chairman, could we see that letter? 

44 

Mr. SHAW. Yes, I will have it distributed to the Members. 

Mr. THOMPSON. Thank you. 

Mr. SHAW. Ms. Hart? 

Ms. HART. Thank you, Mr. Chairman. 

Mr. Secretary, thank you for taking the time to come before us 

at a very critical time for making sure that Americans are being 

provided with the services that they expect. Obviously, in a time 

of transition, there is some pain. We are trying to make sure that 

we address the problems and certainly fix them. 

We have had in my State of Pennsylvania a significant number 

of glitches; however, I do appreciate your quick response to many 

of them at this time. 

One of the things that has happened, I think, that some of the 

other Members have addressed a little bit has been the challenge 

regarding dual-eligibles, those who are covered by Medicare and 

Medicaid, as they transition from Medicaid to Medicare. Under the 

system, some of the States, especially Pennsylvania, have spent a 

significant number of resources sort of filling the gap during the 

transition, and I know CMS has acknowledged that they will be 

made whole for these expenditures. 

Can you give me an idea of how that is going to be done? Is that 

going to come out of some of the insurers that you have contracted 

with? What is the plan for that at this time, if there is one? 

Secretary LEAVITT. Let me reconcile the whole experience and 

then specifically answer your question. 

It became evident to us in early January that for the vast majority of people the system was working, but for some it was not. 

When they went to the drug counter for the first time, the system 

did not know who they were. 

We found that there were two basic problems. First, when people 

enrolled late, that is to say, if they enrolled in the plan on December the 28th and then they went to the drug counter on the 2nd 

of January, the enrollment had not yet been accomplished. Consequently, it set off a series of manual transactions that the pharmacist had to do, and it took people more time, and it was frustrating to them. Likewise, if a person were to change plans late in 

the month, it had the same effect. 

There was a second part of that equation, and that is that as the 

data was transferred from, say, the State of Pennsylvania to CMS 

or from CMS to an insurance plan, the transition of the data was 

not always perfect, and the imperfection meant that there may 

have been Mary Smith in Philadelphia and there may have been 

12 Mary Smiths. The pharmacist didn’t know who it was and, consequently it caused more trouble. So, there were data-matching 

problems that there are always in a transition like this. 

Consequently, at the beginning of the transition, there were 

about 10 percent—and many of them were dual-eligibles—that had 

to take more time at the drug counter. Now, States appropriately 

stepped up, and we cooperatively worked with them to say let’s 

make certain that no one leaves the prescription drug counter with 

their prescription being filled. The State of Pennsylvania began to 

pay the pharmacists in situations where they were not certain. 

We have committed to pay the States or to reimburse the States 

for what the plan would have paid. We will also pay additional adVerDate Aug 31 2005 02:00 Jan 04, 2007 Jkt 030636 PO 00000 Frm 00048 Fmt 6633 Sfmt 6602 E:\HR\OC\30636.XXX 30636
45 

ministrative expenses. Those will not come from the Federal budget—the administrative expenses will, but the cost of the drugs will 

come from the plans, and we will collect from the plans and give 

it to the States. 

Ms. HART. So, the reimbursement then, to make sure that I am 

following you, would have been, had all the information been correct and up-to-date and in order, would have come from the plan; 

therefore, that is where it is going to come from ultimately. 

Secretary LEAVITT. That is right. The plans received a premium 

for it, and they need to pay the claim. We will reconcile and make 

certain that the States do not have to deal with the plans. We will 

assure that that happens in a way so that it happens properly. 

The States were extraordinarily helpful in all of this, and if anyone decides they want to change 25 million beneficiaries on the 

same day, again, they should talk to me. One of the suggestions I 

would make is exactly what we did, and that is to have the States 

there as a buffer so we can feather out any problems, which is exactly what we are doing. The system is getting better every day. 

It is not only a good deal for seniors, but we are working through 

this, and the system gets better every day. 

Ms. HART. Before I run out of time, I just want to address one 

other issue as well, and that is specifically making sure that people 

with disabilities are getting services appropriately under the system. Is there some special thing that you are doing right now to 

help make sure that they are in line properly? 

Secretary LEAVITT. We have been working with the States to 

assure that any of those who are in special need categories are 

given assistance. There have been those who have found it frustrating when they go to the drug counter and find that they have 

to wait until we can identify them in the system. People are getting 

their prescriptions filled, the vast majority of them without delay 

and in a very routine way. Some are having problems. That number diminishes as time goes on, and we are taking particular care 

of those who are disabled or in the class that you have referred to 

as dual-eligibles. 

Ms. HART. All right. Thank you, Mr. Secretary. I yield back. 

Mr. SHAW. Mr. Jefferson may inquire. 

Mr. JEFFERSON. Thank you, Mr. Chairman. 

Mr. Secretary, I don’t know quite where to begin, there is so 

much to talk about. I appreciate your comments to Mr. McCrery, 

of my home State, about the opportunity you see there to build a 

world-class health care facility back home, but I am having a little 

trouble understanding what the steps are that you have in mind 

to get there; what the resources are that you have identified to get 

to that point in time. 

I don’t know if you have had a chance to read newspaper reports 

from back home about the doctors who have made the exodus from 

our city in the wake of the storm, some 4,000 or so before the 

storm, now some number of perhaps less than 1,000. Many of the 

ones who are there are specialty doctors who don’t have general 

practices. Many are having a hard time. They have lost their businesses and patients have gone away, of course, so they don’t have 

any—it is very hard to start up again. There are gaps in insurance, 

46 

and the Small Business Administration (SBA) is not working for 

them. 

A lot of the programs that our area depended on heavily—you 

have mentioned already how you were there and how they had a 

difficult time getting services, even emergency care services. Imagine how bad that would be now compared to what it was then. 

So, I would like you to help me identify what you want to apply 

with respect to the specific services support that will get us back 

to beyond where we were in the light of the fact that these important reductions in programs are very critical to us. They were critical to us back before the storm, and now even more so, and yet 

we are looking at cuts here that may hurt us. 

One of the programs that is proposed by some of the doctors back 

home is to give them incentives to relocate, such as those that are 

given to folks to locate on Indian reservations and in rural areas 

now, incentives that are cut back in the budget, but which we were 

hoping we could add on to New Orleans to make it a special kind 

of place to attract doctors back, to give them support for salaries, 

to give them support for relief from medical school payments, that 

sort of thing. 

Tell me, if you can, what are the specific resources available to 

us to get us to this world-class position you were talking about, 

that are in your budget now? What do you think of these incentives 

that we need to help draw our doctors back home? 

Secretary LEAVITT. The best incentive for a physician to go 

back home is a health care system that works, and most of those 

people will tell you and me that the one that was there before 

didn’t, and that if we can build one that does, it will be a big improvement, one they will want to work in. 

Mr. JEFFERSON. Tell me how to do that, how you are supporting that. 

Secretary LEAVITT. I met with the entire medical community, 

the leaders of the hospital associations, the medical associations, 

the insurance companies, with the hospital administrators and so 

forth, and said to them: You don’t want Washington to design this 

for you. You want to do it yourself. Let’s agree upon some principles. Instead of building a lot of tertiary care and expecting people to walk up to your emergency rooms, why don’t we have a large 

number of community clinics where people can get preventative 

care. Why don’t we use the Medicaid and the Medicare funds that 

we are already spending and the special dollars that have been allocated over the years to Louisiana to pay for its disproportionate 

share population, and design a system that not only includes prevention and wellness and electronic medical records, but also distributes health care in a way that people can reach out and get it. 

If we could agree upon those principles, I would be prepared, I 

conveyed to them, to spend considerable time and considerable resources from Medicaid and Medicare and the other sources that are 

available to design a new system that will work and work well and 

serve everybody. 

Mr. JEFFERSON. You would be committed to substantial new 

resources? 

Secretary LEAVITT. There are existing resources—— 

Mr. JEFFERSON. Well, that is what worries me. 

47 

Secretary LEAVITT. There is no health care system in greater 

New Orleans right now and substantially fewer people. If we can 

redirect the resources that are there, and there is $2 billion that 

was included in the DRA, a big portion of which went to pay for 

Medicare expenses that have already been conducted, but what is 

left over is available. That is a substantial amount of resources 

that we have discretion to use. 

Mr. JEFFERSON. The other thing I would like to ask you to address for me, although there is no time for it now, your Department 

invests a lot of money with the Institute of Medicine reports, various ones that talk about overcoming gaps in medical attention, research, and treatment of minority populations versus the larger 

populations in the country. For instance, the National Health Care 

Disparity Reports released in 2003, 2004, and 2005 to your agency 

illuminate a number of organizational, programmatic, and funding 

priorities that have been recommended to your agency as a result 

of your having contracted for them. Yet we don’t see these being 

implemented in any meaningful way. Are there plans to take these 

reports and put them into action on your watch? 

Secretary LEAVITT. A good example would be the new HIV/ 

AIDS initiative. We all know in this room that a very high disproportion of minority citizens are in the group who are struggling 

with that disease, and the initiative will be used to target and to 

assure that they get the help they need. 

Mr. JEFFERSON. I agree with that and I thank you for that, but 

the recommendations that are most outstanding for them, that are 

most continuous are the ones that relate to Medicaid and Medicare. 

I wish you would take a closer look at those and incorporate that 

into the Department’s program for this coming year. Mr. Chairman, I would like to have a chance to submit this to the Secretary, 

and ask him in the name of the Committee to please make a response to these. There are so many questions here about these 

issues that I cannot get to them all now. 

[The information was not received at time of printing.] 

Secretary LEAVITT. Yes, sir. 

Mr. SHAW. The time of the gentleman has expired. 

Mr. Foley. 

Mr. FOLEY. Thank you very much, Mr. Chairman. Welcome, 

Governor. Let me first just take a minute on HSAs, because I think 

it is important for consumers to be empowered when it comes to 

health care. People in my community join Costco. They pay a membership fee to save money on household items. They will drive 

across a busy intersection to save a penny on a gallon of gas, and 

they will drive around town looking for an additional quarter percent interest on a Certificate of Deposit (CD). When it is their 

money, they are concerned about how they spend it. Under the current rules of engagement, insurance providers, others: ‘‘Don’t 

worry, it is covered. Your insurance will take care of it.’’ No one 

asks fundamental questions. 

I was in the restaurant business. An all-you-can-eat salad buffet, 

people load up their plates. If it is 10 cents an ounce, they take 

only the items they want and what they like. We have to empower 

consumers. It is not always that easy, but I believe people make 

best decisions when it is their money. 

48 

Community health centers. We had a dedication last week. The 

speaker complimented the Republican leadership, particularly the 

President for his focus on community health centers. The person 

doing the introduction was a Democrat. Sitting in the audience, the 

phrase was not specifically for me. My colleague Alcee Hastings 

was there. We have made phenomenal gains, and thanks to the 

$600,000 grant to that center, they are going to be serving minorities, AIDS patients, and others who currently do not have access. 

We are taking people out of the expensive emergency room settings 

and putting them in family user-friendly. 

I represent some Indian reservations. Those people are now in 

community health centers in the community because on the reservation they did not have the professionals to treat the patients. 

So, when I hear people using pejoratives like they are being 

‘‘thrown out of’’ the reservation and into some inadequate health 

care—let me remind my colleagues, go visit some of those sites on 

Indian reservations. You will see the apparent need for quality professionals to serve that underserved community. Your community 

health centers are providing that. 

Let me also thank you for the $53 million allocation to displaced 

residents of the States impacted by the hurricanes—Wilma, 

Katrina, and others. The $53 million to Florida, we sincerely appreciate it. Let it not be lost on any of my colleagues, particularly 

those who attended a funeral yesterday—Louisiana is getting $220 

million, Mississippi $128 million. So, the money is going to people 

who desperately need it, regardless of ethnicity, color, or background. 

Let me also ask you a very important question, and I thank you 

because I know Mr. McCrery and Mr. Shaw and I have all sent you 

a letter on the issue of IVIG, and I have your response, which is 

heartening, that you acknowledge not only the concerns of the Administration, your office particularly, but are also looking to provide some intermediate assistance. I know there has been a huge 

cry for help from our community participants in providing this lifesaving treatment for patients with primary immune deficiency diseases, neuropathies, and a number of other disorders. 

It has been shocking, the lack of opportunity and access, the 

costs, and so if you could just take the remaining time and give me 

a little bit of comfort. I know your letter does provide it. I entered 

my questions into the record so that we can have a follow-up to 

those specifics. I also notice in your letter, you strongly suggest 

that you and other agencies will be working with patients, product 

manufacturers, distributors, physicians, and hospitals. If you could 

elaborate. 

Secretary LEAVITT. Thank you, Congressman. I would like to 

give you my direct assurance that we will be working with you and 

the other Members of Congress and your staff to resolve this situation. The CMS has established a temporary add-on payment for 

2006 for physicians and for outpatient departments who administer 

the IVIG to Medicare patients. The physician can also contact the 

manufacturer to report problems, but we are on the problem, we 

understand it, and we want to resolve it. 

49 

Mr. FOLEY. Great. That assurance is swell, and now I see my 

yellow light, but I also wanted to thank you particularly for Florida, as we embark on our Medicaid modernization, to try and find 

better ways to serve the community, those most needy. You have 

given us the flexibility. We are watching it carefully. I know there 

has been a lot of conversation on Part D. Some people have wanted 

to extend the deadline from the day we started enrollments. We 

understand there is a problem. We have expressed the concern. We 

want our constituents to be able to carefully enroll in a program. 

There is a reason April 15th is the date your taxes are due to the 

IRS. If you don’t have a fixed deadline, no one will sign up. They 

will continue to push back and wait. 

I know you understand the concerns. I know you also understand 

the confusion. People should be a little patient. We have seen statistics that indicate a lot of people have enrolled in this very valuable program. So, to call it a failure, to call it so utterly confusing 

that people cannot figure it out, I think, demeans the senior citizens we serve. They made it through depressions. They made it 

through Korea, World War II, Vietnam, all the other conflicts of 

this world. Some people act like they cannot figure out a simple 

form. So, I look forward to working with you on making certain 

people get the benefits that they are entitled to. 

Secretary LEAVITT. Thank you. 

Mr. SHAW. The time of the gentleman has expired. 

Mr. Doggett. 

Mr. DOGGETT. Thank you, Mr. Chairman, and thank you, Mr. 

Secretary. I gather, Mr. Secretary, you agree with Chairman Thomas’s opening comments that the implementation of this prescription 

drug coverage is one of the Administration’s real success stories. 

Secretary LEAVITT. I think we would all agree that having millions of people have prescription drug coverage who didn’t before—— 

Mr. DOGGETT. As to how many millions fit in that category— 

you have had all of 2004, all of 2005, we are now into 2006, and 

the millions that you have covered who were not covered when the 

President signed the bill into law in December of 2003 is about 3.5 

million. Isn’t that correct? 

Secretary LEAVITT. Sir, we have been enrolling people since October 15th. 

Mr. DOGGETT. Yes, sir, and you have had—— 

Secretary LEAVITT. November 15th. 

Mr. DOGGETT. —really 2 years to get ready for it, and you have 

enrolled—when you say millions, you have enrolled exactly 3.6 million, haven’t you, that didn’t have coverage before. 

Secretary LEAVITT. There are 24 million people who participate, 

and many of those would not have prescription drug coverage today 

who may have had it a year ago and may well not have it next 

year. 

Mr. DOGGETT. Everyone—well, I understand the speculation 

about next year, but of your 24 million that you all boasted about 

today, only 3.6 million lacked coverage of some kind when this bill 

was signed into law, right? 

50 

Secretary LEAVITT. Medicaid has been in law for 40 years, and 

there are still 50 percent of the people who are eligible, regrettably, 

who have not yet signed up. 

Mr. DOGGETT. Yes, sir, I am glad you make that point, and I 

assume you don’t disagree with my 3.6 million figure or would have 

said so. You actually have reduced since last year in your publication in the Federal Register of 39 million people you were—of 

America’s seniors that you were going to target to cover, that you 

would probably only get to 29 million this year, right? 

Secretary LEAVITT. It became evident to me that 28 to 30 million would be a great success. The actuary established a 39-millionperson limit—— 

Mr. DOGGETT. Is this—— 

Secretary LEAVITT. —but in our judgment and the judgment of 

those who look at it from Wall Street and the markets, we believe 

28 to 30 million is a reasonable number. 

Mr. DOGGETT. About 10 million or 11 million less than last 

year. With reference to this program, you refer in your written testimony to the President’s comment about being good stewards of 

tax dollars. I gather it is also your belief that the implementation 

of this prescription drug program is one of the best examples of 

being a good steward of tax dollars, just as it is a good example 

of success for this Administration. 

Secretary LEAVITT. I think there is no question the fact that the 

market is now driving the cost of prescription drug coverage down 

is something we all ought to cheer. 

Mr. DOGGETT. The cost to the taxpayers of this bill currently is estimated to be over $700 billion for this decade, right? 

Secretary LEAVITT. The cost is coming down, and that is good 

news. 

Mr. DOGGETT. The cost to the taxpayers, the estimate still is over $700 billion for this decade, isn’t it? 

Secretary LEAVITT. The cost estimates are as they are, and I 

am not—— 

Mr. DOGGETT. You are not familiar with what it costs? 

Secretary LEAVITT. I am familiar with them, but there are lots 

of ways to express it, and what is clear is that we are seeing a dramatic reduction in the cost of prescription drugs for consumers—— 

Mr. DOGGETT. Comparing that reduction—— 

Secretary LEAVITT. —and it is because of the consumer—because of the fact that consumers now have choice—— 

Mr. DOGGETT. Yes, sir, and comparing that reduction in cost 

with a program that existed before this bill was signed into law 

where the Federal Government does some negotiating for our veterans to reduce their costs, you are also familiar, are you not, with 

the study of the top 20 most prescribed drugs, that if you take the 

very cheapest prices that these plans are now getting under the 

Republican prescription drug bill and you compare that to what the 

Veterans Administration negotiated on behalf of our veterans for 

their drug prices, that the veterans are still getting theirs at about 

half the lowest cost under these plans, aren’t they? 

Secretary LEAVITT. I am not familiar with that study—— 

Mr. DOGGETT. Not familiar with the tremendous savings—— 

Secretary LEAVITT. I don’t think it is necessarily the—— 

51 

Mr. DOGGETT. —that we get when you use negotiating power. 

You don’t suggest that if your office on behalf of all Medicare recipients were involved in trying to negotiate the highest prices in 

the free world on prescription drugs that our uninsured folks have 

had to pay, that if you were involved in negotiating you couldn’t 

get the prices down to a more reasonable level than what your 

most successful plans are achieving? 

Secretary LEAVITT. If that were the case, Secretaries of Health 

and Human Services would have used that authority with Medicaid, which is now the most expensive—until the DRA, is the most 

expensive drug plan—— 

Mr. DOGGETT. You think—— 

Secretary LEAVITT. The truth of the matter is the best way to 

reduce prescription drug costs is to have a market, which we now 

have for the first time, and we are seeing dramatic reductions in 

prices for all consumers—— 

Mr. DOGGETT. So, you continue to oppose giving any negotiating authority as this bill does—— 

Secretary LEAVITT. It is not the best way to bring prices down. 

We are seeing the best—— 

Mr. DOGGETT. One other quick area—— 

Secretary LEAVITT. —way, which is very clearly bringing the 

cost of prescription drugs down. 

Mr. DOGGETT. One other quick area, since my time is expiring, 

President Bush made history last year by being the first President 

in memory, I think, to call a White House Conference on Aging and 

then not show up for it. The first recommendation of that conference was to increase funding for the Older Americans Act (P.L. 

89–73), which in real dollars has fallen every year of this Administration. Under your budget, does that trend continue where you 

continue to cut the real dollar purchasing power available through 

the Older Americans Act for seniors across this country? 

Secretary LEAVITT. I am not able to respond to that question 

directly. We will be happy to get the information to you. 

Mr. DOGGETT. Thank you. I believe it does, that the trend continues, that the seniors who are relying on the Older Americans 

Act, the first priority of a White House Conference on Aging, which 

was mostly Republican-selected Members through the White House 

and otherwise, that that objective is not being met. Thank you, Mr. 

Chairman. 

Mrs. JOHNSON. [Presiding.] Mr. Herger? 

Mr. HERGER. Thank you, Madam Chairman. Mr. Secretary, I 

want to join in thanking you and commending you for being part 

of the Administration, for bringing your expertise, and the manner 

in which you are dealing with these incredibly important issues. 

An issue that I have been involved with as Chairman of the Subcommittee on Human Resources that I know you are very much familiar with has to do with welfare reform. My question has to do 

with an area that I believe we have had some of the greatest success ever with the welfare reform in 1996. We have seen welfare 

rolls, where we have seen those who were on welfare, families, 

being able to go out and find work, being able to be trained for 

work, being able to be prepared, and being able to return to the 

52 

workforce. We have seen those that are on poverty, the poverty levels, drop dramatically because of that. 

So, my question has to do with that, a follow-up to that on what 

the Administration is doing now. The DRA, which the President 

will be signing later today includes provisions to promote even 

more work and assist even more to be able to work among welfare 

recipients. This law will expect all States to engage 50 percent, just 

half of those that are welfare recipients today, in work or training 

starting next year. Some say that is too tough but I disagree, and 

I would hope we could encourage even more to be out engaged in 

either work or being trained on being able to get jobs. 

Could you, Mr. Secretary, talk a little about the efforts your Department has started that would better uncover the work that is 

already going on, already going on but not reported, which would 

help States meet this goal of 50 percent? Specifically, can you talk 

about using the National Directory of New Hires and what results 

you have see thus far from these efforts? 

Secretary LEAVITT. Congressman, to give you specifics, I will 

need to submit them to you and for the record. I will, however, reflect a little on this subject from my days as Governor. 

I was quite deeply involved as Governor and also as Chairman 

of the National Governors’ Association in the development of the 

original welfare reform and the implementation of the Temporary 

Assistance for Needy Families (TANF) program. I can tell you that 

the work requirements have been a very important part of the 

progress we have made, not only the progress institutionally and 

as a government, but in the individual lives of people. We have 

given people a sense of motivation that has been critical to their 

own sense of self. 

Now, I want to be clear that there is not a Governor or a Secretary that I know that isn’t anxious to assure that the lives of 

those who are truly in need, that their needs are met, but helping 

them establish a sense of purpose and having the training that is 

necessary changes lives in very personal and deep ways, and I have 

seen it personally, and I am proud to be part of it, and it is time 

for us as a society to raise our expectations one more notch. 

Mr. HERGER. Thank you, and I agree completely. In another 

area, the DRA proposes $150 million per year in new funding for 

healthy marriage and responsible fatherhood services. As we know, 

it is—as a parent—I am a parent. Most listening are, most of us. 

It is difficult enough to raise children with two parents working let 

alone, as we see, so many families with just one. 

Your budget suggests $250 million per year for these purposes. 

Since the President is just now signing the DRA which overlaps 

with the release of the budget this week, I wanted to be clear that 

you are still proposing an additional $100 million per year in funding for these programs on top of what is provided for in the welfare 

reform provision of the DRA. Beyond just the level of funding, 

could you discuss what the Department hopes to accomplish with 

these funds? 

Secretary LEAVITT. Congressman, in the early testimony I 

made, I indicated that one of the principles that I believe in, a 

principle of investment, is that you invest in prevention, not just 

treatment. Most of the funds we spend in our Department are foVerDate Aug 31 2005 02:00 Jan 04, 2007 Jkt 030636 PO 00000 Frm 00056 Fmt 6633 Sfmt 6602 E:\HR\OC\30636.XXX 30636
53 

cused on treatment. We are picking up the pieces after something 

has gone wrong. 

The money that is being proposed to strengthen healthy marriages is about prevention. It is about helping prevent the devastation that often comes when families, the unit of our society that ultimately we have to depend on for the vast majority of care that 

occurs, to strengthen them and to strengthen the prevention of bad 

things happening. 

Mr. HERGER. Thank you very much, Secretary Leavitt. 

Mrs. JOHNSON. Mr. Pomeroy? 

Mr. POMEROY. Madam Chair, Mr. Thompson was here before 

me, and if you are calling in order, I have to acknowledge that. 

Mrs. JOHNSON. Mr. Thompson? 

Mr. THOMPSON. Thank you, Madam Chair. Thank you, Mr. 

Pomeroy. Mr. Secretary, thank you for being here. I want to get 

back to this issue of California. I have another letter that came 

after my colleague Mr. Becerra’s letter, where the Governor mentions that he has talked to you a number of times, as you indicated. 

As of 5 days ago, California was still paying for about 11,000 prescriptions a day. The Governor has asked—I guess the State has 

asked—for some certain data from your shop. I guess I want to 

know when can California expect that they can and the program 

off to you where you will be fulfilling your responsibility and paying for it. Then, also, what is the status of the data? Are you collecting the data, and can they expect to get answers to their questions anytime soon? 

Secretary LEAVITT. The data that they have requested is being 

provided, and I will tell you that I have asked the Governor to 

work for a transition as of the 15th of February, one that we are 

confident can be made. 

Mr. THOMPSON. If it is not, is there an extension in the works? 

Secretary LEAVITT. We are prepared to make an extension if 

the States are, in fact, doing what they need to do to take care of 

this. I have waivers signed now with 30 States. California is not 

one of them. I did have a conversation with the State of California’s 

representatives a day or two ago, informing them that we were 

going to be able to return $113 million to them that was savings 

because of the prescription drug benefit and the—— 

Mr. THOMPSON. Notwithstanding that, the issue that I was interested in is the fact that California is having to pay for and do 

the Federal Government’s work on 11,000 prescriptions a day. They 

don’t feel confident—as a matter of fact, I will read from the letter. 

It says, ‘‘It is my intent and the intent of the California Legislature 

to extend the program beyond this date because we are not yet satisfied the problems we have discussed have been fixed to adequately protect California’s 1 million dual-eligibles.’’ So, they want 

some assurance that this is going to happen, and they are looking 

for the data that I mentioned, including how these systemic problems have been addressed and exactly how many of these have 

been covered. 

Secretary LEAVITT. We have the data, and it has been provided 

and it is being provided. It is ultimately going to require that the 

State begin what I refer to as pressurize their system. If they just 

take all the—if they continue to pay claims the way they are now, 

54 

there will be a limit, frankly, the length of time that we are prepared to assure their reimbursement. I have given him every assurance that we are prepared to assure that they—— 

Mr. THOMPSON. Well, I think our Republican Governor wants 

to make sure these guys are covered, and they are willing to work 

with you to make sure that that happens. 

Secretary LEAVITT. I am pleased about that, and I flew to Sacramento and I met with him personally. I have talked with him 

several times. I will—— 

Mr. THOMPSON. He mentions that in the letter, but as I say, 

the letter was dated February 6th, and it mentions that although 

you have had phone conversations and a meeting, the data has not 

come to them, and they are not confident—— 

Secretary LEAVITT. There is no reason to think that California 

is any different than the 30 States which we have been able to 

strike a waiver with, as they seem to think they are. We are prepared to work with them. We hope very much we can do it. There 

will be a limit to which I am prepared to make—— 

Mr. THOMPSON. Thank you, Mr. Secretary. If you could—you 

say you have the data. If I could get copies of that so I could—— 

Secretary LEAVITT. We will be happy to supply you with the 

data. 

Mr. THOMPSON. On the State Health Insurance Program 

(SHIP), I haven’t had the same experience as some of the other 

folks on the Committee, nor the experience that you explained. I 

hear from a lot of my constituents that they are having trouble 

navigating through the difficulties of this prescription drug program. What we are finding is that the SHIPs actually help, and I 

guess you recognize that yourself, and your shop has said that individual counseling has been working wonders. I am interested in 

knowing how that is dealt with in the budget. 

It looks like there is not enough money to provide them with the 

staff and the ability to provide this counseling, and I guess the 

money is combined with some other moneys. So, I would like to 

know how the SHIP funding breaks out. If you do agree that this 

is the most effective way to help people sign up, why aren’t we 

funding them at a level that is required? 

Secretary LEAVITT. The State Health Insurance Implementation Plans have been very helpful, but, gratefully, they are not the 

only avenue. They have been one. There are 30,000 pharmacies 

that have been heroic in their—— 

Mr. THOMPSON. How much funding are they going to get? 

Secretary LEAVITT. I don’t know the exact budget number, Congressman. I can get that to you, but I can tell you I have met with 

them all over the country, and they are doing heroic work and they 

are doing helpful work. This is a conversation—— 

Mr. THOMPSON. Can we try and get them the level that they 

need to fund their program? 

Secretary LEAVITT. We need to fund them to the extent that 

they need, but I want to make clear that they are not the only way 

in which enrollment takes place. We are enrolling 250,000 people 

a week in this program, and it is happening with increasing efficiency. It is not easy to bring a new benefit, the biggest change in 

40 years, and people are working through it. The system is better 

55 

every day. As a pharmacist in Alabama told me, there are a few 

bumps but it is getting better every day, and that is—— 

Mr. THOMPSON. I don’t disagree with you, Mr. Secretary, but if the community-based outreach level of funding, the $43 million— 

if the SHIPs got all of that, that would equate to only a dollar per 

constituent that they counsel, and that is just not adequate. 

Secretary LEAVITT. As you know, the SHIPs are for the most 

part volunteers, and those are highly leveraged dollars, and they 

are a good investment, and they do a wonderful job. It would not 

be reasonable for us to assume that all of those who are enrolled 

will be enrolled through the SHIPs. We need to have senior centers, churches, pharmacists, health care workers, and families. I 

will tell you that the biggest source of enrollment has been the children of mature Americans who have been willing to sit down—— 

Mr. THOMPSON. I have heard from them, also. 

Secretary LEAVITT. Well, it is a very important part of this, and 

they need to help. 

Mr. THOMPSON. I have heard very few positive stories from 

those children, but, Madam Chair—— 

Secretary LEAVITT. We appreciate the fact that they worked 

through it. 

Mr. THOMPSON. Thank you, Mr. Secretary. I would like to ask 

unanimous consent to submit this February 6th letter from Governor Schwarzenegger into the record. 

Mrs. JOHNSON. So, ordered, but I thought that letter was submitted earlier. 

Mr. THOMPSON. There are two different letters. Mr. Becerra 

had one that was from, I think, earlier in the month or from last 

month. Mr. Shaw’s letter that he referenced was not from California. It was a letter from the Secretary’s shop to California, and 

it dealt with the clawback, something completely different than 

what we are talking about. 

Mrs. JOHNSON. Thank you, so ordered, and if the Secretary 

would like to submit the answer he sent back to either of those letters, we would be happy to include them in the record as well. 

Secretary LEAVITT. Thank you. 

[The information follows:] 

State Capitol 

Sacramento, CA 95814 

February 6, 2006 

The Honorable Michael O. Leavitt 

Secretary of Health and Human Services 

U.S. Department of Health and Human Services 

200 Independence Avenue, S.W. 

Washington, DC 20201 

Dear Mr. Secretary, 

I write today to follow up on our meeting on January 19, 2006, and our phone 

conversation on January 24, 2006, regarding the implementation of the new Medicare Part D Prescription Drug Benefit. 

As you know, on January 20, 2006, I signed Assembly Bill 132, which established 

an emergency program intended to serve as the payor of last resort for individuals 

who are unable to receive their prescription drugs from Part D due to problems in 

the Medicare system. The legislation appropriated $150 million to provide services 

under this program, which expires on February 11, 2006. It is my intent and the 

intent of the California Legislature to extend the program beyond this date because 

we are not yet satisfied the problems we have discussed have been fixed to adequately protect California’s one million dual eligibles. 

56 

While I agree with you that Medicare Part D is a federal program and it is the 

federal government’s full responsibility to ensure the program’s success, as Governor, I cannot allow California’s most vulnerable residents to forfeit their access 

to the prescription drugs they need to survive. It is California’s desire to discontinue 

our emergency program as soon as the State has confidence that our dual e1igible 

residents will receive the prescription drugs they need under the federal program. 

For us to be confident that our residents are protected, we need one of two things 

from the federal Centers for Medicare and Medicaid Services (CMS). First, as we 

have discussed previously, the State of California needs data from CMS that proves 

the systemic problems in the program have been resolved. As of this point, CMS 

is not providing data on system performance, data accuracy, or even the number of 

cases that CMS caseworkers are resolving. The State bas repeatedly requested from 

CMS data that will allow us to measure the extent of the problem and quantify any 

improvements. Without this data, it will be nearly impossible for California or your 

Department to make an informed decision as to when the State should discontinue 

its emergency program. I ask you to direct CMS to deliver this data to the states 

as soon as possible. 

Second, as I have also mentioned previously, I believe that the federal government 

has a viable option to make it easier for the states to end their emergency programs. 

CMS is currently employing the services of WellPoint, a Medicare Part D Prescription Drug Plan, to serve as the fail safe mechanism to assist those individuals who 

are ‘‘falling through the cracks’’ and have not been assigned a plan. I believe that 

CMS should expand the role of WellPoint to pay for prescriptions where there is 

an error in eligibility, including copayment amounts or an incorrect denial of a drug. 

Further, I believe that CMS can assist WellPoint with the resources to make this 

solution work. Again, I encourage you to exercise that option as soon as possible because it is a viable option to enable states to end their emergency programs. 

As we have discussed, the federal government must fully reimburse California for 

the costs the State has incurred because of the difficulties with implementing Part 

D. I appreciate that you and CMS have worked quickly to identify a process that 

will allow states to recoup some of their costs. However, I understand that your proposal will not cover all of California’s expenses because your proposal does not cover 

the costs of the Part D copayments. This decision guarantees that California will 

be forced to pay a portion of the costs for this federal program—this is unacceptable. 

The State stepped in to protect residents of California because of problems with a 

federal program; California taxpayers should not be forced to shoulder the financial 

burden of fixing a program that is the federal government’s responsibility. The federal government must pay states the Medicare reimbursement amount for services 

provided and must not reduce that reimbursement by the Medicaid copayment or 

any other amount. I ask that you direct CMS to cover all of the costs the states 

incur. 

I understand that you plan to make this reimbursement mechanism available for 

costs incurred through February 15, 2006, and that this deadline can be extended 

as needed. I look forward to working with you to ensure that states are fully reimbursed for our efforts to protect our most vulnerable beneficiaries and I encourage 

you to extend this deadline if Medicare and Medicaid eligibles continue to have 

problems receiving their prescription medications. I intend to continue to work cooperatively with you to ensure that the nearly one million Californians who are dually 

eligible for Medicare and Medi-Cal have access to the prescription drugs that are 

essential to maintaining their health. 

Sincerely, 

Arnold Schwarzenegger 

f 

Governor 

Mr. THOMPSON. Could we submit other questions to be answered? 

Mrs. JOHNSON. Yes, you are always free to submit written 

questions. Mr. Brady? 

Mr. BRADY. Thank you, Madam Chairman. Mr. Secretary, 

thank for being here today. Partisan comments aside, I think the 

criticism of the rollout for Medicare in whole are fair criticisms, but 

I think it needs to be understood that in a major reform, an improvement of a program like this, there are bound to be glitches. 

57 

We are dealing with a lot of seniors who can be hard to reach. The 

ones we are most determined to reach to provide them help sometimes are the toughest to get to. Lots of glitches in the system. We 

know this will be a difficult year, but in the end—I know in Texas, 

one-third of our seniors who are the poorest are going to get the 

most help. My neighbors who are on the plans—it is starting to 

work and they are seeing a reduction in their drug prices, and 

while in Texas, too, we are concerned about budget items, I think 

we are most—I am most concerned about those seniors’ budgets. 

This Medicare plan is going to make a huge difference in a lot of 

seniors’ lives. I love the thought that rather than government 

handing them a Medicaid-plus program, we have all these drug 

companies competing against each other to sell them at the lowest 

price and the most accessible drugs. That is a huge change from 

the government knows best approach. I think in the long run this 

will be very, very helpful to our seniors. 

Let me talk about Hurricane Rita. In the regions in Texas that 

I represent, ours are the border counties. They took in first almost 

half—400,000 of the Katrina evacuees. We are thrilled to have 

them, and we know if the situation were reversed, Louisiana would 

be taking us in. So, we are glad to have them. 

Hurricane Rita actually is sometimes described as ‘‘the forgotten 

hurricane’’ because not only did we have the Katrina evacuees, but 

Hurricane Rita actually landed at a higher wind speed than 

Katrina. It did more damage to the electrical and water and sewer 

grid than Katrina, did more damage to the refineries along our 

coast than Katrina. In many of our counties, 60 percent of the 

homes are damaged or destroyed. It wiped out our timber industry, 

and that is a crop that takes 40 years to regrow. 

We are really struggling. In fact, because we have so many of our 

Katrina folks in our hotels and now in our apartments, we cannot 

get back our own workers to try to recover and rebuild. So, we are 

in quite a jam. 

I was very angry at the U.S. Department of Housing and Urban 

Development’s (HUD) decision to basically turn their back on our 

Hurricane Rita communities last week in their allocation of the 

community development block grants. I was pleased to see today 

the allocation for Texas of $88 million in social services block 

grants to help in health care and those issues. It is about a third 

of what we need, but it is a huge step forward. We appreciate that 

allocation. We know we will be back, both in Congress and with 

your agency, your Department, to ask for more. 

My only comment—it is not even a question. I just would ask for 

your continuing commitment, as you have already shown, to helping our communities not be forgotten; help us recover and dig out 

of this hurricane while we also take care of our Katrina neighbors, 

whom we are glad to have with us. Any comment you want to 

make, Mr. Secretary? 

Secretary LEAVITT. Thank you. I am appreciative of your acknowledgment of the Social Services Block Grant and the allocation 

that is an attempt to do just that, but I think it is also important 

for us to continue to remember that the recovery of people and 

their lives is a huge part of a disaster, and we can learn good lessons from Katrina and Rita and Wilma this year. 

58 

Mr. BRADY. We were very disheartened by HUD’s decisions. We 

are heartened by HHS, so thank you for helping us move back into 

progress. 

Secretary LEAVITT. Thank you. 

Mr. BRADY. Thank you, Madam Chairman. 

Mrs. JOHNSON. Thank you. Mr. Secretary, it is my turn to 

question now, so I have the privilege of welcoming you to our hearing, and I look forward to working with you in the months ahead 

on the issues that you have addressed. I do want to share with you, 

as we open, a comment from a constituent, Gail Glizewski. Gail 

says, she told me, ‘‘I am the happiest senior citizen in town. All you 

have to do is call for help. I am going to save $2,000 a year. The 

Medicare drug plan has given me security for the future and peace 

of mind.’’ 

Honestly, I never saw a happier face, and I really commend you 

and your staff, all the way down to your staff, for the energy and 

determination you have brought to planning the implementation of 

this program and dealing with the problems, which have been challenges. I thank you for your leadership. That first weekend I could 

call down here any time practically day or night and speak to one 

of the top people at CMS because they were on it, they were working with the plans, and they were working to help individual seniors and individual small pharmacists. I am pleased to say that as 

I have gone around my district in the last week and talked to the 

small independent pharmacists, they now see the problems as having been either worked out or are being worked out, and I thank 

you for that. 

I also want to mention that the analogy to the VA is misleading. 

The VA provides a much narrower formulary and only delivers it 

to a few hundred hospitals. We provide a very broad formulary, 

and we are delivering it to every senior and their nearby pharmacies all across the country. I am proud of the breadth of the formulary that you put out there, and I am proud of the job you have 

done to implement it. The fact that costs are 20 percent less than 

expected, who would have ever thought? It would never have happened under a command-and-control pricing system. In fact, one of 

the things we had to do was fix those old pricing systems because 

we were paying more than anyone else in the market. So, it is a 

good job. 

I was the chief sponsor of the Children’s Health Initiative, and 

we expected 6, 8, 9 million kids would be signed up. The first year, 

660,000. The first 2 months you have signed up 21 million. That 

is simply an incredible record, and I thank you for it because Gail 

is not the only one. I have had seniors who saved $4,000, $5,000, 

and I honestly think it is unfair but also unethical that, whether 

you are news outlet or an individual Member of Congress, that you 

give more time to the complexities and challenge of the program 

than you do to the benefits, because of the seniors who have called 

my office, a significant proportion haven’t even tried to register because they are scared. That is terrible. We should be part of educating; we should be part of reminding them of the security and the 

help. The average savings per prescription is $73 across the country. So, I urge my colleagues, get your answers, but urge people to 

59 

sign up, urge them to call. I wanted to be sure to get that on the 

record. 

I want to go on, though, to the Health Technology Initiative that 

not only is in this budget, but that you personally have really led. 

I want to ask you how is the National Coordinator of Health Information Technology and the Agency for Health Care Quality and 

Research going to divvy up this money and what is going to be the 

relationship between that and the American Health Information 

Community? 

Now, that is a lot of gobbledygook for those listening, but the bottom line is that under your leadership, implanting health technology in the cities through the community health centers and others, encouraging collaborations between community health centers, 

hospitals, and doctors is actually meaning now we are reaching the 

uninsured and bringing them into the system with electronic 

health records. I would not want to say that collaboration through 

the WAT program and others in any way hampered by budget decisions. So, could you talk about your Health Information Technology 

Initiative and our efforts to reach the uninsured and the homeless? 

Secretary LEAVITT. We have a clear vision of a health care system that is interoperable, where medical records can be the part 

of the life of every American if they choose. The vision will produce 

lower costs, fewer medical mistakes, higher quality, and, frankly, 

less consumer hassle. By the end of this year we will have taken 

significant steps to accomplish that vision. By the end of this year, 

we will have basic electronic records standards that will be usable. 

We will have standards established and implemented on consumer 

empowerment and on chronic care management and a very important one, biosurveillance, the ability to take information from emergency rooms for public health purposes and for our homeland security purposes. 

This is a movement that has to happen because it is at the heart 

of every aspect of health care. If we are going to see consumer costs 

constrained, it will be in part because we have used the efficiency 

of technology. If we are going to see wellness improve, it will be 

in part because we have access to information. If we are going to 

see physician payment systems improved, it will be because we 

have information technology. If we are going to see quality improvement to where people are spending less because they are 

healthy, it will be because we have improved information technology. It is at the heart of all of those, and we are working hard. 

By the end of this year, we will use the money in this budget to 

have actual deliverables. 

Mrs. JOHNSON. Thank you very much. I agree. It is one of the 

key answers to controlling Medicare costs while improving quality. 

I thank you. 

Mr. Larson? 

Mr. LARSON. I thank the gentlelady from Connecticut, and I 

thank you, Mr. Secretary, for your service to the country. I just 

have first, more of an information question that I hope you can provide the Committee. Last November, the Committee’s Democratic 

staff asked CMS to provide a detailed breakdown of Medicare beneficiaries by congressional district, including the number of duals, 

number of Medicare Advantage enrollees, age versus disabled, and 

60 

other points. This is something, as you know, that the Social Security Administration (SSA) does for Social Security benefits, and it 

is enormously helpful for everyone, regardless of party affiliation or 

policy position. In fact, it has been very helpful for me with regard 

to my district. Yet we have had trouble getting basic data of this 

sort out of CMS, and I am hoping you might be able to help along 

that line. 

Secretary LEAVITT. I will do my best. 

Mr. LARSON. I thank you for that, and that is very important. 

I think there are an awful lot of good questions, and I do a lot of 

hearings throughout my district as well as forums, because I do 

think it is important to provide everyone with all the information 

that they can have. There are winners and losers in this system. 

There is no question about that from what I have found. We encourage everybody that we come in contact with to sign up. 

There isn’t a single hearing that I conduct where people don’t 

wonder aloud why it is that we prohibit you from negotiating directly with the pharmaceutical companies. That is just the hard reality, that in law we prevent you from negotiating directly with 

pharmaceutical companies. There are many veterans who come to 

this meeting also and will cite specifically what the VA does on 

their behalf. So, you might imagine that it confounds the elderly 

when they look at this essential issue in terms of getting prescription drugs that are affordable and accessible to them. As I say, 

there are winners and losers in this program. There shouldn’t be 

any losers in a program where we are seeking to provide the best 

benefits that we can for our seniors. 

Would you lobby, would you take on the effort of negotiating directly with the pharmaceutical companies? There are several proposals, I know, including one of my own, before Congress to do just 

that. 

Secretary LEAVITT. Congressman, I have traveled to, I suspect, 

42 or 43 States regarding Medicare and stood in front of seniors 

and talked to them about their individual situations and answered 

their questions, and I can honestly tell you, if there are winners 

and losers, I haven’t met the losers. I don’t know how you lose on 

a program where you have the government subsidizing either 100 

percent or 75 percent of your drug bill. This is a good deal for seniors—— 

Mr. LARSON. Well, I guess the seniors then in the groups that 

I have been talking to are struggling through 44 different choices 

that they have and coming up and saying, well, under this plan or 

that plan I may be advantaged or not advantaged, and I don’t understand why it is that the veteran who lives next door to me pays 

a $7 deductible and I am going through all these machinations. 

Secretary LEAVITT. Well, it may be—— 

Mr. LARSON. Would you call them winners? 

Secretary LEAVITT. I would say it may be that their neighbor 

is in the veterans’ plan, which has, in fact, one of the most restrictive formularies. 

Mr. LARSON. Which goes directly to my point. 

Secretary LEAVITT. It may have been one of the—it is one of the 

more restrictive formularies we have. 

61 

Mr. LARSON. They will take that restriction, I will tell you that 

right now. 

Secretary LEAVITT. Then one of the good things we could do is 

have a plan in the choice of plans that would emulate that. If we 

had—— 

Mr. LARSON. Your predecessor said that he would, and he recommended negotiating directly with the pharmaceutical companies 

to lower the price. Tommy Thompson said that that is what he 

thought was the best way to go. Would you pursue that avenue? 

Secretary LEAVITT. I believe that the best way to reduce prices 

is to have a robust, competitive market, and we have seen that 

demonstrated in Part D. 

Mr. LARSON. If this was competitive, when the government is 

providing the money to the companies to compete against the government, how is that competitive? 

Secretary LEAVITT. We have regulated prices in Medicaid, 

and—— 

Mr. LARSON. When every other Nation in an industrial economy 

negotiates on behalf of their citizens and we don’t, we end up subsidizing them with our citizens. How is that competitive? 

Secretary LEAVITT. We currently have a high number, some 

argue too many, but we have a high number of plans who are going 

to the pharmaceuticals and saying to them, ‘‘If I am going to be 

competitive in this marketplace, I have got to have your lowest 

cost.’’ They are formulating their plans to be the lowest, and we are 

seeing the benefit in the form of lower prescription drug costs for 

the first time in decades. It is a fact. It is happening. 

Mr. LARSON. Not according to the report that was most recently 

issued by Henry Waxman. In fact, you can go to drugstore.com, for 

that matter, and get lower rates than within the existing program. 

It is—— 

Secretary LEAVITT. All I can tell you, Congressman, all that 

needs to be said, is that when this program was started, the average cost to an American would have been $37 a month. It is now 

$25. I just sent back hundreds of millions of dollars to States who 

would otherwise be suffering higher costs because of it. Prescription drug costs are getting lower, and they are getting lower because we have a robust, competitive prescription drug market for 

the very first time, and that is a good deal for seniors, and it is 

a good deal for taxpayers. 

Mr. LARSON. Respectfully, Mr. Secretary, you are an honorable 

man and so are all the people that serve on this Committee, but 

when seniors make decisions, ‘‘lower’’ is a relative term. When you 

are making the decision between the food you put on your table, 

how you heat and cool your home, and the prescription drugs that 

you have to take for your survival, ‘‘lower’’ is a relative term. We 

need the best possible price, and that happens when you negotiate 

on behalf of all the seniors impacted, not these narrow groups, not 

44 different people negotiating. That doesn’t create the kind of competition that we know in terms of supply and demand. 

Secretary LEAVITT. Congressman, I would argue that for the 

first time in the history of this country, there is no reason that a 

senior should have the worry that their prescription drugs would 

wipe out their savings. That was not true before January 1st. It is 

62 

true now. We are seeing seniors who are not only having their 

health protected because they have prescription drugs they did not 

have before. We are seeing them save money, and we are seeing 

them have the peace of mind that they will not have their prescription drugs wipe their savings out. Is it a perfect plan? No; but for 

the first time, millions have coverage who did not, and that is good 

news. 

Mr. LARSON. It is an imperfect plan that needs to be perfected 

by the willingness of the government to step forward on behalf of 

those seniors and negotiate a price for them where they can survive. Thank you. 

Mrs. JOHNSON. Mr. Beauprez? 

Mr. BEAUPREZ. Thank you, Madam Chair. Mr. Secretary, 

thank you for being here. I actually would commend the prescription drug plan. My seniors are very happy that that $36, $37 premium did not come true. What some of us thought would happen 

when free market principles are applied to health care actually did 

happen, that when you brought more, not fewer, and certainly not 

only one option to the marketplace, that it did drive prices down. 

In my State, we are seeing premiums around $22, $23, and the 

seniors are very grateful for that. Competition works everywhere 

else. People like choice everywhere else. I think this was a step in 

very much the right direction. Our seniors, as well as the taxpayers, are well served by it. 

I want to ask a very, almost personal question because it relates 

specifically to one of my constituents, and I will get to it in a 

minute. In the DRA, we took some steps to modernize, reform Medicaid specifically, and Medicare. One of those steps related to oxygen and oxygen concentrators that are used by a growing number 

of seniors. Before my father passed away, he was on oxygen himself, so this does become pretty personal. Can you walk me through 

what we did in the DRA and specifically what in this budget might 

address the use of oxygen by so many of our seniors? 

Secretary LEAVITT. The practice has been, when people use oxygen, to rent the machine and the service. It has seemed inconsistent to many in the Congress and to many of those of us who 

administer the program that service goes on and on and on, and 

at some point in time the machine is never paid for. It just goes 

on perpetually. So, the proposal is after 13 months of paying 10 

percent a month of the cost of the machine, it ought to belong to 

the consumer. That just seems good sense, and it is good sense for 

the plan and good sense for the consumer himself or herself. 

Mr. BEAUPREZ. At the end of that 13 months, you are not going 

to cut off payments to where people no longer get their oxygen? 

Secretary LEAVITT. We just want them to own the machine. 

Mr. BEAUPREZ. Okay. Well, in my district—and I believe probably nationwide—oxygen suppliers specifically sent out letters and 

informed their users, senior citizens whose lives depended on oxygen, rather obviously, that the Federal Government, this Congress, 

this Administration, you, I guess, were going to terminate their oxygen. Do you want to tell whoever might be out there listening 

what the truth is once again? 

Secretary LEAVITT. It is true often that the enthusiasm of critics rarely has—they rarely temper their criticism with realism. In 

63 

this case, we simply wanted them to have a better deal. We wanted 

them to own the oxygen equipment. We wanted the government 

not to have to pay for it over and over and over again, and we 

wanted the oxygen companies to have a fair price but to not have 

an unfair price. 

Mr. BEAUPREZ. Well, on durable medical goods, such as an oxygen concentrator, it isn’t only the government in this case, which 

I am going to get to in a minute; it is about an 80/20 split with 

the co-pay that the individual pays. This is a case that was actually 

brought to me: Russ, on behalf of his wife, Jane, came to me and 

he said, ‘‘This doesn’t make any sense. My wife is now on oxygen.’’ 

He said, ‘‘Every single month, I am charged $31.87. My insurance 

provider pays almost $160.’’ He said, ‘‘This is going to go on for as 

long as my wife lives and is on oxygen.’’ On the back, he copied the 

concentrator. He said, ‘‘I can buy the thing for $635 complete with 

every bell and whistle.’’ In just a little over 3 months, between his 

co-pay and the insurance company’s payment, you own the thing. 

Now, what you are telling me is it will actually go on for 13 months 

and then we give ownership to the individual, to the patient, correct? Continue to provide the oxygen and whatever maintenance is 

necessary for the equipment. 

Secretary LEAVITT. We want people to have the oxygen they 

need. We just don’t want the taxpayers to have to pay an unreasonable amount for it. The system needs to work. It needs to work for 

taxpayers and for the beneficiary. 

Mr. BEAUPREZ. It makes sense to me. I think it is shameless 

when you have individuals, such as my dad was before he passed 

away, that were absolutely dependent on every breath they took on 

that machine, to send them a letter and suggest to them that the 

Federal Government somehow is going to take away their lifeline, 

their oxygen. Absolutely unconscionable. I thank you for the explanation, and I yield back, Madam Chair. 

Mrs. JOHNSON. Mr. Emanuel? 

Mr. EMANUEL. Thank you. I would like to thank the Chairperson for the time, Mr. Secretary, for the hearing, to your father 

for being here, who I am sure is proud. As Mark Twain used to say, 

‘‘At 13, I had concluded my father was a fool. By 17, I was shocked 

what he could learn in only 4 years.’’ One of the—there is a whole 

debate about whether, in fact, in the budget the propositions are— 

as it relates to part B are cuts, slowing the rate of growth, and so 

forth. Let there be no doubt that by your own estimate, that is, the 

Administration’s, $36 billion over 5 years saved. The Administration cites MedPAC as the source for these ideas. 

I would like to bring your attention—because as we look for savings across the board, the President says in the State of the Union 

he would like to find savings. We have to be belt-tightening everywhere. The Medicare Payment Advisory Commission, the source 

that you all cite for your savings, also says we should eliminate the 

Preferred Provider Organization (PPO) slush fund, which would 

save over the same 5 year window $5.4 billion. That was not part 

of the President’s recommendations in the budget, but MedPAC, 

which is what you cite for these cuts, reductions, slowing the rate 

of growth—however you want to talk about it—or including in the 

participation rate for those making over $80,000, MedPAC calls for 

64 

the elimination of the overpayment of private plans, saves $30 billion. I am not sure whether that was a 5 or 10 year number, but 

$30 billion there. 

MedPAC called for the elimination of the double payments for medical education. That is a $5.5 billion saving. They also called 

for the removal of the extra risk fund, which is $19 billion. If 

MedPAC is going to be the umpire we use, i.e., you use—we talk 

often about MedPAC here as a source for giving us guidance on 

how to deal with Medicare issues—there are four recommendations 

that tally well over $60 billion in savings that we net. Whether it 

is omission—you didn’t get the report, I am more than willing to 

send you the MedPAC recommendations, Mr. Secretary, if you 

didn’t get them. There is $60 billion in corporate welfare in this 

deal that is not in the President’s budget. 

Now, there is some merit to the argument—and we have discussed it at length—of whether people making X dollars should pay 

a higher cost than those making below X dollars. There is a rationale for that argument. We will have that discussion. I have an indication I know we are going to lose, but what I am wondering is, 

if MedPAC is such a good source for this guidance on this policy, 

why were the other recommendations that were real dollars—these 

aren’t rounding errors; we are talking about $30 billion: the PPO 

slush fund, the overpayment, the double payment for education, as 

well as the risk adjustment. We are talking about close to $60 billion totally omitted. So, if we are going to look for extra sacrifice 

across the board, everybody has to have some skin in the game, I 

am amazed at the omission in the budget of savings. 

Now, that doesn’t say that those replace the ones you have. 

There is an argument for that. You can see there is not a question 

here. It is a statement, because I would argue that this budget 

keeps in place a lot of corporate welfare of the worst kind. Now, 

if you want to advocate the free market and using privatization, 

fine, but I don’t think the taxpayer should subsidize the private 

market. You want to be in the business? Be in the business. You 

want to compete against Medicare? Compete against Medicare. We 

are just not asking taxpayers to subsidize your competition. That 

is what this is. 

Now, I would also like to lend my words to my colleague from 

Connecticut. You have examples of people who are going to be able 

to get some prescription drugs. I can sit here—Terry Vickers, a 

constituent of mine who was enrolled January 1st and was cut off 

January 30th. We still have no solution to that person’s problem. 

They got 1 month of drug benefit in January. I have a couple, Julia 

San Juan and her husband. She got enrolled—dual-eligible. She got 

enrolled, he isn’t. The pharmacist had to give them five pills to 

hold them over for his blood pressure. We still have no solution 

with my caseworkers. It is not just a perfect plan or a good plan, 

and it is not just a rollout start problems. This is structurally, in 

my view, flawed. 

Now, you can disagree with the direct negotiations. You can disagree with reimportation, because at the end of the day we are subsidizing Europe and the rest of the world, both on the R&D side 

and the price side, or getting generics to market quicker. In every 

one of those free market ideas, direct negotiations just like what 

65 

Costco does or Sam’s Club does, allowing the free market to work 

in the sense of competition between—I will finish up, Madam 

Chair—and then also generic markets against name brand. In 

every one of those areas, it is a free market principle of competition 

that would bring in better price competition, not just to the seniors 

but to the taxpayers. In these plans overall, you continue corporate 

subsidies and corporate welfare and put it on the back of others 

where they need not have to have these cuts. Thank you. 

Mrs. JOHNSON. I am sorry to gavel my colleagues down, but the 

ones who have been waiting have been waiting for a very long 

time. 

Mr. EMANUEL. I apologize for being long-winded. 

Mrs. JOHNSON. I would like to recognize Mr. Ramstad. 

Mr. RAMSTAD. Thank you, Madam Chair. Mr. Secretary, good 

to see you. Thank you for your indulgence here today and your participation. Mr. Secretary, I want to switch gears and discuss another critical issue affecting access to affordable prescription drugs 

for seniors. As you know, when we passed the Medicare Modernization Act, at least in the House, we also passed an amendment that 

would have allowed the reimportation of less expensive prescription 

drugs from Canada and other countries. Unfortunately, the conference did not adopt the provision, but the general practice has 

been to allow individuals to purchase drugs from Canada for their 

own personal use. When I have queried officials from Customs or 

CMS, they have consistently told me that that is the general practice, that is, to allow individuals to purchase drugs from Canada 

for their own personal use, not to allow pharmacies to make bulk 

purchases for resale, but to allow individuals to purchase drugs. 

So, relying on that policy, both the State of Minnesota and the 

Minnesota Senior Federation have set up programs to help facilitate the purchase of mail-order prescription drugs from Canada. 

The programs have worked well. We are a border State with Canada. In fact, many residents have taken buses to Canada, and others have bought prescription drugs over the Internet. It has worked 

well. It has saved money. After all, we allow the free flow of all 

other goods and services pursuant to the North American Free 

Trade Agreement (NAFTA), which many of us here worked hard to 

pass to create the free trade zone comprising Canada, the United 

States, and Mexico. So, it seemed consistent with that as well. 

Well, just in the past few days, I have been absolutely shocked 

and, quite frankly, outraged to learn that there has been a surge 

in confiscations of mail-order prescription drugs by the Customs 

Service. Seniors from Minnesota who have relied on these drugs, 

many life or death drugs that they need to continue a quality of 

life, continue living, their drugs have been confiscated, at least 100 

cases that we are aware of. Now, this is obviously very distressing 

to seniors who are counting on receiving drugs that they quite literally in many cases need to survive. 

Mr. Secretary, I want to ask you two questions, please. One, are 

you aware of why the recent surge in confiscations, just since the 

1st of the year? Why has the policy seemingly shifted into one of 

confiscating mail-order drugs from Canada? Further, given that we 

import food and all other goods and services from Canada without 

problems, that there is no evidence of Americans being harmed by 

66 

drugs from Canada, can you tell me why HHS continues to block 

reimportation of prescription drugs as a policy? 

Secretary LEAVITT. First of all, our job is not to block it. It is 

to find out if it is safe, and we are not certain and cannot guarantee that it is. It is the Congress who will make that policy decision. I don’t know with respect to the specific circumstances you 

reference, but I might be able to give you insight as to why that 

is occurring. 

Many people who acquire drugs from Canada do so over the 

Internet. A site recently noticed on the Internet was called Canadian Generics, and the U.S. Food and Drug Administration (FDA) 

did some work to find out what was behind it. It had Canadian 

flags and all kinds of symbols of Canada. When you actually dug 

into it, you found out that the ISP was in China. You found out 

the website was in Belize. You found out that the check was negotiated in the West Indies and that the postmark on the drugs was 

Dallas, Texas. 

When you actually look at the drugs that came, you find that 

every one of them was mis-dosed, in some cases having dramatically more, as much as 100 percent more of the active ingredient 

than was represented. In some cases, they were brilliantly counterfeited in packaging, but when you actually tested the substance, it 

was tap water, not the substance that was supposed to be in the 

syringe. 

My point is that if you are buying drugs over the Internet from 

sources you are not sure of, it is buyer beware. I cannot as Secretary of Health and Human Services attest or warrant to the safety of those drugs. I don’t know if that was the case in any of those 

100 situations, but I can tell you that it is now a $34 billion industry, and that it is of major concern not just to us but to the World 

Health Organization. 

Mr. RAMSTAD. Well, is it your—and I will yield back, Madam 

Chair. Is it your suspicion, at least, that there is a nexus there to 

the 100 cases I referenced of confiscation, that there is a connection 

between actual reason to believe or proof of unsafe drugs? Or were 

these random confiscations? That is what I am trying to get at. Has 

the policy shifted? 

Secretary LEAVITT. I don’t know the answer to that, except that 

we know that drug counterfeiting is a substantially greater risk 

every day. I can tell you that if you—— 

Mr. RAMSTAD. Well, can you find out the answer to that question? 

Secretary LEAVITT. I would be happy to. 

Mr. RAMSTAD. The seniors in Minnesota, I think, deserve to 

know. Is the policy shifting? Should the Minnesota Senior Federation change—they are trying to make it easier to—— 

Mrs. JOHNSON. Thank you. This is an important point—— 

Mr. RAMSTAD. —buy prescription drugs for seniors. So, if you 

would get back to me, Mr. Secretary. Thank you. I look forward to 

your response. 

Mrs. JOHNSON. Yes, if the Secretary would get that information 

and get back to us, I would appreciate it. 

Mr. RAMSTAD. Thank you, Madam Chair. 

Mrs. JOHNSON. Mr. English? 

67 

Mr. ENGLISH. Thank you, Madam Chair. Mr. Secretary, I appreciate your testimony today. Like some of the others who have 

posed questions, I have gone through an extensive process in my 

district in reaching out to seniors who are making decisions about 

the new Part D benefit. I guess the bulk of my interest today has 

to do with that. I have been fascinated by the flip-flop we have 

seen from the other side today. After all, they had proposed language also that barred the Federal Government from direct negotiations on drug pricing. My own view has been that we need to 

give an opportunity at least for the networks that are being set up 

here to provide the service to negotiate themselves with the drug 

companies and see if we could generate discounts. 

I noticed with interest that the current estimates on the price of 

the overall benefit have dropped significantly, and I would like you 

to comment on whether some of the drug pricing advantages we 

have seen from the establishment of this benefit and the competition contained with it have actually brought down some of those 

prices. 

Secretary LEAVITT. Congressman, that is at the heart of the 

reason that the drug prices are going down. We now have an organized competitive market for the first time in prescription drugs, 

and I believe the benefits have not only been realized because of 

that, but they will continue to be realized. 

Mr. ENGLISH. I am concerned, though, about one of the aspects 

of the benefit that I have been skeptical of from the outset, and 

that I have heard a lot about from seniors, and that is the enrollment penalty, the late enrollment penalty for the new Part D benefit. I realize that there are other areas of Medicare, including part 

B, that have these sorts of late enrollment penalties. I also realize 

that the penalty is modest up front, but is cumulative. I am wondering, can you articulate in your view the purpose of these late 

enrollment penalties? Why are they important to the Medicare system? I guess at what point do you think the penalty would become 

so high as to effectively price seniors out of the coverage market? 

Does such a point exist? 

Secretary LEAVITT. Part D is an insurance program. Like any 

insurance program, if you wait until just before you are going to 

use it, it is quite expensive. For example, if you bought life insurance just before you were going to use it, it would be very expensive. If you bought long-term care insurance just before you were 

going to use it and move into a facility, it would be quite expensive. 

The same is true with prescription drugs. If we allowed people 

to buy the program just before they were going to use it, we know 

that they would put off purchasing it until just before they had a 

need, and then they would run up high costs, and that would bring 

the cost up for everyone. This is a function of creating an actuarially sound pricing mechanism that will recognize the risk that increases when people put off buying it until they know they have 

a need. 

Mr. ENGLISH. At some point, would the Administration consider 

a proposal that would establish—even as we have a window for 

people to make changes every year in their benefits, would there 

be perhaps an openness to the idea of creating some sort of cap on 

68 

this penalty if people decide to buy into the benefit within an annual window? 

Secretary LEAVITT. That is a policy question that would require 

the approval of Congress. The basic construct of the program now 

is the actuarial soundness that I have spoken of. The impact would 

be that it would increase the cost to all participants; that is to say, 

if a person chose not to enroll and then later enrolled in that window, the cost of their drug benefit would have been subsidized not 

just by the government but by all those who were participants before. 

Mr. ENGLISH. Understood. That is a policy question, and what 

I would like to do is engage CMS and your Department and explore 

the policy implications of perhaps consider a legislative remedy 

down the road that might speak to some of those concerns. My concern is not with the immediate penalties as much as looking at the 

out-years, how some of these penalties could buildup to make the 

benefit, in effect, prohibitive for some who perhaps have enjoyed 

pretty good coverage and would find themselves in a situation in 

the out-years of wanting to take on the benefit and would find 

themselves, through no fault of their own, at a serious disadvantage. I salute you though for your answer, and I am grateful for 

the opportunity to have this exchange. I yield back the balance of 

my time. 

Mrs. JOHNSON. Thank you. Ms. Tubbs Jones? 

Ms. TUBBS JONES. Thank you, Madam Chairwoman. Mr. Secretary, good afternoon. I am Stephanie Tubbs Jones. I come from 

Cleveland, Ohio. How many letters did you get from our Governor 

about problems with the Medicare sign-up and how much money 

needed to be reimbursed to Ohio for problem with the prescription 

drug program? 

Secretary LEAVITT. I actually spent a fair amount of time in 

Ohio directly with the Governor and with those who are applying 

for the benefits and visiting with beneficiaries and pharmacists and 

others. I think I have a reasonably good picture of what has been 

happening, both in Ohio and other States. 

Ms. TUBBS JONES. Does your picture include that tons of seniors—I don’t even know how to put numbers on it—were having 

problems getting through to the call-up lines? I personally opposed 

the program but attempted to help my constituents in light of the 

fact that it was a program that involved—sent out brochures. Then 

people would call my office and say, ‘‘Congresswoman, we cannot 

get through on the line. We cannot‘‘—having a problem. So, what 

have you done to relieve the problem in Ohio, sir? 

Secretary LEAVITT. Perhaps I could show you generally how 

that is occurring. If I could show these charts, this might be an appropriate—— 

Ms. TUBBS JONES. You know what? I don’t think I have time 

for charts. Why don’t you get those charts to my office and then 

I will review them. I don’t have but 5 minutes. 

Secretary LEAVITT. Then just let me give you the quick version, 

that the time waits were absolutely unacceptable during the first 

week or week and half, and they have dropped consistently—— 

Ms. TUBBS JONES. This is just Ohio? 

69 

Secretary LEAVITT. No, that is not just Ohio, but that is the national picture. Ohio would have not been any different. 

Ms. TUBBS JONES. Well, then, that won’t help me, Mr. Secretary. I would love for you to send me these charts so I can review 

them, but I have a lot of other questions I want to ask you. 

[The information follows:] 


30636A.001
70 

On behalf of my colleague from Louisiana, he was concerned 

that, as you talk about trying to do all you can to support Louisiana, the social services block grant for Louisiana was reduced by 

almost $8 million, from $25.7 million, almost $26 million, to down 

to $18 million. He is concerned about what—your real concern for 

helping Louisiana when you would reduce those dollars, their dollars by $8 million, and perhaps you could get back to Mr. Jefferson 

about what happened there. Let me—— 

Secretary LEAVITT. Perhaps I could mention to you that that 

isn’t necessarily—they are getting the vast majority of that Social 

Services Block Grant funding; $220 million of the $550 million is 

going to Louisiana. So, I am not sure what he is referencing. 

Ms. TUBBS JONES. Well, I am not sure either, but maybe you 

can get back to him. He asked me to ask the question, and I am 

doing that on his behalf. Another thing that I am concerned about 

is the reduction of dollars to the Office of Minority Health, and the 

reason I am concerned about it is when we started doing Social Security, the President committed to African Americans that ‘‘I am 

going to make sure you have Social Security, and I am going to figure out how it is that since you die early, why—that we are going 

to make sure you get Social Security.’’ 

Well, the response by the African American community was, ‘‘Mr. 

President, don’t fix Social Security since I die early. Fix why I die 

early.’’ One of the reasons that African Americans die early is because of the disparity in dollars available to African Americans in 

health care. One of the most important programs that dealt with 

that is the Office of Minority Health. Can you give me an explanation of why, when your Administration or the Administration is 


30636A.002
71 

concerned about minority health, that you would reduce dollars to 

that particular program? 

Secretary LEAVITT. I can give you an explanation on why it is 

that we are increasing the dollars going into community health 

centers, where a large percentage of them are served, is being increased. I can show you how we are using dollars from programs 

that emphasize the diseases that affect minorities in disproportionate share. I can show you many different situations where we 

are emphasizing as a matter of both theme and substance our need 

to supplement the needs of minority people. 

Ms. TUBBS JONES. You know what? It is funny because your 

response is, ‘‘The way I am going to fix it is I am going to help community health centers.’’ I am looking at a piece that says the budget eliminates Health Resource and Service Administration’s community health State planning grants. I am doing one, and I am reducing the other. The reality is there is a significant need to fund 

programs that provide support to all communities, but particularly 

minority communities, because of the health disparity. 

Let me take you to another page. According to my notes, the 

President is cutting funding for national family care giver support, 

home-delivered meals, congregate meals, protection of vulnerable 

older Americans, preventive health services, nutrition services, incentive programs, and Alzheimer’s disease. Don’t you think those 

programs are more important to the maintenance of seniors in our 

community? 

Secretary LEAVITT. Every program is important to someone in 

a budget, and we are in a period of time where we are reducing 

deficits. I have been forced to make decisions that dealt with conflicts between those priorities. These are my judgments. You may 

have different values and, in fact, that is why we are here, is to 

talk about which decisions I made and you—— 

Ms. TUBBS JONES. You recognize—a last question, Madam 

Chairwoman. You recognize that the programs that I just talked 

about for seniors are some of the programs that allow seniors to 

stay in their homes versus going to nursing homes, right? 

Secretary LEAVITT. No one in this Administration has anything 

but enthusiasm about being able to have seniors served in their 

homes. You will see many programs in this budget that make that 

possible and enable it. 

Ms. TUBBS JONES. Well, we differ on it, and I thank you, 

Madam Chairwoman, for—— 

Mrs. JOHNSON. If the gentlelady will suspend, I am going to 

give the Secretary a chance at the end to make some comments, 

because so many of the questions have taken all the time and not 

resulted in dialog. 

Ms. TUBBS JONES. Madam Chair, I—— 

Mrs. JOHNSON. Your questions at this point—— 

Ms. TUBBS JONES. —am not the only one that took all the—— 

Mrs. JOHNSON. Your question at this point is repetitive of your 

earlier questions, and as I say, there are Members that have been 

waiting a long time to question, so I am going to recognize Mr. 

Chocola now. 

Ms. TUBBS JONES. I appreciate it, Madam Chairwoman, but 

don’t just chastise me. I am not the only one—— 

72 

Mrs. JOHNSON. Oh, I am not. I have been having to gavel down 

a lot of my colleagues. I am sorry to do that, but I am doing that 

out of fairness to the ones who are waiting. In fairness to the Secretary, I am going to give him a few minutes at the end to be able 

to respond to attacks like corporate protection. Mr. Chocola? 

Mr. CHOCOLA. Thank you, Madam Chair, and thank you, Mr. 

Secretary, for being here. Thank you for your patience. A lot of the 

questions I was going to ask have already been asked or touched 

upon, but maybe I will give you a chance to respond to some things 

that have been discussed. My district is in north-central Indiana. 

We have had some seniors, Medicare beneficiaries, that have been 

confused. We have had some problems with dual-eligible issues, but 

what we have found is kind of a magical thing. When you don’t 

complain about it, when you don’t tell the seniors how confusing it 

is, but sit down with them and help them, we have been able to 

help thousands of seniors through townhalls, workshops, office visits, telephone calls. We have experienced some great stories. I will 

just share a couple of them with you. 

One constituent spent roughly $654 a month prior to implementation of Part D. Under the new experience, he is paying $217 a 

month. He pays a $66 premium, so he has one of the higher-priced 

plans, but he saves $370 a month. He is one of the winners, and 

he is a pretty happy guy. One other is a constituent that qualified 

for the extra help for low-income individuals. She takes seven prescriptions, $297 a month. Today she pays $23 a month. So, I don’t 

think that our experience is unique, but would you like to comment 

further on that? 

Secretary LEAVITT. There are 250,000 people a week enrolling 

in this benefit. They are not enrolling in it because people said they 

had trouble at the drug counter. People are telling their neighbors, 

‘‘It worked well for me.’’ The vast majority of people who go to the 

drug counter will get their prescription in a normal and routine 

way. There have been a small number of people who have had to 

spend some extra time, and every one of those, it is a problem for 

them, and it is a big problem for me, and we are doing everything 

we can. This is a good deal for seniors. Every one of them saved 

money. 

I had the same experience. I sat down on Christmas Eve with my 

wife’s mother. She had been told by friends of hers at the senior 

center, ‘‘Oh, I heard this was confusing.’’ It took us half an hour. 

She had a list of her prescription drugs. She was spending well 

over $8,000 a year. The drug benefit will cost her about—she got 

a little better plan. She got one that did not have a deductible, but 

she will save almost $5,000. I worry, like you do, that there have 

been those who have discouraged seniors. That is unfortunate, because it is a good deal for seniors and we want make certain that 

they have the prescription drugs that they need. 

Mr. CHOCOLA. I appreciate your efforts. Just Friday, I had a 

call from a constituent that had called our office earlier and said 

this plan is incomprehensible, there is no way he can navigate 

through it. We sat down with him, and he called on Friday and 

said this is the best thing he has ever experienced, and he took 

back all of his complaints before. So, I think the amazing thing is 

73 

when you sit down and help people, we find that there is a lot of 

help out there. 

Secretary LEAVITT. We are getting through this. This is the implementation of the largest change in Medicare’s history. Medicare 

was not implemented originally without unexpected problems. The 

fact that we are finding them, fixing them and finishing them and 

that the system gets better every day is the measure of success. 

Mr. CHOCOLA. I agree. Just on another issue, I used to be in 

the manufacturing business, used to make things like chicken feeders, and we could make thousands of chicken feeders without ever 

making a mistake. We never wrote anything down. Everything was 

bar-coded. I don’t see that level of technology for things that are 

available to make widgets implemented in the health care system. 

The President talked about electronic medical records within 10 

years. It seems to me that we are at the Betamax/VHS stage where 

we can’t quite determine what the standard ought to be that we 

ought to operate under. Do you have efforts to try to identify that 

standard, and how are you going to get to that point? 

Secretary LEAVITT. Yes. The Chairperson referenced the American Health Information Community. That is an effort to create 

standards so that electronic medical records can move forward. In 

this budget, there is substantial new money directed toward health 

information technology because it is at the heart of our capacity to 

make health care more efficient. Your point about the bar-coding 

in a manufacturing facility is a good one. There are efforts currently being deployed all over the country for bar-coding within the 

health community. The problem has been that the bar-code standards didn’t match up. We are now creating a bar-code standard so 

that when something is bar-coded in New Mexico, it is the same 

as when it happens in Minnesota. When that occurs, we will begin 

to see greater efficiency. I believe that the President’s vision, in 

fact, will be carried out and that it will result in fewer medical mistakes, lower costs, higher quality, and a lot less hassle. 

Mr. CHOCOLA. Well, every conversation I have with health care 

providers, I ask the question: Why can’t we apply proven practices 

and procedures and technology that is used in the manufacturing 

business every day into the health care system? I am not sure I always get good answers, but I certainly would appreciate all your 

efforts to make sure that we implement that because I think we 

will all be winners if that is the case. 

Secretary LEAVITT. Thank you. 

Mr. CHOCOLA. Thank you, and I yield back, Madam Chair. 

Mrs. JOHNSON. Thank you. Mr. Pomeroy? 

Mr. POMEROY. I thank the Chair. I have worked very hard to 

try and get the Medicare Part D program explained to the senior 

citizens I represent and to assist them to the extent possible in 

signing up: a mass mailing, a radio Public Service Announcement 

(PSA), meetings all across the State, and I have hired additional 

staff to assist with the outreach efforts to try and get the word out 

to people. I appreciated, Mr. Secretary, your trip to Fargo in basically the same spirit. 

My conclusions are slightly different than my friend from Indiana’s. I think we have got some real problems here that we are 

going to have to look at and consider. I believe improvements can 

74 

and must be made to this program. Hearing some of the discussion 

about how swell everything is going, I am thinking of that line 

from the Groucho Marx movie: Do I believe you or do I believe my 

own eyes? 

On Monday, I had a meeting in Fargo with a number of stakeholders in this system. They certainly included seniors, senior advocates trying to help people sign up, pharmacists, physicians, 

medical system representatives. There were real concerns expressed at this meeting, Mr. Secretary. I would like to just relay 

a few of them to you. 

One of them involves the issue raised by my colleague, Congressman Ramstad, about the appearance of a stepped up effort to stop 

people from accessing, of their own free will, drugs in Canada if 

they want to. I have heard you saying that was not coming from 

HHS. You have not issued direction or been part of communications about stepped up restrictions? 

Secretary LEAVITT. No, I know of no change in policy that 

would have been reflected in his story. That does not mean that 

there haven’t been changes, but they have not come as a result of 

the implementation of Part D. 

Mr. POMEROY. Okay, but you are stepping up efforts to restrict 

drugs coming down from Canada? 

Secretary LEAVITT. We are stepping up efforts to protect people 

from counterfeit drugs. That is what I was referencing. 

Mr. POMEROY. Right, although the situation—Mr. Ramstad referenced a situation similar to what some in my State have talked 

about. They have been doing this for a while. This isn’t one of these 

fancy Internet deals, whipping them around the world. These are 

suppliers they have worked with, maybe for years. Now they are 

finding problems where they have never found them before, and 

that would reflect then this new initiative that has been—this 

stepped-up effort by HHS? 

Secretary LEAVITT. It is hard to hear about one anecdote and 

respond in terms of if it was caused by one thing or another. I don’t 

know the answer to it. 

Mr. POMEROY. I do note the part of the your answer that said 

the policy was pre-existing, we are stepping up efforts to enforce 

the policy. 

Secretary LEAVITT. On counterfeit drugs. 

Mr. POMEROY. On imported drugs from Canada? 

Secretary LEAVITT. Not specifically. We are working to assure 

that consumers are protected from counterfeit drugs. 

Mr. POMEROY. By stepping up efforts to restrict imported drugs 

from Canada coming into the United States? 

Secretary LEAVITT. Not specifically Canada, but generally. I am 

not able to make reference—I am happy to respond, but I have no 

knowledge of any policy change that is directly focused—— 

Mr. POMEROY. Not a policy change, but stepped-up enforcement 

activity. 

Secretary LEAVITT. I am not able to respond to that because I 

have no specific knowledge. 

Mr. POMEROY. I would request information to the extent that 

you can get it. The complexity of this plan is bewildering. It is not 

a start-up bump. It is going to continue to be bewildering. I am 

75 

going to ask that this cartoon that appeared today in the Fargo 

Forum appear in the record, and it, in a humorous way, depicts the 

bewildering situation that seniors are facing. 

[The information follows:] 

Mr. POMEROY. We have had 8,700 people sign up in North Dakota that weren’t automatically assigned or have creditable coverage. One of them is my mom, my 85-year-old mother with whom 

I sat down and worked this through, and I have encouraged in my 

PSA families to undertake this as a family undertaking, but there 

is no getting around it. It is absolutely complex, and we need to 

look at ways to make it more simple. The Republican elected insurance commissioner has called for standardization of formularies, 

standardization of plan designs. I think that his recommendations 

need some consideration. 

Secretary LEAVITT. Congressman, can I say that we are currently dealing with what I will refer to euphemistically as Part D 

1.0. We are going to be starting very soon on what will be prescription drug Part D 2.0, which is the next plan year. Part D 2.0 will 

be informed dramatically by what we have learned with 1.0. The 

market has clearly driven the cost down, and the market now 

clearly needs to simplify it. This program does need simplification, 

and the market will lead us there, and I believe we will do all we 

can to guide the market there, because there is no reason that this 

plan cannot and should not continue to improve every year. It will 

be a blessing in the lives of millions of people. It is today. It isn’t 

perfect. We were not handed a perfect plan to implement. Our implementation has not been without flaw, but we are finding the 

problems. We are fixing the problems. Millions of people are getting their prescriptions filled every day. 


30636A.003
76 

Mr. POMEROY. I know my time has expired. I appreciate the acknowledgment of the need to work on this program and make it 

more simple. I did not hear that in your earlier statements. I have 

been here a while. Look, I will acknowledge this thing is doing 

some good. My mother is going to save $2,000 this year. I believe 

that, as frustrating as seniors are finding the sign-up period, it is 

worth their work to do it, but I want to make it less frustrating 

for them as we implement improvements. 

Secretary LEAVITT. How long did it take you to sign your mother up? 

Mr. POMEROY. It took about 45 minutes once we had all her 

stuff together. 

Secretary LEAVITT. That matches my experience. If you can get 

the drug bottles and the Medicare card, it is half an hour or 45 

minutes, depending on if it is the first time you have done it. It 

takes some time, but it works for people. 

Mr. POMEROY. I was the insurance commissioner of North Dakota for 8 years. I know a little bit about coverages, and I can use 

a computer. She would have had a heck of a time had I not been 

there. I yield back. 

Mrs. JOHNSON. The gentleman from Massachusetts, would you 

like to inquire? 

Mr. NEAL. Thank you, Madam Chairperson. I apologize for 

being late. Mr. Bolten is at the Committee on the Budget, and that 

is where I was. They were simultaneously scheduled. I want you 

to know, Mr. Secretary, your name did come up over there. 

[Laughter.] 

Secretary LEAVITT. I guess I am relieved. 

Mr. NEAL. You did indicate a couple of moments ago—and I am 

going to go back to Social Security in a second—that the cost of the 

program is going down. 

Secretary LEAVITT. Part D. 

Mr. NEAL. Mr. Secretary, is it not fair for those of us who were 

critical of the initiative as proposed to have heard the former Director of the Center for Medicare & Medicaid Services suggest publicly 

that it was going to cost $400 billion, and then within a matter of 

days of the vote, which took place, by the way, at 4 o’clock in the 

morning—or I think that is when we started. I think we ended 

around 6:00—that it was suggested it was going to cost $750 billion? Is it a little bit inconsistent then to come back and say the 

cost of the program is going down after it was suggested at the outset it was going to cost $400 billion? In a sense, it is like the former 

head of OMB saying that the cost of Iraq was going to be $60 billion a year—or $60 billion in the run-up to the war. 

Secretary LEAVITT. I am aware that there were differences of 

view on what it was going to cost, not between 700 and 400, but 

there were differences that were smaller than that. The difference 

between the 700 number is a different plan year and different—it 

would be comparing apples to oranges, but your point I understand. 

Mr. NEAL. Thank you. Mr. Bolten is coming back here I think 

at 4:30 today, and he will be delighted to see me based on the testimony you have offered after we went back and forth on those numVerDate Aug 31 2005 02:00 Jan 04, 2007 Jkt 030636 PO 00000 Frm 00080 Fmt 6633 Sfmt 6602 E:\HR\OC\30636.XXX 30636
77 

bers. I will say he is pretty definite in explaining the position of 

the Administration as it relates to these numbers. 

Secretary LEAVITT. It is clear—I am not referring to differences—I know that it started at one number and numbers were 

re-estimated. That is a matter of history, not a matter of opinion. 

Mr. NEAL. Right, and I appreciate that line. Thank you very 

much. Mr. Secretary, last year we began the Social Security discussion here, really never began the debate but began the discussion. 

The issue has kind of made its way back into the President’s budget. Is there going to be a recommendation from the Administration 

that we begin to discuss the solvency of Social Security in a bipartisan manner? Or is it going to be the way that it was done last 

year, it is our way or no way? 

Secretary LEAVITT. The President in his State of the Union address indicated that he believes, as I suspect you do, and I do, that 

the entitlements need to be dealt with. I believe his commitment 

is to do it in a bipartisan way. 

Mr. NEAL. I raise that question because, if you recall last year, 

the President suggested as part of the proposal that the only thing 

that was necessary was that there be private accounts and no discussion of any tax increases. If we are going back to the idea of a 

commission that is supposed to stand up intellectually under rigor 

and some scrutiny, I don’t know how you could begin the discussion 

and constrain it by saying these are the two items that are cornerstones of the initiative or there cannot be a discussion. I just offer 

that to you. You ran a State. You know something about doing 

these things. If you start from the premise that we are not going 

to do this or we are not going to do that, it strikes a tough chord 

for people on the other side who might hold a slightly different 

view. 

Secretary LEAVITT. I understand your point. 

Mr. NEAL. Thank you, Madam Chairman. 

Mrs. JOHNSON. Thank you very much. As we conclude on this 

issue of the numbers, I do want the record to reflect that our estimate of our bill was $400 billion. That was 2 years of no program 

and 2 years of a program. Under that same scenario, the other bill, 

the major Democrat bill was $1.3 trillion for 2 years of no program 

and 2 years of a program. 

Mr. NEAL. Would the gentlelady yield? 

Mrs. JOHNSON. I would be happy to yield. 

Mr. NEAL. Thank you. Madam Chairperson, do you think that 

there would be a reasonable conclusion on this side, given testimony of the professionals who have made a career over at CMS, 

do you think that when they said they were told not to say anything about the numbers—one of the nice things about appointed 

officials in this town is that they really do care about their careers 

after they leave here. 

Mrs. JOHNSON. That is—— 

Mr. NEAL. Is that reasonable? 

Mrs. JOHNSON. —an interesting issue, reclaiming my time. You 

will remember that at that point your bill had not been subjected 

to a rigorous estimate, so it was hard to say these are the two estimates now and these are the parallel estimates that will take place 

once there is 4 years of a program. The point I am making is that 

78 

there was a big disparity in costs over 4 years. That disparity of 

costs would have increased commensurately with the change in the 

estimate of our bill, because when you compare an estimate for 2 

years of no program and 2 years of program with an estimate for 

4 years of program, you are going to get a higher estimate when 

the program is in place for 4 years. That is a no-brainer. Everybody 

knew it. If it had been our bill for 400, that would have been one 

thing. If it had been your bill for $1.3 trillion, that was another 

thing, but at the time, we were unable to do apples and oranges. 

So, it was a lot of speculation, and there were a lot of controversies 

about the estimates. Bottom line, what is happening with our estimates would have happened if the other bill had been passed, the 

only difference being the costs would have been extraordinarily 

more. So, we are dealing with what we have. I appreciate you, Mr. 

Secretary—— 

Mr. NEAL. Would the gentlelady yield? 

Mrs. JOHNSON. —for being here. I am going to wrap this up. 

The Secretary has been here a long time, but I would be happy to 

talk with you afterward. Mr. Secretary, thank you for being here. 

Thank you for your leadership on the international health issues 

that we are now as a leader in the world community of Nations 

and one of the most advanced in health care responsible to provide 

leadership in those areas, and thank you to you and your staff 

right down to the secretaries and the others that stayed late, that 

worked weekends, and that have really held in there over this 

month of February, and now into March, to make sure that we 

could straighten out the bugs in the program and that seniors will 

get the help with prescription drugs that we put in place for them 

and that they would not be disappointed. Thank you for being with 

us. 

Secretary LEAVITT. Thank you. 

[Whereupon, at 1:23 p.m., the hearing was adjourned.] 

[Questions submitted by Mr. Shaw and Mr. Thompson to Secretary Leavitt. His responses follow:] 

Questions submitted by Representative Shaw 

I have been holding monthly Medicare prescription drug benefit information sessions in both of the counties that my congressional district reaches. 

The attendance at these sessions has been very good. Many seniors have 

been interested in enrolling in the new benefit. However, like seniors 

across the county, my constituents have raised concerns and are confused. 

Question: South Florida seniors continue to raise concern about the ‘‘bait 

and switch’’ issue of Part D plans dropping coverage of a particular prescription drug mid-year. Please explain to me what is being done to prevent this. Is there any way that the program can be amended to prevent 

this mid-year formulary switch? 

Answer: CMS recognizes the importance of formulary stability for the Medicare 

population. However, prescription drug use is constantly evolving, and new drug 

availability, new medical knowledge, and new opportunities for improving safety 

and quality at low cost will inevitably occur over the course of a year requiring 

changes to the formulary. CMS will continue to ensure that each formulary provides 

a broad range of medically appropriate drugs and does not discriminate or substantially discourage enrollment of certain groups of beneficiaries. 

It is important to note, all proposed formulary changes, excluding formulary expansion changes, must be submitted to CMS for review and approval. Additionally, 

beneficiaries will not lose coverage for their drugs because of a mid-year formulary 

79 

change except for clear scientific evidence, cost reasons related to a new generic 

drug coming on the market, or new FDA or clinical information becomes available. 

Question: Seniors in my district have over 40 choices of Part D plans. We 

all know that competition is great but it is causing much confusion. What 

is currently being done to improve the way seniors navigate through all 

the information? What advice would you give the average senior who is 

very frustrated with the entire enrollment process? 

Answer: As indicated in the 2007 call letter, CMS is planning to use its negotiating authority this year to simplify beneficiary choices. Multiple bids for the 2007 

contract year from a single plan sponsor represent meaningful variation based on 

plan characteristics that will provide beneficiaries with substantially different options such as variation in deductibles, the use of flat copays versus coinsurance, and 

coverage in the gap versus no coverage. This will allow beneficiaries with clear preferences in one or more of these areas to more easily navigate plan options based 

on the coverage characteristics they value most. Beneficiaries have a variety of resources available to assist in choosing among plans, including comprehensive formulary and network pharmacy information on the Prescription Drug Plan Finder 

tool at www.Medicare.gov, assistance from trained customer service representatives 

at 1–800–MEDICARE, and personalized counseling through the State Health Insurance Assistance Programs (SHIPs). 

Question: The enrollment deadline of May 15, 2006, for Part D coverage 

during calendar year 2006 was set to ensure that seniors who wished to enroll did so in a timely manner. However, many have feared that this enrollment deadline will not provide seniors enough time to review plan options 

and enroll especially in light of the computer difficulties experienced between plans and pharmacists during the first month of the benefit. What 

specific steps are you taking to ensure that seniors have adequate time to 

review all plan options and enroll in coverage by May 15, 2006? Answer: In 2006 Medicare pays a physician $903 for doing an MRI of the brain 

or an MRI of the abdomen. Medicare will also pay a Hospital Outpatient Department (OPD) $506 for the exact same test. Thus, Medicare is paying almost $400 or 

78 percent more for doing these MRI imaging tests purely depending on whether 

the test is performed in an OPD or a physician’s office. Similarly, Medicare will pay 

267 percent more for doing an ultrasound guidance for artery repair in a physician’s 

office than an OPD ($228 vs. $62). These comparisons do not include a physician’s 

interpretation of the test for which Medicare will pay a separate fee. There is no 

consistency in the percentage that the physician fee schedule exceeds the hospital 

OPD payment amount. The percentage difference varies by procedure. 

In the context of: (1) significantly larger payments under the physician fee schedule than the OPD for the same service for certain imaging services, (2) site neutral 

payments for the same service identified by MedPAC as a long term goal under 

Medicare fee-for-service payment systems, (3) rapid growth in Medicare spending for 

imaging services for several years, (4) MedPAC raising methodological issues that 

suggest relative values under the physician fee schedule for imaging services would 

be too high, combined with a lack of procedure and equipment specific information 

on alternative equipment utilization assumptions to use in the practice expense formula to address such issues, section 5102(b) of the Deficit Reduction Act of 2005 

establishes a payment limit for the technical component of imaging services. The 

provision requires that Medicare not pay a physician more than Medicare would pay 

the OPD for furnishing the same imaging procedure. A physician’s interpretation of 

the test for which Medicare will pay a separate fee is not affected by the provision. 

This step to level the playingfield between physicians’ offices and hospital OPDs 

only applies to procedures where Medicare pays more in physicians’ offices; the DRA 

cap provision does not apply to all imaging procedures furnished in physicians’ offices. In addition, the percent that Medicare payment rates for physicians exceeds 

OPDs are not all as large as the examples cited above; in numerous cases, the differential is 10 to 20 percent. Thus, the overall impact is not expected to be as dramatic as the example of some procedures. The DRA provisions will be implemented 

through notice and comment rulemaking. These proposals are expected to be published this summer and will allow for a 60 day public comment period. A final rule 

will be published by November 1, 2006 and will be effective for services furnished 

on or after January 1, 2007. 

Question: The issue of cancer treatment, early detection and prevention 

is near and dear to me. I am actively supporting the National Cancer Institute’s goal of ending the suffering and death due to cancer by 2015. I am 

extremely disappointed and discouraged to see that the President’s proposed budget cuts $40 million in funding for the National Cancer Institute. 

80 

Question: Our nation is on the brink of numerous breakthroughs on the 

early detection of, and treatment for cancer. We need to sprint, not jog, to 

the finish line. Why does the proposed budget cut NCI funding at such a 

critical point? What commitments have the HHS and the Administration 

specifically made in support of NCI’s 2015 goal? 

I also understand that if we want to reach the 2015 goal, the key does not 

lie solely in the federal appropriations process. I will soon be introducing 

legislation strengthened and amended the Medicare program in the area of 

cancer treatment and detection. With the baby boomers approaching Medicare age, we will have a major crisis on our hands in the program. We must 

lay the ground work now to provide these future beneficiaries with adequate cancer care. What specific improvements to the Medicare program 

would you like to see in the area of cancer screening, treatment and prevention? How can the Ways and Means Committee help achieve the 2015 

goal? 

Answer: The prevention, early detection, and treatment of cancer are major priorities within the Department of Health and Human Services. We are pleased to report that Medicare now covers a full range of cancer screenings recommended by 

the U.S. Preventive Services Task Force. Medicare beneficiaries are covered for 

screening tests and procedures aimed at early detection of breast, cervical and vaginal, colorectal, and prostate cancers. Coverage of a one-time initial preventive physical exam (aka the ‘‘Welcome to Medicare Visit’’) provides new beneficiaries an opportunity discuss cancer risk factors and screening regimens with their doctor. 

Through its evidence-based National Coverage Determination process, Medicare 

also now covers smoking cessation counseling for beneficiaries diagnosed with a 

smoking-related illness or condition, or taking medication affected by smoking. 

Challenges remain in ensuring these services are well utilized by those who would 

benefit the most. Toward that end, we have launched a comprehensive outreach program to educate providers and beneficiaries about the availability of these life-saving benefits. In addition, with the new Part D prescription drug coverage, Medicare 

may now cover a wider range of cancer-related drugs and vaccines, as they become 

available. Cancer drugs administered by a physician (or oral equivalents of drugs 

usually administered by physicians) continue to be covered under Medicare part B. 

Finally, the Cancer Prevention and Treatment Demonstration for Ethnic and Racial Minorities (established by the Benefits Improvement and Protection Act of 2000) 

is now underway. This demonstration is aimed at reducing disparities in cancer prevention and treatment for African American, Latino, Asian American/Pacific Islander, and American Indian/Alaskan Native beneficiary populations. These projects 

will be designed around new and innovative intervention models to facilitate appropriate use of Medicare-covered screening, diagnosis, and treatment services by these 

populations. We look forward to continuing to work with you in support of these important initiatives. 

Question: How do you think Congress can support the 2015 goal and do 

more to foster collaboration with other agencies and the private sector? 

Answer: The President’s Fiscal Year 2007 Budget requests $4.75 billion in funding 

for the National Cancer Institute (NCI) at NIH, which leads the Administration’s 

efforts toward achieving the 2015 goal of eliminating suffering and death due to 

cancer. Addressing the cancer problem requires that NCI work across institutional 

and sector boundaries, share knowledge, and bring together the diverse members of 

the Department of Health and Human Services (DHHS) family of agencies, as well 

as other federal offices, that can help develop systems-based solutions to the cancer 

problem. For example, DHHS Secretary Mike Leavitt announced earlier this year 

the Oncology Biomarker Qualification Initiative (OBQI)—an unprecedented interagency agreement among NCI, FDA, and the Centers for Medicare and Medicaid 

Services (CMS) to collaborate on improving the development of cancer therapies and 

the outcomes for cancer patients through biomarker development and evaluation. 

CMS will continue to join and support these collaborative efforts in pursuit of the 

2015 goal, and we appreciate your shared interest. 

Question: My doctors have told me that smoking probably did not play 

any role in my form of lung cancer. I have been told that any number of 

factors, like our genes, our age, and the environment, can cause cancer. Is 

the NIH doing enough to support efforts to better understand the causes 

of cancer? How will the proposed decrease in the NCI’s budget affect this? 

Answer: The Following was not received at the time of printing. 

81 

Questions submitted by Representative Thompson 

Question: Reimbursement rates for physicians in counties across America 

are too low because CMS hasn’t updated their geographic cost factors. Doctors in Sonoma County are getting paid 8.2% less than your own staff acknowledges that they should be paid. This is happening to doctors all-over. 

CMS has supported a budget neutral solution—going so far as to propose 

a budget neutral fix for Sonoma and Santa Cruz counties in the 2005 August Federal Register. You then withdrew this proposed solution due to 

what you cited as ‘‘nearly complete lack of support’’ in the November 2005 

Physician Fee Schedule Final Rule. We will always see opposition to a ‘‘fix’’ 

that takes away from group A to give more to group B—regardless of 

whether or not group B really does deserve more. The CMA has proposed 

a nationwide fix that would cost only $115 million and has bipartisan support. Is CMS willing to work with Members to find an offset for this cost? 

What is CMS willing to do to make sure that this problem—which I have 

been fighting to resolve since I came to Congress in 1998, and others have 

been fighting even longer—can finally be rectified? 

Answer: One proposal by the California Medical Association (CMA) would cost 

$115 million per year. That’s more than a billion dollars over a 10-year budget-scoring window. Another CMA proposal would cost $300 million per year. That’s $3.0 

billion over 10 years. 

Locality changes are budget-neutral with respect to the aggregate amount of 

Medicare money in a State. That is, reconfigurations of localities within a State do 

not result in any more Medicare money for the State in the aggregate, but only redistributions of money within a State. Since there will be both winners and losers 

in any locality reconfiguration, we rely on State medical associations to be the impetus behind these changes. We have assumed that opposition, or lack of support, 

from a State’s medical association generally indicates a lack of broad support for the 

proposed change through the State’s medical professional community. We have been 

working and will continue to work with the CMA, Members of Congress and other 

interested parties on the physician payment locality structure in California. 

Question: State Health Insurance Assistance Programs—or SHIPs—get 

funded through the Medicare and You Education Program. According to 

the FY07 HHS Budget in Brief, they—and other outreach programs—are 

funded through Community Based Outreach. This year, Community Based 

Outreach is funded at $43.6 Million. What portion of that funding is allocated specifically for the SHIPs? What factors does CMS consider when determining the level of funding SHIPs need to meet beneficiary demand? 

Answer: The Community-based Outreach appropriations are allocated across all 

the programs under that umbrella based on CMS objectives and corresponding program needs at the time the funding is to be distributed. Annual SHIP grants are 

awarded in late March, and fiscal year (FY) grants are announced at that time. For 

FY 2006, CMS awarded about $30 million in funding to SHIPs to help beneficiaries 

with enrolling in Medicare’s new prescription drug program and understanding 

many other aspects of Medicare benefits. The FY 2007 grants will be announced in 

late March 2007, with the exact SHIP allocation known shortly before that time. 

The level of funding allocated to the SHIPs is generally based on the relative 

number of beneficiaries in each state and the expected level of effort that is required 

to deliver counseling services. Consideration also is given for special needs groups 

that may require greater resources to serve, such as rural beneficiaries or other targeted populations. 

Question: The Deficit Reduction Act included language to reduce payments for certain imaging services provided in the physician office setting 

or at stand-alone imaging centers. The payment amounts will be reduced 

to the amount paid in the hospital outpatient setting. I am told that some 

codes may be reduced by more than 30% and others by as much as 75%, 

such as for vascular imaging using ultrasound. I understand the desire to 

address differences in payments between settings, but I’m curious about 

how it was decided to use the hospital outpatient value. Was it because it 

would save money, or were their other factors involved? Has there been 

any analysis of whether or not the outpatient payment amount is adequate 

or appropriate? 

Answer: In 2006 Medicare pays a physician $903 for doing an MRI of the brain 

or an MRI of the abdomen. Medicare will also pay a Hospital Outpatient Department (OPD) $506 for the exact same test. Thus, Medicare is paying almost $400 or 

78 percent more for doing these MRI imaging tests purely depending on whether 

82 

the test is performed in an OPD or a physician’s office. Similarly, Medicare will pay 

267 percent more for doing an ultrasound guidance for artery repair in a physician’s 

office than an OPD ($228 vs. $62). These comparisons do not include a physician’s 

interpretation of the test for which Medicare will pay a separate fee. There is no 

consistency in the percentage that the physician fee schedule exceeds the hospital 

OPD payment amount. The percentage difference varies by procedure. 

In the context of: (1) significantly larger payments under the physician fee schedule than the OPD for the same service for certain imaging services, (2) site neutral 

payments for the same service identified by MedPAC as a long term goal under 

Medicare fee-for-service payment systems, (3) rapid growth in Medicare spending for 

imaging services for several years, (4) MedPAC raising methodological issues that 

suggest relative values under the physician fee schedule for imaging services would 

be too high, combined with a lack of procedure and equipment specific information 

on alternative equipment utilization assumptions to use in the practice expense formula to address such issues, section 5102(b) of the Deficit Reduction Act of 2005 

establishes a payment limit for the technical component of imaging services. The 

provision requires that Medicare not pay a physician more than Medicare would pay 

the OPD for furnishing the same imaging procedure. A physician’s interpretation of 

the test for which Medicare will pay a separate fee is not affected by the provision. 

This step to level the playingfield between physicians’ offices and hospital OPDs 

only applies to procedures where Medicare pays more in physicians’ offices; the DRA 

cap provision does not apply to all imaging procedures furnished in physicians’ offices. In addition, the percent that Medicare payment rates for physicians exceeds 

OPDs are not all as large as the examples cited above; in numerous cases, the differential is 10 to 20 percent. Thus, the overall impact is not expected to be as dramatic as the example of some procedures. The DRA provisions will be implemented 

through notice and comment rulemaking. These proposals are expected to be published this summer and will allow for a 60 day public comment period. A final rule 

will be published by November 1, 2006 and will be effective for services furnished 

on or after January 1, 2007. 

[Submissions for the record follow:] 

AFGE Social Security Administration 

Baltimore, Maryland 21244 

February 7, 2006 

Committee on Ways & Means 

U.S. House of Representatives 

1102 Longworth House Office Building 

Washington D.C. 20515 

Dear Secretary Leavitt, 

Below are four questions that necessitate a response. Please find them below. 

1. The National 800 Number Network has been a growing concern for Medicare 

Part D beneficiaries because of the busy rates running above 35%. Can you 

confirm the busy rate of callers to the 800 Number and explain how this issue 

is being addressed? 

2. How are your Processing Centers addressing the large backlog as a result of 

the 200,000 in office visitors a day? 

3. As the baby boomers retire, how will the SSA have the funds to replace SSA 

employees when their budget was cut by $300 million this year (FY07 proposed 

cuts appear to be significant as well); compounded by the increased responsibilities the government imposed on the SSA with the new Medicare Part D program? 

4. SSA Commissioner Barnhart recently enacted a two-year hiring freeze acrossthe-board which went into effect January 6, 2006. In addition, the Commissioner suspended all overtime pay and restricted unpaid leave. How will you 

address employee dissatisfaction and maintain morale when SSA employees 

are fighting such an uphill battle? 

Sincerely, 

Witold Skwierczynski 

f 

President 

83 

Aurora, Illinois 60505 

February 3, 2006 

To the Honorable Congressman Bill Thomas and the Committee on Ways and 

Means: 

Please find attached a letter that I had written to Speaker of the House Dennis 

Hastert regarding my concerns with the Social Security/Supplemental Security and 

Medicaid process. 

I am very concerned regarding the President’s Fiscal Year 2007 Budget and its 

cuts to Medicaid, childcare and TANF. As you will see from my letter, I am an advocate for my clients many who are disabled and seeking SSI and Medicaid. Therefore, 

I witness firsthand the process involved in applying for these programs both for my 

clients as well as our local IDHS office. 

The current system is already fraught with red tape and back logs in the processing of Medicaid claims especially in our area of Aurora/Kane County. I know 

however, these same issues are statewide. The current process of IDHS removing 

the P3 status, as well as the budget cuts to the Kane County IDHS office specifically 

(notwithstanding a need for further funding for the CAU Unit), our SSA Oak Brook 

office which serves our residents being too back logged, and finally a shortage of Administrative Law Judges to hear the cases, leads to the actual applicants unduly 

suffering and not having their cases heard in a fair and timely manner. 

Further cuts to the Medicaid Program as well as the other cuts outlined in this 

budget will be detrimental to many of the over 50 million people who rely on Medicaid, as well as those applying. These cuts will also further burden local IDHS Office’s which have already suffered from massive cuts and layoffs and are unable already to process the great volume of claims due to being short-staffed in a timely 

manner. 

I ask that you consider this letter and attachment to be officially submitted for 

record. Thank you for your time and attention to this matter. 

Sincerely, 

Kim Aponte 

October 13, 2005 

Speaker of the House Dennis Hastert 

14th Congressional District 

235 Cannon Office Building 

Washington, DC 20515 

Dear Speaker of the House Dennis Hastert: 

I am writing this letter to you as a representative of Aurora Township and as a 

social service professional. As case manager of Aurora Township in our General Assistance and Emergency Assistance programs, I witness firsthand those physically 

and mentally disabled individual’s that come to our office to apply for assistance because they are unable to be self-sufficient due to no income and having to wait oftentimes years for their Social Security Disability Income (SSDI)/Supplemental Security Income (SSI) and subsequent Medicaid cards to be approved. 

The application processes for all of these programs are technical, confusing and 

altogether too lengthy resulting in many individual’s not qualifying for the benefits 

that they should be entitled to. The SSD/SSI process of usually over two years to 

make a determination on whether an individual is actually disabled or not is inhumane in that it forces those who cannot work and have no income to not have the 

medical or mental health services they so rightly are entitled to, not have access 

to prescription coverage (many times to lifesaving medications), as well as having 

no form of income with which one can survive. This lengthy process has also caused 

many individuals to become evicted or foreclosed on their apartments or homes and 

forces the burden then on friends and family members (many who are low-income 

themselves) to support these individuals until their determinations come through. 

Linked to the long application process of SSD or SSI, is the Illinois Department 

of Human Services (PA) application process for a medical card (Medicaid). This process takes anywhere from 60–77 days and is also very confusing, lengthy and complex. In most cases these applications are automatically denied unless the Social Security Administration (SSA) has deemed an individual disabled. 

I am writing to ask your assistance and intervention in advocating for and proposing legislation that would improve Social Security’s Disability process. 

I currently have many clients that have been waiting over two years for their 

medical cards and SSD or SSI to be approved. Many of these clients have serious 

84 

medical conditions such as Congestive Heart Failure, and are on lengthy lists of 

medications averaging from $300.00–$500.00 a month. Many are close to being 

evicted and many more have already lost their homes or apartments due to an inability to work and not receiving ongoing supplemental income. I also have clients 

that are needing surgeries for a variety of medical conditions and are unable to have 

this necessary medical treatment because of not having income, insurance or now 

even the ability to be seen at Cook County Hospital because they do not live in Chicago. I also have clients that were on SSI previously, were taken off due to incarceration and now the reinstatement process also takes up to two years or more, even 

if their medical situation is the same or has worsened. 

Many are represented by lawyers, however, this has not shortened the process, 

as applicants are now waiting a hearing date before a judge, and they’re told there 

could be up to a year delay as there are a shortage of judges to hear these cases. 

I feel this two-year plus application process is unfair and unjust. I cannot imagine 

being too sick and disabled to work and knowing I had to wait up to two years to 

get assistance that is rightly due to these individuals. I cannot imagine what it 

would be like myself knowing my medications I needed to survive cost from $300– 

$500.00 a month and I nor my family had the ability to pay for them. I, myself, 

could not afford to pay for prescriptions totaling these amounts on my full-time income. 

I have spoken to many doctors and lawyers who agree that the process is unfair 

and inhumane. They too are frustrated wondering how it is that several doctors can 

deem an individual incapacitated by a medical condition and yet the IDHS and SSA 

board’s medical staff routinely deny and refute these diagnoses. 

As a Township, which is mandated to provide General Assistance to its residents 

in need, we, unlike many others were assisting these individuals with medical and 

prescription assistance until PA or SSA reached a decision. However now, due to 

having had several very expensive surgeries for these clients within this year alone 

(one was $74,303.00 at Public Aid rates), we no longer are able to assist these individuals until they have been denied for Medicaid and have appealed (as they are 

deemed presumptively eligible for Medicaid). This leaves a 60–77 day window that 

these desperately ill people will not have any resources to carry them through for 

medical assistance or prescriptions. 

I will be the one once again facing these individual’s and letting them know that 

they will have to do without their lifesaving medication and/or any needed medical 

treatment for 60–77 days until Public Aid renders a decision which 90% of the time 

will be denied unless SSA approves them. Perhaps because I am the one who sees 

them on a daily basis, I feel compelled to stand up for these individual’s rights that 

are being violated by a system that few challenge. I am asking for you to stand up 

for these individuals as well. 

I would appreciate any assistance you may be able to lend to this matter. And 

if you have any questions, please feel free to contact me at work. 

Sincerely, 

Kim Aponte 

Æ