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25–654—PDF 2005

S. HRG. 109–265

NOMINATIONS OF ALEX AZAR II, TIMOTHY D.

ADAMS, SUZANNE C. DeFRANCIS, CHARLES E.

JOHNSON, AND SHARA L. ARANOFF

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

ON THE

NOMINATIONS OF

ALEX AZAR II, TO BE DEPUTY SECRETARY, U.S. DEPARTMENT OF

HEALTH AND HUMAN SERVICES; TIMOTHY D. ADAMS, TO BE UNDER

SECRETARY FOR INTERNATIONAL AFFAIRS, U.S. DEPARTMENT OF

THE TREASURY; SUZANNE C. DeFRANCIS, TO BE ASSISTANT SECRETARY FOR PUBLIC AFFAIRS, U.S. DEPARTMENT OF HEALTH AND

HUMAN SERVICES; CHARLES E. JOHNSON, TO BE ASSISTANT SECRETARY FOR BUDGET, TECHNOLOGY AND FINANCE, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; AND SHARA L. ARANOFF,

TO BE A MEMBER OF THE INTERNATIONAL TRADE COMMISSION

MAY 24, 2005

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman, Committee

on Finance ............................................................................................................ 4

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 5

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 1

ADMINISTRATION NOMINEES

Azar, Hon. Alex, II, nominated to be Deputy Secretary of Health and Human

Services, U.S. Department of Health and Human Services, Washington,

DC .......................................................................................................................... 8

Adams, Timothy D., nominated to be Under Secretary for International Affairs, U.S. Department of the Treasury, Washington, DC ................................ 10

DeFrancis, Suzanne C., nominated to be Assistant Secretary for Public Affairs, U.S. Department of Health and Human Services, Washington, DC ...... 20

Johnson, Hon. Charles E., nominated to be Assistant Secretary for Budget,

Technology and Finance, U.S. Department of Health and Human Services,

Washington, DC ................................................................................................... 21

Aranoff, Shara L., nominated to be a Member, International Trade Commission, Washington, DC .......................................................................................... 23

CONGRESSIONAL WITNESS

McConnell, Hon. Mitch, a U.S. Senator from Kentucky ....................................... 3

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Adams, Timothy D.:

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 27

Biographical ...................................................................................................... 29

Responses to questions from Senator Baucus ................................................ 35

Aranoff, Shara L.:

Testimony .......................................................................................................... 23

Prepared statement .......................................................................................... 47

Biographical ...................................................................................................... 49

Azar, Hon. Alex, II:

Testimony .......................................................................................................... 8

Prepared statement .......................................................................................... 58

Biographical ...................................................................................................... 62

Responses to questions from Senators Grassley and Baucus ....................... 73

Baucus, Hon. Max:

Opening statement ........................................................................................... 5

Statements in support of the 2005 Agricultural Export Facilitation Act

(S. 328) ........................................................................................................... 86

Crapo, Hon. Mike:

Prepared statement .......................................................................................... 97

DeFrancis, Suzanne C.:

Testimony .......................................................................................................... 20

Prepared statement .......................................................................................... 98

Biographical ...................................................................................................... 103

Responses to questions from Senators Grassley and Baucus ....................... 110

Grassley, Hon. Charles E.:

Opening statement ........................................................................................... 4

Page

IV

Hatch, Hon. Orrin G.:

Opening statement ........................................................................................... 1

Johnson, Hon. Charles E.:

Testimony .......................................................................................................... 21

Prepared statement .......................................................................................... 114

Biographical ...................................................................................................... 118

Responses to questions from Senator Grassley .............................................. 128

McConnell, Hon. Mitch:

Testimony .......................................................................................................... 3

(1)

NOMINATIONS OF ALEX AZAR II, TO BE DEPUTY SECRETARY, U.S. DEPARTMENT OF

HEALTH AND HUMAN SERVICES; TIMOTHY

D. ADAMS, TO BE UNDER SECRETARY FOR

INTERNATIONAL AFFAIRS, U.S. DEPARTMENT OF THE TREASURY; SUZANNE C.

DeFRANCIS, TO BE ASSISTANT SECRETARY

FOR PUBLIC AFFAIRS, U.S. DEPARTMENT

OF HEALTH AND HUMAN SERVICES;

CHARLES E. JOHNSON, TO BE ASSISTANT

SECRETARY FOR BUDGET, TECHNOLOGY

AND FINANCE, U.S. DEPARTMENT OF

HEALTH AND HUMAN SERVICES; AND

SHARA L. ARANOFF, TO BE A MEMBER OF

THE INTERNATIONAL TRADE COMMISSION

TUESDAY, MAY 24, 2005

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC.

The hearing was convened, pursuant to notice, at 10:05 a.m., in

room SD–628, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Also present: Senators Hatch, Thomas and Baucus.

The CHAIRMAN. I will call the hearing to order. Normally, I and

Senator Baucus would give an opening statement, but because my

colleagues have time constraints, I am going to call on Senator

Hatch to make his comments introducing a friend and colleague.

So, why do you not proceed, Senator Hatch? Then we will do regular order after you have completed.

OPENING STATEMENT OF HON. ORRIN G. HATCH,

A U.S. SENATOR FROM UTAH

Senator HATCH. Well, thank you, Mr. Chairman. I am very appreciative that you would get me up and let me make my remarks

about a very dear friend and a top-notch person who is willing to

serve the government, in fact, two top-notch persons.

First, I would just like to say a few words about Alex Azar. Alex

is the nominee for Deputy Secretary of HHS. He has a wife, Jennifer, and his children, Claire and Alex, ages 5 and 2. He has been

2

general counsel of HHS since 2001. He hails from Salisbury, Maryland.

He went to Dartmouth College for undergraduate, and Yale Law

School for his law degree. He clerked on the Fourth Circuit and at

the Supreme Court of the United States, and became a partner in

one of the most prestigious firms in Washington, Riley, Rein &

Fielding.

I know Alex very well. I just am so grateful that he is willing

to serve like this in our government, because he is a wonderful attorney, a tremendous human being, totally honest and capable, and

I believe that he will do a terrific job as deputy over there.

Of course, I have a tremendous interest in having good people

serve at HHS, as do both of you, and especially since our former

governor is now Secretary over there. So, I just wanted to say a few

words about Alex, because I have such a high regard for him.

But, Mr. Chairman, it is my honor and privilege to introduce a

fellow Utahn, Charles E. Johnson—we call him Charlie—to all

members of the Senate Finance Committee. I am grateful for the

three of you here today. I am also grateful that you reinstituted

this hearing, because these are good people who deserve to be up

and out in the Senate.

I want to recognize Charlie’s lovely wife, Susanna, and their fine

family. I will have him introduce them as he testifies.

I have known Charlie for a long time. I have worked with him

on many issues concerning Utah, especially those affecting health

care policy.

However, let me make clear to the committee that Charlie has

been a leader in the field of accounting. He has a long track record

of distinguished service in both the public and private sectors. In

addition, he is very familiar with health care policy and how health

care impacts our national budget.

So I believe, and I know, that he is well-suited for this position.

Today, Charlie serves as the Chief Financial Officer of the Environmental Protection Agency. Charlie was appointed by President

Bush and confirmed by the U.S. Senate to this current position in

the year 2004. When Secretary Mike Leavitt was first elected governor in the State of Utah, he chose Charlie to serve as his chief

of staff, because Mike knew Charlie would get the job done, and

he did.

As chief of staff, Charlie learned the importance of working collaboratively to seek solutions. I know he will continue to use these

skills in this new job as Assistant Secretary for Budget, Technology

and Finance.

So, I am grateful that he is willing to take his time out of the

private sector and serve in the public sector and help our country,

and to help our former governor over there at HHS, whom everybody on this committee, I think, has a decent, strong, and favorable

opinion of.

Back home, Charlie served in many positions, notably as president of the Huntsman Cancer Foundation and vice president of

Huntsman, LLC. In addition, he also served as a member of the

Utah State Board of Regents, which oversees all public institutions

of higher education in the State of Utah, and served as chair of the

3

Board of Regents. He has held numerous leadership positions and

has been awarded many honors for his hard work and dedication.

Mr. Chairman, while Charlie spent 31 years in the practice of

public accounting and has broad experience with public companies,

he has quite a diverse background which will be useful in his new

position. He is an exceptional individual, and I know that he will

do a fine job at HHS. So with pride and admiration, I introduce

this committee to Charlie Johnson.

I will just say, though—I do not want to take any more of our

distinguished Majority Whip’s time—that I know this man personally. He is a terrific human being. He is extremely knowledgeable.

He is totally honest. He is a person who will help our government

to do better. He is bipartisan in nature.

He can work with anybody. That is saying something, for somebody who works with all of us here on Capitol Hill. I think you will

all be very pleased with the service that he will give to our country.

So I appreciate you allowing me to do this so I can get back to

the Intelligence Committee.

The CHAIRMAN. Senator Hatch, we thank you.

I am going to call on Senator McConnell before we give our opening comments so that Senator McConnell can go about his work as

well.

So would you proceed, Senator McConnell?

STATEMENT OF HON. MITCH McCONNELL,

A U.S. SENATOR FROM KENTUCKY

Senator MCCONNELL. Thank you, Mr. Chairman, Senator Baucus, Senator Thomas. It is my honor today to introduce Tim

Adams, the President’s nominee to be the next Under Secretary for

International Affairs at the Treasury Department.

With his confirmation, as I hope this committee will do shortly,

the department will immediately benefit from his many years of experience in fiscal policy, both in the private and public sectors.

Mr. Adams currently serves as Senior Advisor to Treasury Secretary John Snow, and previously served as chief of staff to Secretary Snow and Treasury Secretary Paul O’Neill.

In these roles, he has coordinated policy development throughout

the entire department and with other executive branch agencies.

He advises the Secretary on policy issues and economic and market

conditions.

After the vicious attacks of September 11, Mr. Adams was instrumental in the efforts to get the New York financial markets up and

running again promptly. He moved quickly to help ensure that

New York City got much-needed funds for its recovery, and he was

part of the team that tracked down and stopped the money flow to

groups that supported terror.

Tim Adams has worked tirelessly with international financial institutions to get more foreign assistance to those who most need it.

He has urged international donors to emphasize grants over loans

so that developing nations are not encumbered with unwieldy debt,

and he is a strong supporter of a favorite cause of mine, the Millennium Challenge Account.

4

Focusing more of our international aid in the MCA helps ensure

good governance, stronger democratic institutions, and greater support for human rights in the countries we assist.

Before and between his stints at Treasury, Tim worked as a policy director for both Bush-Cheney presidential campaigns. He led

the Treasury transition team for the current administration, and

he has worked at the Export-Import Bank, the White House Office

of Policy Development, and the Office of Management and Budget

under President George H.W. Bush.

Mr. Adams co-founded and served as managing director for the

G–7 Group, an economic and political consulting firm that serves

blue chip global financial institutions. He is a fellow Kentuckian

and a fellow alumnus of the University of Kentucky, where he received his bachelor’s and two graduate degrees.

In addition to a fine career, Mr. Chairman, Tim has a wonderful

family. I am sure it is with great pride in their husband and dad

that they are here today, his wife Jennifer, and his children,

Tindall and William.

The President has chosen Tim Adams to serve in this administration because of his vast experience in financial affairs, as well

as his good judgment and because he has consistently demonstrated over the years a willingness to serve his country.

I believe that those two attributes make Tim an exceptional candidate for this job. I appreciate the committee’s quick handling of

his nomination and look forward to his confirmation.

In closing, Mr. Chairman, let me just say, Tim Adams represents

the best in public service. It is with great home State pride that

I thank you for allowing me to testify on his behalf.

The CHAIRMAN. Of course, we are glad to have you testify and

present your friend and colleague to the committee. Thank you

very much.

Senator MCCONNELL. Thank you, Mr. Chairman.

The CHAIRMAN. You bet.

OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. This hearing has already convened, and we are

considering five presidential nominees to the Department of Health

and Human Services, the Department of the Treasury, and the

International Trade Commission.

I congratulate all the nominees and thank you very much for

your willingness to serve the people of this country. Our first panel

is going to be Alex Azar and Timothy Adams.

Alex, who already has a distinguished career in public service,

has been nominated to be Deputy Secretary of HHS, a position in

which he is presently serving as Acting.

Prior to his current role, Mr. Azar was the department’s general

counsel. He has a tremendous breadth of legal experience on a

range of issues, including Food and Drug Administration law,

which is of particular keen interest to me because of the oversight

hearings that I have had involving new pharmaceutical products

that have tended to have some questions about their safety.

I am confident that his experience will enable him to fulfill a

broad range of responsibilities in the Deputy Secretary’s office.

5

The next nominee is Timothy Adams. He has been nominated to

be Under Secretary of Treasury for International Affairs. Mr.

Adams brings a wealth of experience to this important position.

In addition to a distinguished career in business and finance, Mr.

Adams also served as chief of staff to two Treasury secretaries,

Paul O’Neill, and the current Secretary, John Snow.

In 2003, Mr. Adams was awarded the Treasury Department’s

highest award, the Alexander Hamilton Award. Mr. Adams’ diverse

professional experience and dedication to public service will benefit

the Treasury Department.

Senator Baucus, to you for your opening statement.

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Thank you, Mr. Chairman.

As you indicated, Mr. Chairman, we are here to consider the

nominations of Alex Azar, to be Deputy Secretary of the Department of Health and Human Services; Tim Adams, to be Under Secretary for International Affairs at Treasury; Shara Aranoff, to be

Commissioner on the International Trade Commission; Charles

Johnson, to be Assistant Secretary for Budget Technology and Finance; and Suzanne DeFrancis, to be Assistant Secretary for Public

Affairs at HHS.

Clearly, these candidates are all well-qualified for the respective

positions for which they have been nominated. I look forward, as

I know you do, Mr. Chairman, in serving with them all in the future.

While many of these candidates will likely be excellent public

servants, I can assure you that one individual will undoubtedly

shine.

The nominee to be Commissioner at the ITC is well-known to me

and to others on this committee. She has served ably on my Finance Committee trade staff for the past 41⁄2 years, longer than

anyone else currently on that staff.

She is uniquely qualified to serve as an ITC Commissioner, having worked as an attorney at the ITC for 8 years. She is smart. She

is very smart. She is capable. I am certain that she will be an exemplary Commissioner. Congratulations, Shara. I am very delighted for you.

The International Trade Commission plays a critical role in administering U.S. trade remedy policy. U.S. companies must have

assurance that their government will protect their interests against

unfair practices or destabilizing forces in the international market.

But just as United States companies look to the ITC for redress

against injury, other nations look to the ITC as an impartial, transparent entity that can be trusted as a model of good trade remedy

enforcement.

I have long believed that rigorous enforcement of our safeguard,

antidumping, and countervailing duty trade laws is ever more important as the United States continues to pursue a liberalized

trade agenda in free trade agreements and the WTO.

The individuals nominated to serve at the Department of Health

and Human Services are also called upon to bring their expertise,

6

their judgment—independent judgment, especially—to the department.

Mr. Azar, welcome back to the committee. The last time the Finance Committee confirmed you for HHS general counsel, as I am

sure you will recall, I expressed some concerns about your lack of

expertise in health care. I am glad to hear that you have worked

hard and brought fair-minded legal analysis to the department.

I will not spend much time today talking about my concerns surrounding implementation of the new Medicare prescription drug

law, because I have made those concerns known at previous hearings, and especially in a letter to CMS Administrator Mark McClellan.

I also will not spend time talking about the Medicaid Commission, because I have made my views and concerns about a biased

commission known to Secretary Leavitt already.

Rather, I would take just a minute to say that, in the coming

weeks, I plan to introduce a bill with the Chairman, Senator Grassley, that will take important steps in Medicare to pay providers

based on quality. It is a critically important issue on which we

need to make progress this year.

I will also be working on a bill to build in transparency and accountability under the new Medicare Part D drug benefit. I want

to make sure that the public, researchers, and congressional support agencies have access to the information they need to evaluate

the new drug benefit.

Given how difficult it was to get HHS to share enrollment data

on the drug discount card, I feel that we need to make sure that

the law ensures adequate transparency.

Ms. DeFrancis, Mr. Johnson, I wish you luck and thank you for

volunteering to serve.

Mr. Adams, welcome. You have an accomplished resume, and I

thank you for your willingness to serve. If you are confirmed by the

Senate, one issue that will fall under your supervision is U.S. trade

policy at Treasury.

I want to highlight this portion of your portfolio because it requires closer oversight for this committee in light of a recent Treasury decision to restrict agriculture exports to Cuba, a promising

new market worth $400 million to United States farmers and

ranchers last year.

Congress authorized United States agricultural exports to Cuba

on a cash-in-advance basis in the Trade Sanctions Reform and Export Enhancement Act of 2000. The key words in that statute are

‘‘export enhancement.’’

We in Congress intended to open up the Cuban market to agriculture sales for two key reasons. The first is, using food as a

weapon never works. Fidel Castro has not missed a meal in 45

years.

But more to the point, members of Congress understood that

farmers and ranchers back home in our States needed new markets. I work for the people of Montana, and, frankly, if you are confirmed to this post, Mr. Adams, you will too.

For my whole career, I have worked to open new markets for

Montana farmers, ranchers and businesses, and one of those new

markets is Cuba. I led a delegation of Montanans to Cuba in SepVerDate 11-MAY-2000 09:13 Feb 10, 2006 Jkt 095484 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 25654.000 SFINANC2 PsN: SFINANC2
7

tember of 2003 and came home with a commitment by Cuba to purchase $10 million in Montana agricultural products.

Over the course of the next year or so, Cuba fulfilled that commitment, buying $10.4 million in Montana wheat, peas, and beans.

So I returned to Cuba last December and negotiated an even better

deal for Montana. Cubans agreed to buy $15 million worth of Montana agricultural products.

Several contracts for the sale of Montana products made possible

by that deal, worth several million dollars to my constituents, are

now in serious jeopardy. Why? Because of a Treasury rule change

restricting the cash-in-advance payment rules that govern agricultural trade with Cuba.

The new rule reinterprets the cash-in-advance requirement on

sales to Cuba to mean cash in advance of shipment instead of the

customary cash in advance of delivery.

But if Cuba must pay for the goods before they leave the U.S.

port, the goods become Cuban assets, vulnerable to seizure to satisfy unrelated property claims against Cuba. This is not idle speculation. Two years ago, the court awarded two stolen Cuban planes

to a Florida woman just to satisfy her claim against the Castro government.

As a result of this rule change, wary Cuban buyers have already

turned to importers of other countries for $300 million worth of

food imports. This rule change was clearly just a back-door attempt

to overturn the will of Congress and to shut down agricultural

sales to Cuba.

Listen to what the nonpartisan Congressional Research Service

concluded about this proposed and actual change in the rules by

OFAC over at Treasury:

It appears customary within the international trade and financial community to place emphasis on the transfer of legal

control rather than on the date of shipment.

In other words, it appears that a seller can ship goods without relinquishing legal control of them, therefore payment can

still be required in advance of the transfer of legal control.

OFAC’s proposed interpretation appears to limit the available payment options to those that are considered risky, undesirable, and under-utilized. Acceptance of OFAC’s proposed interpretation appears likely to result in a reduction of trade

with Cuba, which appears to be contrary to the express intent

of Congress.

Those are not my words. That is an objective analysis of the Congressional Research Service. Treasury had no authority to defy

Congressional intent with respect to these sales. Congress passes

laws, not Treasury.

I care so much about this rule change because it impacts Montanans directly. Contracts for $3 million worth of Montana wheat

and peas negotiated months ago will have to be renegotiated or

abandoned. Why? Because the rule changes the terms of sale. That

$3 million is directly out of the pockets of Montanans, Mr. Adams,

and I will not allow that to happen.

8

The bottom line is obvious. This new rule will add cost and risk

to future sales, making American exporters less competitive in the

Cuban market compared with foreign exporters.

There is a fellow named Mr. Steinhagen who owns the Yellowstone Bean Company in Bridger, Montana. He tells me that Cuba

could be worth up to $25 million a year to his company alone. As

Jim points out, this is not peanuts. Jim is hoping to make Cuba

his biggest customer, ahead even of Wal-Mart. But now, thanks to

the bureaucrats at Treasury, he could lose Cuba as a customer altogether.

I have other letters from other constituents, and I will not bring

them up right now. But I do want you to read them, because this

is a big deal. I listen to my constituents, Mr. Adams. I cannot always get for them what they want, but this one is a no-brainer.

And I am not alone. I am joined by Republicans and Democrats in

this Congress who represent farmers, ranchers, shipping authorities, et cetera.

We, together, introduced the Agriculture Export Facilitation Act

to overturn the Treasury rule, and I am pressing hard to make

that pass. We have 30 co-sponsors and we will continue to push for

this.

My first priority, though, is to reverse this unnecessary, wrongheaded, politically motivated rule change. Last year when word got

out that Treasury was considering this change, I warned that I

would take considerable time discussing significant Treasury nominees if that change were made.

Treasury made the rule change anyway, so I have no choice but

to make good on my promise and closely examine significant Treasury nominees as they come up before the Senate until I feel confident that agricultural sales to Cuba can continue as they have for

the past 4 years.

I hope to work with you, Mr. Adams, and with Treasury to turn

this rule around so we can proceed as Congress intended, and it

is also good policy.

Thank you.

The CHAIRMAN. Thank you, Senator Baucus.

Senator BAUCUS. I apologize to my colleagues, and thank them

for their indulgence for that longer statement. Thank you.

The CHAIRMAN. Yes.

Now we will go to the nominees for their statements and the introduction of any family and friends that they have here supporting

them at this particular time.

Would you proceed?

STATEMENT OF HON. ALEX AZAR II, NOMINATED TO BE DEPUTY SECRETARY OF HEALTH AND HUMAN SERVICES, U.S.

DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC

Mr. AZAR. Thank you, Mr. Chairman. My name is Alex Azar.

Thank you, Senator Baucus and other members of the committee,

for convening this hearing. I appreciate the opportunity to be before you today.

I would also like to thank Senator Hatch for his very kind words

of introduction.

9

I also am appreciative of the President’s confidence, and Secretary Leavitt, for this opportunity to continue to serve at the Department of Health and Human Services, if confirmed by the Senate. It is a great department. I have spent 4 years there.

I love the work of the department, its programs and its people.

I also very much appreciate former Secretary Thompson’s confidence, and for the opportunity to serve as general counsel there

for the last 4 years.

My wife Jennifer, my son Alex, and my daughter Claire may join

us at some point in the hearing. I want to thank them publicly for

all the sacrifices they have made in the last several years for this

public service.

As general counsel, I supervise approximately 450 lawyers and

another 90 professional staff that cover the breadth of legal issues

at the Department of Health and Human Services and its over 300

programs.

I am immensely grateful to the career attorneys and staff at the

Office of General Counsel, for any successes that I have had in the

last 4 years have been attributable to them and to their loyalty,

support, and dedication to the mission of HHS.

Our goal is to provide advice and counsel to the department and

litigation support across the broad range of programs that we have,

the 300 programs that touch the lives of every single American.

I also personally serve as the Senior Legal Advisor, first to Secretary Thompson, and now to Secretary Leavitt, and serve as a

member of the senior leadership team at the department.

These have been a very historic 4 years for HHS, as you know.

We have faced the unprecedented public health challenges of the

attacks of September 11th, the subsequent anthrax attacks, the

preparedness for smallpox, monkey pox, SARS, influenza, and

avian influenza.

We have also worked to enhance our food safety program, working with a bipartisan effort here in Congress to pass the historic

food safety reforms of the Bioterrorism Preparedness Act that gave

the Food and Drug Administration critical new authorities to protect our Nation’s food supply.

We also have worked with this committee and with this bipartisan leadership here to enact the Medicare Modernization Act and

the historic reforms there that are going to bring choice and opportunity to more seniors and more disabled people in our country.

We have worked to reform generic drug approval processes, to

speed up the approval of drugs, getting rid of successive 30-month

stays by innovator companies so that we could work, in the Medicare Modernization Act, with this Congress, to save $35 billion for

consumers over 10 years.

We also are just beginning the work on patient safety and quality of care initiatives, and the promise of health information technology has captured the public’s imagination. We are looking forward to try to deliver on the promise of having an electronic health

record for all Americans within the next 10 years.

I am excited about the prospect of staying at HHS because I

think the next 4 years will offer the same type of historic opportunity for the department and its programs, and also the opporVerDate 11-MAY-2000 09:13 Feb 10, 2006 Jkt 095484 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 25654.000 SFINANC2 PsN: SFINANC2
10

tunity to work with this committee and the Congress to move forward there.

Obviously, as the Secretary has said, the major priority right

now is the successful implementation of the Medicare Modernization Act. We have to get beneficiaries educated. We have to ensure

that the program we have all worked so hard on is a success.

We also have to protect the Nation against bioterrorist attack

and emerging infectious diseases, and we have to try to advance

the agenda on patient safety and health information technology to

bring those promises to fruition.

Finally, we need to expand the opportunities for all Americans

to secure or purchase health insurance, if we possibly can.

If confirmed, I look forward to working with Secretary Leavitt on

trying to fulfill the mission that the President has laid out for us,

and I also look forward to the opportunity to work with you and

other members of the committee and the Congress as we protect

the Nation’s public health and welfare.

Thank you very much for the opportunity to be here today.

The CHAIRMAN. Thank you, Mr. Azar.

[The prepared statement of Mr. Azar appears in the appendix.]

The CHAIRMAN. Now, Mr. Adams? You can introduce family and

friends as well.

STATEMENT OF TIMOTHY D. ADAMS, NOMINATED TO BE

UNDER SECRETARY FOR INTERNATIONAL AFFAIRS, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, DC

Mr. ADAMS. Thank you, Chairman Grassley, Ranking Member

Baucus, and members of the committee. Thank you for the opportunity to appear before you here today. I am honored that President Bush nominated me to serve as Under Secretary for the

Treasury for International Affairs and, if confirmed, to have the opportunity to work with Secretary John Snow, the Treasury staff,

and my colleagues in the administration.

If confirmed, I also look forward to working closely with this

committee, the U.S. Senate generally, and your colleagues in the

House of Representatives. I want to do this to help advance the

President’s economic agenda and to further the well-being of all

Americans.

I also want to thank Senator McConnell for introducing me. I

have known the Senator for many, many years and am honored by

his presence.

Finally, I want to thank my wife, Jennifer, and our children, William and Tindall, who are back here.

Senator BAUCUS. Could you stand, please? This is quite a big

day. We would like to recognize the family. That is great.

Mr. ADAMS. I think one has gone missing. [Laughter.]

Senator BAUCUS. Right. Thank you.

Mr. ADAMS. But I want to thank them for their unwavering support of my great passion, which is public service. I could not do

what I do without their help. While I am out enjoying the intellectual stimulation of the jobs that we have, my dear wife is at home

taking care of sick children and sick dogs, and she makes it all

work. I thank her so much for all that she does.

11

Indeed, if I am confirmed, this will be my third stint working in

the Federal Government. I look forward to bringing my skills,

knowledge, and experiences to help address the great challenges

before us, and to seize the historic opportunities to advance the

cause of freedom and improve living conditions everywhere.

Finally, I want to say that I bring to this challenging position important personal attributes, such as an inclusive and a practical,

analytical problem-solving style in a diplomatic demeanor, which I

think is going to be very important as we address some of the challenges which I hope we have a chance to talk about shortly.

If confirmed, I will immediately tackle several pressing issues,

including growing global imbalances, China’s stable integration

into the global financial system, identifying and preventing financial crises, and ensuring that development assistance is more effective, especially in Africa.

I will also work to implement the President’s vision for the Middle East, establish closer ties with Latin America, help open foreign

markets for U.S. goods and services, including agricultural products, and support transition economies and fragile democracies.

Finally, I will continue to push the critical importance of economic growth, good governance, the rule of law, and capital formation so that all parts of the global economy would become more vibrant and prosperous in the future.

Mr. Chairman, Senator Baucus, I am grateful for this opportunity to appear before you today. I would be pleased to answer

any questions you have, or any other members of this committee.

[The prepared statement of Mr. Adams appears in the appendix.]

The CHAIRMAN. All right. The first three questions will be outside of our 5-minute time period. These are questions that we ask

every nominee.

So I will ask each of you, then each of you separately respond.

First, is there anything that you are aware of in your background

that might present a conflict of interest with the duties of office to

which you have been nominated? Mr. Azar?

Mr. AZAR. No, sir.

The CHAIRMAN. Mr. Adams?

Mr. ADAMS. No, Mr. Chairman.

The CHAIRMAN. Second, do you know of any reason, personal or

otherwise, that would in any way prevent you from fully and honorably discharging the responsibilities of the office to which you

have been nominated? Mr. Azar?

Mr. AZAR. No, sir.

The CHAIRMAN. Mr. Adams?

Mr. ADAMS. No, Mr. Chairman.

The CHAIRMAN. Last question. Do you agree, without reservation,

to respond to any reasonable summons to appear and testify before

any duly constituted committee of Congress, if you are confirmed?

Mr. Azar?

Mr. AZAR. Yes, sir.

Mr. ADAMS. Yes, sir.

The CHAIRMAN. Thank you.

I just have one question that I am going to ask Mr. Azar, then

I will turn to Senator Baucus.

12

In your role as general counsel, you saw first-hand the fraud and

abuse that can occur in our health care programs, including Medicare and Medicaid. I know you share a commitment to ensuring

that every step be taken to prevent fraud and abuse and to punish

perpetrators.

It is sad to say, but Medicare beneficiaries are not the only ones

waiting for a new drug benefit. We saw it with the drug cards.

Scam artists started working right away to take advantage of beneficiaries, and in the end taking advantage of taxpayers.

We took several steps to make sure that the department had the

tools and resources to prevent scams and to ensure proper oversight of companies offering the Part D benefit.

Can you tell us a little more about the department’s strategy to

ensure that beneficiaries get the benefits that they deserve, and

that these companies comply with all of the rules and requirements

to serve Medicare beneficiaries?

Mr. AZAR. Mr. Chairman, thank you very much. I would like to

thank you for your leadership on protecting the program against

fraud, waste and abuse. This committee has obviously been very

vigilant, and your personal efforts have encouraged us as we move

forward in these areas.

I agree with you that we have to be extremely vigilant with this

new program getting up and running to ensure that we protect it

against fraud, waste and abuse, particularly on the Part D benefit

and the new providers that we are going to have in this environment. I also agree that we need to come down hard on any who

abuse the program and the trust that they will have.

The Medicare Modernization Act, which this committee worked

on, gives us extremely broad authority to gather information so

that we can fulfill this type of oversight responsibility on those who

would be Medicare Advantage prescription drug providers, as well

as the Part D prescription drug plans. The language actually allows us to gather such information as the Secretary determines

necessary to carry out the act.

This is important because several of the payment provisions

where we will pay these intermediaries will depend on net cost—

the prices that are being paid for drugs, net of any rebates or discounts that the prescription drug plans happen to receive—so we

need to be able to have access to their records so that we can ensure that they are providing us complete and accurate information.

When we put out the Part D final regulations, we made clear

their obligation to get these records, to keep them, to have complete access for our oversight purposes, and also put them on notice

that we intend to be looking at these records as we examine to ensure that the Federal taxpayer, whether it is re-insurance or the

catastrophic benefit, that we are getting exactly what the statute

provides in terms of the net numbers.

We also are requiring that the sponsors of the plans have to certify the accuracy of the information that they provide to us. So,

many tools would be available to us to enforce against them, including the False Claims Act, with relators being able to sue, in addition to the Federal Government being able to sue, to protect the

taxpayer funds.

13

We also have the anti-kickback statute and all the other civil

monetary penalty authorities that the Inspector General and the

Justice Department would have to work on to protect against any

type of misrepresentation.

We also worked to put out regulations to ensure that every Part

D plan will have to have a compliance program, and we offered factors that those compliance programs will have to have.

So, Mr. Chairman, I want to reiterate to you that protecting this

program against fraud, waste and abuse is a critical priority for us

as we move forward into 2006. Thank you.

The CHAIRMAN. Yes. Thank you.

Now I call on Senator Baucus.

Senator BAUCUS. Thank you, Mr. Chairman.

The CHAIRMAN. I am done with my questions, so take whatever

time you need.

Senator BAUCUS. Take care of yourself.

Mr. Adams, I just have a couple of questions about the matter

which I discussed in my statement. Also, to generally get your reaction to whether you agree that it makes sense for the United States

to violate the sanctity of contracts.

I might say, in March of this year, I think, many agriculture

groups petitioned Treasury to exempt preexisting contracts from

the new Treasury rule. Treasury declined.

According to Congress Daily, there are about $200 million worth

of previously linked agreements with Cuba coming up in the next

several months that would have to be renegotiated or abandoned

because of the rule change, placing those earlier contracts at greater jeopardy.

I might say also that one person—actually, it was a fellow who

was quoted in Congress Daily—who said that if he compared this

Treasury rule to the 1980 grain embargo that President Carter imposed on the Soviet Union after its invasion of Afghanistan, ‘‘By

issuing this regulation, Bush is the first president since Jimmy

Carter to violate the sanctity of agriculture export contracts in such

a broad fashion.’’

Would you feel comfortable recommending that Treasury not exempt those pre-negotiated contracts? What would your recommendation be if that issue were to come before you which would

result in a violation of contract sanctity?

Mr. ADAMS. Thank you for the question, Senator. I certainly believe in the enforcement of contracts. It is an important rule, an

important item that we certainly press upon other countries, especially when we discuss the importance of development.

If I am fortunate enough to be confirmed, I will certainly make

this a priority, although I will point out that OFAC is not directly

under the control of my portfolio, it is a part of Under Secretary

Levey’s office.

Senator BAUCUS. I know that. But you are still being nominated

for an international position at Treasury, so you can certainly have

not only the opportunity, but the responsibility, to weigh in.

Mr. ADAMS. Yes, Senator. I can assure you that I will enforce the

law based on the best interpretation available within Treasury.

14

Senator BAUCUS. But would you feel comfortable recommending

a policy decision that resulted in a violation of contract sanctity,

given the factual situation I just gave to you?

Mr. ADAMS. Senator, I do not know the factual details.

Senator BAUCUS. Basically, contracts were made, Treasury

changed the rules contrary to the will of Congress, and would not

agree to a petition by those exporters for their preexisting contracts

to be exempt. Treasury said no.

Mr. ADAMS. Senator, I can promise you, if I am fortunate enough

to be confirmed, I will look into this matter. I will certainly share

your concern with my colleagues within the Treasury Department.

Senator BAUCUS. But does it not sound like a straight violation

of the sanctity of contracts? I do not care which contracts, but after

the fact, if they change the rules.

Mr. ADAMS. Senator, I am reluctant to offer an opinion on a matter that I have not studied in great detail. Again, given the opportunity to be confirmed, I can promise you and the other members

of this committee——

Senator BAUCUS. Oh, you are going to have plenty of time to look

into this, I guarantee you that. You will have lots of time to think

about this, because this is an outrage, that Treasury would overturn the express intent of Congress—the express intent of Congress—for short-term partisan, political reasons, which most farmers and ranchers in this country vehemently disagree with. Vehemently.

You also must know that this is especially hard for Montana and

other State farmers and ranchers for a couple of reasons. We are

losing our export markets overseas, generally, because of competition and because of subsidies from other countries. We are losing

it. We are not getting as much as we had in the past.

Second, farmers and ranchers are getting squeezed a lot more.

The Federal Budget Act is another reason as well. We have to open

markets, not take them away. Cuba was ranked 227th in order of

our markets in exports of countries back several years ago.

But then Congress passed that statute, the one I mentioned, in

2000. Now Cuba rose up to about, I guess 24th, or something like

that. Major agricultural export sales to Cuba.

It is not going to solve all the problems for farmers and ranchers,

clearly, but it is going to help. I am just, frankly, quite disturbed

that the administration would, again, against the express intent of

Congress, just willy-nilly make the rule change for partisan, shortterm political reasons.

You have a lot of experience with this, actually, because I think

Senator McConnell said that when you were chief of staff, he said

that you handled such issues as terrorist financing. OFAC is terrorist financing. So, you handled these issues. So what happened?

Mr. ADAMS. Well, Senator, as chief of staff, I handled many

issues, and usually it was at a very high level. With respect to the

enforcement agencies and the regulatory institutions within Treasury, I tended to take a very hands-off approach because of the

unique nature of the work that they do.

Let me do say, Senator, that I support agriculture exports. I

grew up in rural Kentucky. I grew up with a backyard that was

full of corn. I worked my way through college cutting tobacco. I

15

know the importance of agricultural products to this country and

the importance of exports. In fact, I just was talking with Ambassador Portman last evening about CAFTA and the importance of

CAFTA and other trade negotiations under way.

Senator BAUCUS. Well, that is fine, but we are not talking about

CAFTA. I very much appreciate your background working on a

farm. I appreciate that very much.

We are talking about current farmers and ranchers in this country who are denied export markets against the express intent and

will of Congress. That is what we are talking about here, and that

has got to change. OFAC has got to turn that rule around back to

what it was previously to implement the intent of Congress.

Thank you.

The CHAIRMAN. I am not directing this toward you, Mr. Adams,

but I want to say that I have the same feeling on this issue as

what Senator Baucus had expressed. So, I am disappointed with

the Treasury’s interpretation of the terms of the Trade Sanctions

Reform and Export Enhancement Act of 2000.

It seems to me the law clearly permits exports of U.S. agricultural products to Cuba, contingent upon the words ‘‘payment of

cash in advance.’’ Treasury issued a final rule that provides that

the terms just given means payment of cash prior to shipment.

Consistent with international practice, however, U.S. exporters of

agricultural products over the past 3 years have customarily received payment at other times in the shipping process, including

after the point that goods have reached Cuba.

In these cases, exporters have retained title and control of relevant agricultural products until time of final payment. So, Congress intended for exporters to be able to retain title and control

of the relevant agricultural products until time of final payment.

It is quite obvious, from the statistics that Senator Baucus has

given, that Cuba has become an important export market for U.S.

products, including Iowa farmers, in recent years. Treasury’s ruling

threatens Iowa agricultural exports, and I support efforts to reverse the Treasury rulings.

I say this in support of my own position, but Senator Baucus has

enunciated it. Senator Baucus and I do not agree on everything in

regard to Cuba, but we surely agree on this issue.

Further questions?

Senator BAUCUS. Mr. Chairman, just a couple of brief ones for

Mr. Azar.

I would like to know more about the Secretary’s plan to ensure

the so-called Commission on Medicaid’s independence, because

frankly I am a bit concerned about its composition. The Secretary

announced plans to create a commission, as you know.

I, for one, strongly urged upon him that that commission be unbiased, independent, very good people appointed so we can get

some good results here. However, I am concerned, because that is

apparently not what happened. I might say that, given the outline

and what is on it, the commission, as I understand it, was three

groups.

The voting members are those solely appointed by the Secretary,

15. Then there are non-voting advisors also appointed by the Secretary, which include State and local government officials. Then

16

the last group is advisory members of Congress who are non-voting. That would be eight.

So the Secretary will appoint 30, different members of Congress

would appoint 8. Fifteen of the 30 appointed by the Secretary

would be voting, 15 not voting, and 8 appointed by members of

Congress would also be non-voting. That does not sound like an

independent, objective commission to me. How can you reassure us

that it will be?

Mr. AZAR. Mr. Chairman, we look forward to working with you

and other members of the committee to try to ensure that we look

at the Medicaid program in a way that puts it on a sound footing

and that this commission be solid, respected, respectable, and bipartisan so that it can recommend key changes that are needed to

the Medicaid program.

The Secretary is absolutely committed to ensuring that all points

of view are represented, left, right, center on this. As you mentioned, the charter that we just put out, as well as a solicitation

to ask for individuals and entities to suggest representatives to

serve on this advisory committee, would include three classes of individuals: the voting members, non-voting representatives, and

non-voting representatives of Congress.

The voting membership—under the Federal Advisory Committee

Act—that the Secretary would appoint, will have broad representation across the full spectrum. There are going to be State Medicaid

directors and governors.

We are also going to have representatives of three public policy

organizations with expertise in the Medicaid program. The Secretary is committed to ensure that those representatives who are

voting members will represent the spectrum of political interest in

looking at Medicaid reforms.

The non-voting representatives will include consumer and other

provider representatives, and we would have, of course, bipartisan

members of Congress there participating also. Secretary Leavitt, I

know, worked with you and other members of this committee on

this.

Senator BAUCUS. I appreciate that, Mr. Azar. Clearly, that is

what you have to say. But facts speak louder than words. The

President had one or two Social Security commissions which nobody paid any attention to, because those were stacked decks. They

were cooked deals in advance. They were a waste of time.

We had a Medicare commission which had members of Congress

voting. They spent a lot of good, hard work. Several of our colleagues were on that commission, Senator Breaux, especially.

I am just telling you that you have got to work mightily—I do

not think you will succeed—in overcoming the impression that this

is a stacked deck. This is a cooked deal, again. This administration

has lots of cooked commissions, and this is another, as it appears,

as it seems.

I just hope that you would come up with something that works,

because you are starting off with so many strikes against you because it is not independent, it is not objective, it is not bipartisan.

It is solely appointed by the Secretary. Solely, except for a few

members of Congress who cannot vote.

17

Mr. AZAR. I hear your concerns, and I will take them back to the

Secretary. I know the proof will be in how the commission is set

up and the membership that gets selected, which of course has not

been done yet. The Secretary is committed to trying to make sure

that this is a fair process.

Senator BAUCUS. He was overruled. He was told by somebody upstairs in the White House that set it up this way. I appreciate the

Secretary’s intent. He is a good guy. But, clearly, this was not his

call. He was told to do it this way, and that is unfortunate.

Mr. Azar, on another matter, I understand that HHS recently

changed its criteria for approving new health centers. The department is now requiring medically under-served areas to abide by the

same service area as health professional shortage areas.

As a result of this, a potential health center in Havre, Montana

was denied an application as an FQHC. As I understand it, this

change will affect other States as well. For example, I understand

Idaho may have a similar issue.

I have two questions. HPSA and the medically under-served area

status are very different. HPSAs are based on provider-to-patient

ratios, while medically under-served areas are based on poverty

level, infant mortality, and percentage of elderly patients, as well

as provider-to-patient ratios. Is it not unfair to require that medically under-served areas be identical to HPSAs?

Mr. AZAR. Senator, with regard to the Havre facility, we have

been working, and I want to let you know that, as to that facility

in Montana, I will personally work with HRSA to make sure they

continue to get the kind of technical assistance they would need to

try to get to an approvable status, both with the Montana State

Primary Care Office, as well as with HRSA after that.

We have been providing assistance, trying to work through the

Primary Care Office in Montana, but we will continue to provide

intensive technical assistance to try to get them where they need

to be so that they can meet the criteria and be approved.

Senator BAUCUS. I appreciate that. There has been a question

about the rule. Was the change made through the proper notice

and comment rulemaking process?

Mr. AZAR. Senator, I actually am not familiar with that change

in the rule. I would be happy to look into that and get back to you,

Senator.

Senator BAUCUS. Would you, please, and let me know? If you

would also take a look at the health center in Kalispell which is

having difficulty getting approval.

Mr. AZAR. Yes.

[The information appears in the appendix.]

Mr. AZAR. Senator, with that facility, there have been some

issues with the co-applicant. Again, with that facility, I can assure

you, I personally will work with HRSA to ensure that we deploy

a technical assistance team to try to get the issues with the co-applicant settled so that we can try to get them where they need to

be for approval.

Senator BAUCUS. Thank you very much.

One question, Mr. Adams. You said you were chief of staff for the

Secretary, and you also discussed international financing issues.

You are not telling me, are you, that the Secretary was not inVerDate 11-MAY-2000 09:13 Feb 10, 2006 Jkt 095484 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 25654.000 SFINANC2 PsN: SFINANC2
18

volved in this OFAC rule change, are you? He did not know about

it? You are not telling me the Secretary did not know about it, are

you?

Mr. ADAMS. Senator, I was not at Treasury at the time this rule

was promulgated. I am not privy to the conversations that occurred

at the time.

The CHAIRMAN. Can I enlighten you a little bit? I cannot speak

for Senator Baucus, but I did have a telephone conversation the

day of the announcement from the Secretary.

Senator BAUCUS. Which indicates he knew about it, I would

think.

Mr. ADAMS. Yes, sir. Given what the Chairman just said, that

would indicate that the Secretary did know about it.

Senator BAUCUS. Thank you. Which means it was a policy decision, which means he can overrule it.

Thank you. I am finished. Thank you.

The CHAIRMAN. I wanted to follow-up, if you would permit me to,

with Mr. Azar on the point of the commission. A couple of points,

hopefully, not to relieve any fears that Senator Baucus might have,

but instead to probably remind things that I hope are facts out

there that we already have been working on this assumption.

This would have been with or without the commission. Of course,

now we have the commission, so it is a fact of life that the commission exists. But it was not always assumed that we would have a

commission to advise on saving money within Medicaid.

We were going back very early. It was always the assumption,

because this is a Federal-State program and a lot of State budgets

and governors were finding themselves in trouble, and a bipartisan

group of governors was making these statements, that we were

going to proceed in a bipartisan way with the governors because of

the State’s involvement.

I am not sure how far our presumption goes that you get a bipartisan agreement, but it is kind of presumed during the Senate’s debate that if we did not get a bipartisan agreement, we would not

be able to get a reconciliation anyway.

So as we proceed down this road, with or without a commission,

we are going to work with the governors, work with a bipartisan

group of people to make savings, not just savings as an end in

themselves, but with a goal in mind that there were certain common sense things, like generic drugs, or for Medicaid Title 19, getting rid of the assets, and some other things, that we would be able

to save the 1 percent that we are talking about saving out of a $1.1

trillion program over the next 5 years, with bipartisan support, or

we probably would not be able to get it done anyway, but doing it

not just to save the Federal budget, but to help governors where

Medicaid is a tremendous problem in their State budget.

Mr. AZAR. Mr. Chairman, I think you are absolutely right. That

is how Secretary Leavitt has approached this from the time he took

office, and working with you, and other members of the committee.

I cannot recall the exact number, but I think he has met with

over 40 governors on this to try to build the type of bipartisan, and

also federalist, consensus towards common-sense reforms to put the

program on a sound footing for the States and for the Federal Government, the types of common-sense reforms that you mentioned,

19

changing the drug pricing mechanism, protecting the program

against fraud, sheltering assets that really ought to be attributed

to them. That is why I really do think the Secretary’s commitment

here on making sure the Medicaid commission represents all views

and comes up with good, common-sense solutions that can have

support is where——

The CHAIRMAN. And that obviously implies not just a partisan

view, either.

Mr. AZAR. Right. Yes, Senator.

The CHAIRMAN. That he wants it to be bipartisan.

Mr. AZAR. Absolutely, sir.

The CHAIRMAN. I think Senator Baucus has asked all of the questions he was going to ask. Thank you all very much for your willingness to serve the American people.

Mr. AZAR. Thank you, Mr. Chairman.

The CHAIRMAN. One admonition. So many members are not here,

and then even if members are here, kind of a rule of thumb I have

is to make sure that answers in writing are given before your issue

will come up on the floor. I think all members, Republican and

Democrat, deserve that attention.

Thank you all very much.

Mr. AZAR. Thank you, Mr. Chairman.

Mr. ADAMS. Thank you.

The CHAIRMAN. I am going to move to our second panel. We have

Suzanne C. DeFrancis, Hon. Charles Johnson, who has already

been introduced by a colleague of ours, and Shara Aranoff.

Our first nominee, Suzanne DeFrancis, is for Assistant Secretary

for Public Affairs, Department of HHS. Of course, this office is

deeply involved in the campaign to educate beneficiaries and everybody else about the Part D drug benefit.

She has held several positions, both in the private and public

sectors, in communications. This combination of work with different audiences will undoubtedly serve the implementation of the

new drug benefit very well.

Charles Johnson is nominated to be Assistant Secretary for

Budget, Technology and Finance at the Department of Health and

Human Services. He also has a distinguished career in both the

public and private sectors.

As Assistant Secretary, he will have responsibilities for the office

of National Coordinator of Health Information Technology. We

need to be able to harness the potential that health information

technology holds to improve quality and efficiency. I think we view

Mr. Johnson as up to that task.

Shara Aranoff has been nominated as Commissioner of the ITC.

She has practiced international trade law for over 15 years in both

the private sector and the government. She spent 7 years with the

Office of General Counsel, so she is obviously quite familiar with

the work of the commission, and for the past 4 years, obviously,

working with those of us on the Senate Finance Committee. Senator Baucus has spoken very, very highly of you folks.

So, I think we will proceed now to Ms. DeFrancis, then Charles

Johnson, then Ms. Aranoff.

You are invited to make an opening statement, as well as any

introduction of family and friends.

20

STATEMENT OF SUZANNE C. DeFRANCIS, NOMINATED TO BE

ASSISTANT SECRETARY FOR PUBLIC AFFAIRS, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC

Ms. DEFRANCIS. Thank you, Chairman Grassley, and thank you,

Senator Baucus and the other members of the committee. It is an

honor to be here. I appreciate you taking the time, after what I

know has been a long night, to consider my nomination as Assistant Secretary of Public Affairs at HHS.

One of my first jobs in communications was working next door

in the Russell Senate Office building, where I worked as a Deputy

Press Secretary for Robert P. Griffin of Michigan. Please do not ask

me under oath how long ago that was, but through that experience

I learned the important role the Senate plays.

I very much look forward to consulting with you and your staff

as we work to the mutual goals we have of helping the health and

well-being of the American people.

I would also like to mention that I met, and married, on Senator

Griffin’s staff a man named Jim DeFrancis. Jim loved the Senate.

He often referred to it as the ‘‘upper body,’’ to the chagrin of friends

of ours on the House side. But he died at 55 of prostate cancer. I

would like to mention Mr. Crapo’s work in that regard, and am appreciative of that.

I know he would be proud to see me here today. He was certainly

proud of his three sons, two of whom are with me today, James and

Will. James is an honors graduate of the University of Chicago and

going to Notre Dame to study for a master’s in theology. Will is a

rising junior at SMU, and he is taking a course this summer in Arabic so that some day he can assist in the war on terror.

Mark is my middle son. He is hopefully studying for exams at

Northwestern University, where he intends to graduate this summer with a degree in theater, and a passion for acting and directing.

I would also like to mention my husband, Dr. Phil Wakeland. He

had tried to be here. He had canceled a business trip, rescheduled

it. I dropped him off at Union Station at 8 this morning and said

go ahead and go. But he has been enormously supportive of me. He

is the senior scientist for the National Cotton Council and has appeared before the Senate a number of times.

Finally, I want to acknowledge my parents. I have a 90-year-old

father who wanted to be here today, but I think he looked outside

this morning and decided he would sleep in, which is the prerogative a 90-year-old person can have. And my mother, who suffers

from Alzheimer’s, would be with me today if she could.

I want to thank President Bush for nominating me to this position. For the past 2 years, I had the privilege of serving him in the

White House as Deputy Assistant to the President for Communications.

During that time, I worked on many of the issues that fall within

HHS’s purview, so I was very pleased to be asked by Secretary

Leavitt to join his team.

As you know, Secretary Leavitt has laid out a vision and a very

detailed plan for the department, which actually makes the job of

a communicator pretty easy because we know where his priorities

are and where he wants to take this department.

21

We will be focusing on modernizing Medicare and Medicaid, and

particularly communicating with seniors and disabled persons

about the new prescription drug benefit. I know he plans to spend

a lot of time on that, and I certainly plan to spend a lot of time

on that.

We have, of course, many other roles that you are aware of. I will

not go into them all. I think the challenges are great, but I have

great confidence in Secretary Leavitt and the whole team at HHS.

I am eager to be confirmed soon so I can be a full partner with

them in the work ahead.

I have been fortunate in my career to work in a variety of different jobs and to learn from each of them. I worked in government, both the legislative and the executive branches. I have

worked in politics and political campaigns. I worked at a private

sector PR firm with health care credentials.

Most importantly, I spent 15 years as a stay-at-home mom,

which taught me a lot of lessons, including what is most important

in life. I look forward to bringing the sum of these experiences to

the task at hand at HHS and hope that I can make a difference

in the lives of our fellow citizens.

If you and the members of the committee see fit to give me that

opportunity, I pledge to you, with God’s help, I will give it everything I have.

Thank you, Senator.

The CHAIRMAN. Thank you, Ms. DeFrancis.

[The prepared statement of Ms. DeFrancis appears in the appendix.]

The CHAIRMAN. Now, Mr. Johnson?

STATEMENT OF HON. CHARLES E. JOHNSON, NOMINATED TO

BE ASSISTANT SECRETARY FOR BUDGET, TECHNOLOGY AND

FINANCE, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC

Mr. JOHNSON. Thank you, Mr. Chairman, and thank you, Senator Baucus. Again, I recognize that you have had a lot of pressing

business, and for you to accommodate us today, I am grateful for

that.

I would like to thank the President also, and my good friend,

Secretary Leavitt, for this opportunity to be considered at least by

the Senate Finance Committee, and then the full Senate.

I want to thank Senator Hatch. He is a good friend, and I appreciated his kind remarks and introduction of me today.

Let me introduce my wife, Susanna Johnson. Susanna, would

you stand, please? Susanna is not only an enthusiastic supporter,

she is also the one to keep me grounded. So, it is a dual role for

her.

Senator BAUCUS. How does she do that?

Mr. JOHNSON. It is difficult, Senator. [Laughter.] But she manages. She manages me very well.

I would like to also thank the Senate Finance Committee staff.

They were very accommodating with me and very kind, and I intend to reciprocate, if I am confirmed, and will work closely with

your staff.

22

I have had a limited time at HHS, but I do appreciate Kerry

Weems and the introduction I have had in briefings with HHS. So,

I look at this morning as an opportunity to do three things: first,

to offer thanks to those who brought me to this point in time; second, to just personalize a little bit some of the things from my past

experiences; and third, to tell you a little bit as to the way I will

operate based on my history.

First, let me go then to my past experiences. I believe that from

my 31 years in the practice of public accounting, including a member of the Board of Directors of one of the Nation’s—well, internationally—largest accounting firms, I have learned both leadership, and I believe I have learned financial matters from one end

to the other.

From my service in State government, I have learned several

things. First, I have learned that citizens want to trust government. If we will work each and every day to earn that trust, they

will continue to trust government. But that requires fair policies

and fair fiscal accountability, and we have to give them value for

the dollars that they are going to extend to us in their taxes.

Likewise, I have learned that all budgets are an exercise in comparisons. I have literally looked at hundreds of budgets over my career and I seldom see a budget that does not have some good aspect to it. But our job is to make comparisons and select the best

to be funded. That, I consider a responsibility.

I have learned that the business of government must be open

and transparent, again, if we are going to have the trust of the

American citizen. I believe I understand the interrelationships between the Federal Government, States and tribes, and local governments.

From my service as chair of the Board of Regents, I have learned

the synergistic value of hearing different points of view and then

making factually based decisions. From my service as chair of a

cancer foundation, I have learned a lot about the devastating impact of disease. With that knowledge has come increased compassion.

Our challenge, I believe, at HHS is to continue to raise the level

of health care and living standards while remaining economically

competitive in a global economy. That is a delicate balance.

So what are the principles upon which I will operate? First, I

want to pledge to you that I will be accountable to you and other

decisionmakers to provide you with both timely and relevant data.

I will always think in terms of results and taking into account the

benefits to our citizens.

I will think in terms of people, always trying to raise them up

and improving their lives. I will think in terms of matching our

money with our policies. If there is a mismatch, then it will be one

of my responsibilities to seek alignment. In an increasingly complex

government, I will continually seek to simplify.

Now my most prized value: trust and integrity. It will be my goal

not to tamper with that. A philosopher once said, ‘‘Man is the sum

total of his experiences.’’ This is where I have been, this is who I

am. I have spent a lifetime hoping to be able to stand before a committee such as this and stand the scrutiny and the questioning,

23

and to be honored to be considered for confirmation as an Assistant

Secretary.

You have many appointees. This is my second time to seek an

appointment, and the thrill never goes away. I am very honored,

and I thank you for allowing me to be here this morning. I will be

pleased to answer any questions.

The CHAIRMAN. Thank you, Mr. Johnson.

[The prepared statement of Mr. Johnson appears in the appendix.]

The CHAIRMAN. Now, Ms. Aranoff?

STATEMENT OF SHARA L. ARANOFF, NOMINATED TO BE A

MEMBER OF THE INTERNATIONAL TRADE COMMISSION,

WASHINGTON, DC

Ms. ARANOFF. Thank you very much, Mr. Chairman. I want to

thank you and your staff for setting up this hearing so quickly.

Having prepared hearing materials from many nominees myself, I

know how much work is required.

I want to introduce the family who are here with me today. Immediately behind me are my children, Nathaniel and Leora Korn,

and my mother, Harriet Starrett.

Senator BAUCUS. Would you all please stand? Thank you very,

very much. We are almost as proud of Shara as you are.

Ms. ARANOFF. And my husband, David Korn, is really sorry that

he could not be here today. He is at a long-planned speaking engagement in Europe, and was the only one who was pleased when

I called last night to say the hearing was postponed. [Laughter.]

I am honored to be here today as the President’s nominee for

Commissioner of the U.S. International Trade Commission. I particularly want to thank the Democratic leader, Senator Reid, for

his support of my nomination. Most importantly, I want to thank

you, Senator Baucus, not just for your strong support of my nomination, but for giving me the opportunity to serve on the staff of

this committee for the past 41⁄2 years.

I have been privileged to work with you and with the members

and staff of the Finance Committee on a number of important

pieces of trade legislation, including the Trade Act of 2002 and the

implementation acts for our free trade agreements with Singapore,

Chile, Morocco, and Australia.

It has also been my privilege to serve the people of Montana. You

know I did not grow up in Montana, but these past 4 years have

given me the opportunity to visit the State, to meet Montanans, to

become familiar with their lives and concerns.

I hope I have contributed in my own small way to trade policies

that will help the workers, farmers, ranchers, and businesses of

Montana and of the Nation to thrive in the global economy.

I have studied and worked on international trade issues for more

than 20 years. My professional experience spans both the public

and private sectors and all three branches of the government. I believe that this broad experience makes me well-prepared to serve

as an ITC commissioner. I am excited at the prospect of continuing

my commitment to public service in this new capacity.

Although many nominees for ITC commissioner are experienced

trade practitioners, I do have a unique perspective. Before joining

24

the staff of the Finance Committee, I worked for more than 7 years

as a staff attorney in the ITC’s Office of General Counsel.

In that capacity, I came to know and respect the more than 300

people who make up the Commission and appreciate the work that

they do every day for Congress, for the executive branch, the business community, and the general public. If confirmed, I will be

proud to continue that tradition of service.

The principal responsibility of an ITC commissioner is the fair,

impartial, and vigorous administration of our trade remedy laws.

The Commission’s antidumping, countervailing duty, safeguard,

and Section 337 decisions are under scrutiny every day at home

and abroad.

America’s workers, farmers and businesses need to know that

they have recourse when they face unfair or injurious practices.

The Commission’s work also needs to reflect the high standards of

objectivity and due process to which we ask our trading partners

to adhere.

If confirmed, I will administer these laws objectively with an

open mind, and without substituting any policy bias in place of

statutory language and Congressional intent.

While the Commission is not a policymaking agency, it plays a

second important role as our government’s source for expert trade

advice. When Congress and the President consider new trade

agreements or legislation, they rely heavily on the Commission’s

unbiased fact-finding studies and analysis.

If confirmed, I commit to work with you to make the agency’s resources as broadly available as possible in support of the legislative

process.

I contemplate, with some regret, the prospect of leaving the Senate and the colleagues I have come to respect and rely upon. At the

same time, if I am confirmed as an ITC commissioner, I look forward to continuing to work with the members and staff of the Finance Committee on advancing important trade priorities.

Thank you, Mr. Chairman.

[The prepared statement of Ms. Aranoff appears in the appendix.]

The CHAIRMAN. Thank you all very much.

Now the usual three questions. Is there anything that you are

aware of in your background that might present a conflict of interest with the duties of office to which you have been nominated? Ms.

DeFrancis?

Ms. DEFRANCIS. No, Mr. Chairman.

The CHAIRMAN. Mr. Johnson?

Mr. JOHNSON. No, sir.

The CHAIRMAN. Ms. Aranoff?

Ms. ARANOFF. No, sir.

The CHAIRMAN. Second, do you know of any reason, personal or

otherwise, that would in any way prevent you from fully and honorably discharging the responsibilities of the office to which you

have been nominated? Ms. DeFrancis?

Ms. DEFRANCIS. No, Mr. Chairman.

Mr. JOHNSON. No, sir.

Ms. ARANOFF. No, Mr. Chairman.

25

The CHAIRMAN. Last, do you agree, without reservation, to respond to any reasonable summons to appear and testify before any

duly constituted committee of Congress, if confirmed?

Ms. DEFRANCIS. Yes, Mr. Chairman.

Mr. JOHNSON. Yes, I do, Mr. Chairman.

Ms. ARANOFF. Yes, Mr. Chairman.

The CHAIRMAN. All right. Thank you very much.

A couple of things before I leave, because I do not feel so well,

and Senator Baucus is going to finish the meeting.

Number one, as I admonished the previous panel, if you get

questions for answer in writing, at least from my committee, we

would expect you to have those answered before your nomination

would come up on the floor.

The second thing, is for me to thank you for your public service

and to express my appreciation, as chairman of this committee,

that we have people like you who want to serve.

Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman. Get well.

The CHAIRMAN. Thank you.

Senator BAUCUS. Ms. DeFrancis, I just have one question regarding the determination by GAO that HHS has violated statutes prohibiting dissemination of information which is, in a sense, publicity

or propaganda, without divulging the source of the material.

As you well know, not too long ago HHS put out a video with

actors who portrayed themselves as news people, as journalists,

and so on and so forth, about the drug benefit.

Anybody watching this would think it is a news story, and it was

not a news story at all. It was a pre-packaged public relations video

put out by HHS which deceived the public. GAO found that, under

the current statutes, that in fact it was a violation, that it violated

a statute enacted in 1951 to prohibit such actions.

It occurred again in January of 2005, when GAO addressed the

issue of so-called VNRs, that is, Video News Releases. They are not

really news, they are just propaganda. They should be VPRs.

With respect to the Office of National Drug Policy, that VNR is

very similar to the one on Medicare and is basically intended to

portray them as news sources. It was not news at all, it was propaganda.

How do you draw the line, and what do you intend to do about

this, if you are confirmed?

Ms. DEFRANCIS. Thank you, Senator. Certainly, the Department

of Health and Human Services puts out a lot of information for the

public, a lot of health information, on everything from flu, to smallpox, to obesity. We have done that for previous administrations and

we have used a number of tools, of which VNRs are one example.

Certainly, I think we have a responsibility to communicate information to the public, but I also believe we have a responsibility to

let the public know where that information comes from.

If I am confirmed, any prepackaged news stories will follow the

law. They will contain clear notification within the text or audio of

who is producing this. The bottom line is, the public will know

where the information comes from.

26

I think that is our responsibility. I also would submit that it is

the responsibility of news stations around the country to also disclose where that information comes from.

Senator BAUCUS. I liked your answer up until the very end. Unfortunately, news standards are deteriorating. That is, I think the

press is not nearly as vigorous as it once was in identifying such

matters, that is, in saying, for example, this is really not a press

story, this is a publicity piece. I think it is not right for you to put

the burden on them. You have to put the burden on yourself, on

the agency. You have got to make sure you follow the law. You

should not try to have someone else police you, a TV station, to ask

whether you are following the law or not.

Ms. DEFRANCIS. Absolutely, Senator. I agree.

Senator BAUCUS. You should follow up.

Ms. DEFRANCIS. We definitely have the responsibility to do that.

Senator BAUCUS. Not only some, you have the exact responsibility. Not just some. You have total responsibility. You have total

responsibility. If you are putting it out, you have responsibility. Is

that not right?

Ms. DEFRANCIS. Yes, sir. It is right.

Senator BAUCUS. I just hope that we do not see any fudging. Just

be straight with the American people, and they will be straight

with you. Do not lead with the chin here, with fudging and getting

yourself in more hot water than really is appropriate and necessary.

Ms. DEFRANCIS. I appreciate that concern, Senator.

Senator BAUCUS. So, we will be watching closely. I believe very

strongly that we serve people to serve, not to deceive people. I just

wish you very well in your job, and good luck.

Ms. DEFRANCIS. Thank you, Senator.

Senator BAUCUS. Good luck to you all.

Mr. Johnson, in listening to Mr. Hatch, I learned that you are

friends with a lot of people I am friends with, too, and I appreciate

that very much.

Mr. JOHNSON. Thank you.

Senator BAUCUS. I can tell you are a good man just by the way

Senator Hatch introduced you.

Mr. JOHNSON. Thank you very much.

Senator BAUCUS. And also, just your countenance and how you

portray yourself.

Mr. JOHNSON. Thank you very much.

Senator BAUCUS. And Shara, good luck. That is great. I customarily ask all new nominees to the ITC to come to Montana. You

have been to Montana many times. You know the State. I just wish

you very well in this advancement in your career.

Ms. ARANOFF. Thank you very much, Senator.

Senator BAUCUS. The hearing is adjourned.

[Whereupon, at 11:23 a.m., the hearing was concluded.]

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