```

[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]

 
              PRESIDENT'S FISCAL YEAR 2006 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

                             FIRST SESSION

                               __________

                           FEBRUARY 17, 2005

                               __________

                            Serial No. 109-4

                               __________

         Printed for the use of the Committee on Ways and Means

                    U.S. GOVERNMENT PRINTING OFFICE
23-915                      WASHINGTON : 2006
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800  
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001

                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

E. CLAY SHAW, JR., Florida           CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut        FORTNEY PETE STARK, California
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
ROB PORTMAN, Ohio                    WILLIAM J. JEFFERSON, Louisiana
PHIL ENGLISH, Pennsylvania           JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               XAVIER BECERRA, California
JERRY WELLER, Illinois               LLOYD DOGGETT, Texas
KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
RON LEWIS, Kentucky                  STEPHANIE TUBBS JONES, Ohio
MARK FOLEY, Florida                  MIKE THOMPSON, California
KEVIN BRADY, Texas                   JOHN B. LARSON, Connecticut
THOMAS M. REYNOLDS, New York         RAHM EMANUEL, Illinois
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana

                    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.

                            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 
  Leavitt, Secretary.............................................     6

                       SUBMISSIONS FOR THE RECORD

Bryson, Marlena Roberta, Canyon Country, CA, statement...........    53
Center for Parental Responsibility, Roseville, MN, Molly K. 
  Olson, statement and attachment................................    55
O'Dell, Tammy Lee, Mesa, AZ, statement...........................    59
Piper, Charolette M., and Chris P. Nelling, Mercersburg, PA, 
  statement......................................................    60
Reightley, Roberta Lynn, Tehachapi, CA, and Elroy and Pamala 
  Romero, Bakersfield, CA, statement.............................    62
The Oklahoma Taxpayer, Lawton, OK, Bob Moore, statement..........    64

                  PRESIDENT'S FISCAL YEAR 2006 BUDGET
                       FOR THE U.S. DEPARTMENT OF
                       HEALTH AND HUMAN SERVICES

                              ----------                              

                      THURSDAY, FEBRUARY 17, 2005

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 11:23 a.m., in 
room 1100, Longworth House Office Building, Hon. Bill M. Thomas 
(Chairman of the Committee) presiding.
    [The advisory and revised advisory announcing the hearing 
follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 10, 2005
No. FC-3

                      Thomas Announces Hearing on

              President's Fiscal Year 2006 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 2006 Budget for the U.S. Department of 
Health and Human Services. The hearing will take place on Thursday, 
February 17, 2005, in the main Committee hearing room, 1100 Longworth 
House Office Building, beginning at 10:00 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 February 2, 2005, President George W. Bush delivered his State 
of the Union address, in which he discussed several legislative 
initiatives. The President provided the details of these proposals on 
February 7, 2005, in his Fiscal Year 2006 Budget, as submitted to the 
Congress. The budget for the U.S. Department of Health and Human 
Services included initiatives aimed at: strengthening and improving 
Medicare; assisting individuals who lack health insurance; and 
reauthorizing and improving Temporary Assistance for Needy Families and 
related welfare reform programs.
      
    In announcing the hearing, Chairman Thomas stated, ``I look forward 
to working with Secretary Leavitt as we continue to implement the 
Medicare Modernization Act and continue to strengthen and modernize the 
program that is so vital to our Nation's seniors.''
      
    ``This hearing also provides an opportunity to discuss the 
President's plan to improve on the 1996 landmark welfare reform law. 
Those reforms have led to higher earnings for low-income parents, 
historic declines in child poverty, and a sharp reduction in the 
welfare caseload. We have more work to do, and are committed to changes 
which will help move more individuals from welfare to work and 
independence.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing is to review the President's Fiscal Year 
2006 Budget proposals 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, 
``Click here to provide a submission for the record.'' Once you have 
followed the online instructions, completing all informational forms 
and clicking ``submit'' on the final page, an email will be sent to the 
address which you supply confirming your interest in providing a 
submission for the record. You MUST REPLY to the email and ATTACH your 
submission as a Word or WordPerfect document, in compliance with the 
formatting requirements listed below, by close of business Thursday, 
March 3, 2005. 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 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 it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies on electronic submissions for printing the official 
hearing record.
      
    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 by the Committee.
      
    3. All submissions must include a list of all clients, persons, 
and/or organizations on whose behalf the witness appears. A 
supplemental sheet must accompany each submission listing the name, 
company, address, telephone and fax numbers of each witness.
      
    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.

                                 

                   * * * NOTICE--CHANGE IN TIME * * *

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 16, 2005
FC-3-Revised

                Change in Time for Committee Hearing on

              President's Fiscal Year 2006 Budget for the

              U.S. Department of Health and Human Services

    Congressman Bill Thomas (R-CA), Chairman, Committee on Ways and 
Means, today announced that the full Committee hearing on the 
President's Fiscal Year 2006 Budget for the U.S. Department of Health 
and Human Services previously scheduled for Thursday, February 17, 
2005, at 10:00 a.m., in the main Committee hearing room, 1100 Longworth 
House Office Building, will now be held at 11:00 a.m.
      
    All other details for the hearing remain the same. (See full 
Committee Advisory No. FC-3 dated February 10, 2005.)

                                 

    Chairman THOMAS. As I mentioned earlier, we welcome for the 
first time the new Secretary of the U.S. Department of Health 
and Human Services, and the Chair is pleased to indicate that 
Secretary Leavitt in a previous life was a Governor. The Chair 
believes that the most recent Secretary, also, a former 
Governor, provided enormous insight, support, and assistance in 
dealing with one of the major health programs that the United 
States has, which is coordinated closely with States, and that 
is the Medicaid program. That is not a subject matter within 
the jurisdiction of this Committee, but because those measures 
are so closely linked to the Committee's jurisdictional 
concerns over Medicare, that having someone who has been there 
and done that I think is an enormous advantage for us not to 
make some of the mistakes that had been made in the past, not 
through any concern or direction but simply because of a 
failure either of communication or understanding.
    The President's fiscal year 2006 budget outlines a number 
of priorities to create incentives to reduce health costs, 
cover more of the uninsured with affordable health insurance, 
and make changes in the Medicare program. During the 
President's first term, of course, concrete steps were taken to 
advance those goals. A new Medicare prescription drug benefit, 
additional preventive and wellness benefits will provide 
seniors with the beginning of a 21st-century health care 
product. In addition, a new vehicle, Health Savings Accounts, 
which is designed to offer families broader access to 
affordable coverage, has been placed in law as well. We know 
much work needs to be done. This will be the beginning of a 
process, working closely with the administration in overseeing 
a number of areas, that requires continued administrative 
adjustment and attention with the scope of the new legislation. 
Mr. Secretary, I want to thank you for coming today. We are 
very interested in hearing your perspective on the President's 
budget and how to go forward.
    The Chair will shortly recognize the gentleman from 
California, Mr. Stark, for the minority's opening statement. 
The Chair would acknowledge that the gentleman from New York, 
Mr. Rangel, is not able to be with us today because he has the 
privilege and honor of recognizing a monument to his 
predecessor, the first black representative from the eastern 
seaboard since reconstruction, Adam Clayton Powell, Jr. That 
event is occurring as we speak in New York. He had a choice to 
make, and the Chair believes he made the correct one. So, the 
Chair will recognize the gentleman from California.
    Mr. STARK. Thank you, Mr. Chairman; and welcome, Secretary 
Leavitt, to the Ways and Means Committee. We look forward to 
working with you the next few years. Your record precedes you. 
You did some innovative things as Governor of Utah, and we will 
be interested in seeing how that experience serves you here in 
Washington. Our own Governor is here, importuning us all for 
more money. I don't think he is going to be very successful, 
but that is the Republicans' fault. They are in charge, and 
they don't want to help a Republican Governor. Well, I don't 
know. I can't help them. We do face unprecedented cuts in 
Medicaid. The President's budget cuts some $50 billion in 
funding to the State of California, and I am sure each of us 
here have similar problems in our own State. We are here, you 
are here as Secretary of Health and Human Services, so, let us 
get on to that.
    There is a moral issue in a budget. When resources are 
limited, there is a need to rearrange spending and ensure that 
the most vulnerable are taken care of. For those who read the 
Bible, I think they could find for me where it says somewhere 
in the Bible that we should care for the least among us. Having 
said that, I would hate to be touting the President's budget 
when I arrive at the pearly gates, but that is another issue. 
The budget is notable not only for omissions but again for 
gimmicks. We have all heard the story of the changing prices of 
the drug benefit that we passed last year and how its costs 
have zoomed, at least insofar as the public knows. Many of us 
were not surprised that it went from whatever it was, 400 to 
800, but the 400 to 537 could elicit an ``I told you so.''
    In your budget--and you didn't write it. You weren't here 
when this document was created. We just found out last night 
that there is an $8.3 billion cost increase in your budget that 
was not pointed out. We had to find it on a line item, and I 
gather that your office isn't going to make it public until 
Friday. It postpones risk adjustment for the managed care 
plans. We--at last year's budget, that was supposed to be 
implemented this year. Now you kick it out 4 or 5 years. We 
lose 8.5--almost $8.5 billion, which is another giveaway to the 
managed care plans which are already costing us 115 percent of 
what standard Medicare costs us. It is that kind of shell game 
where things are hidden from us and/or postponed in their 
announcements that make the public hearken back to weapons of 
mass destruction and changes in estimates on the costs of 
drug--of a drug plan, and I don't think it serves any of us 
well. We can blame the shenanigans on the Republicans, but it 
ends up they get blamed by the public just as much as the rest 
of us for not giving us the true story.
    Your budget also, confirms that there are no savings from 
the Medicare Advantage Plan, and in fact they cost more than 
traditional Medicare. Now I am willing to bet you--I am not 
much of a betting man, but I will bet you a thousand bucks to 
the charity of your choice, if you will award me the same 
opportunity, that there are never any savings, whether you take 
it over the budget window or over the infinite horizon, from 
the Medicare Advantage Plan. Your own actuaries, I might 
suggest, have already confirmed that, if you want to turn 
behind you. So, I don't think you can find in HHS or the 
administration an actuary or an estimator who will tell you 
that these managed--these Medicare Advantage Plans do anything 
but cost the taxpayers more. Now some might say there are more 
benefits for seniors, but those benefits ought to go to every 
Medicare beneficiary and not just those as an inducement to try 
and dismantle Medicare as we know it. We are going to talk 
about TANF later; and I know, based on your record, that you 
believe we can do better there.
    Then we will probably mention the negotiation on drug 
prices. Your predecessor said he should have been allowed or 
your office should have been allowed to continue the 
negotiations. It just seems a bewilderment to me that we are 
willing to hamstring you and not allow you, if you found a way 
to negotiate better prices for our seniors under the Medicare 
drug benefit, to do so. To me, that is a blatant gift to the 
pharmaceutical industry and is an irresponsible way for us to 
manage the taxpayers' money. So, we are going to have a lot to 
work on. My colleagues are going to have a lot of interest in 
your ideas for going forth as you administer perhaps the 
largest bureaucracy and I think one of the most important in 
our government. Thank you for joining us today.
    Chairman THOMAS. I thank the gentleman. I will tell the 
Secretary that any written statement he may have will be made a 
part of the record, and he can address the Committee in any way 
he sees fit. Mr. Secretary.

  STATEMENT OF THE HONORABLE MICHAEL LEAVITT, SECRETARY, U.S. 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Secretary LEAVITT. Good morning, Mr. Chairman. Thank you. 
Congressman Stark, thank you. Members of the Committee, I want 
to express appreciation for having an opportunity to come and 
to discuss the President's fiscal year 2006 budget. The 
President and I share what I believe to be an aggressive agenda 
for the upcoming year. The agenda takes us closer to a Nation 
where health insurance is within reach of every American, where 
we become a nation with American workers who are competitive 
and have a comparative advantage in a global marketplace 
because of the fact that they are healthy and productive, a 
nation where health technology and information technology 
improve and produce fewer mistakes and produce better outcomes 
and lower costs.
    To advance that agenda, the President proposes a $642 
billion budget. That is an increase of $58 billion. It is an 
increase of 10 percent over the previous year. The 
discretionary portion of that budget is $67 billion in budget 
and authority and $71 billion on the program level. Now $642 
billion is a lot of money, and it is my responsibility as 
Secretary to ensure that all of those dollars are spent 
effectively. The people of this country who pay the taxes and 
the people who are served by them should expect no less.
    I would like to just take a moment or two and outline some 
of the highlights, some you have mentioned. Medicaid, a health 
insurance program for nearly 46 million Americans. State 
governments are struggling, frankly, under the burdensome rules 
and the burdensome regulations and the financing system that 
exists between the Federal government and their own States. The 
President and the Department are committed to resolving the 
growing challenges that they have. These are challenges that we 
share. This is a partnership. The President's budget would 
assure appropriate and economically responsible changes. As the 
President's budget notes, taxpayers will save $60 billion over 
the next 10 years when inappropriate Federal spending such as 
intergovernmental transfers and other loopholes are eliminated.
    If these savings are enacted, State and Federal taxpayers 
will save substantially on a $5 trillion budget on Medicaid 
over the next 10 years. That budget will continue to grow as 
one of the fastest-growing segments of the Federal budget. It 
will grow at more than 7 percent a year for those entire 10 
years. When spending on our most needy populations to ensure 
the effective use of tax dollars, we propose to build on the 
successes of the SCHIP program, the State Children's Health 
Insurance Program, and waiver programs. These allow States the 
flexibility to construct targeted benefits, to coordinate with 
private insurance, and to extend coverage to uninsured 
individuals and to families not typically covered by Medicaid.
    This is just part of the President's plan. It is a plan to 
help some of the 45 million Americans who currently don't have 
health insurance. In addition to our efforts to improve 
Medicaid and SCHIP, we propose to spend $125.7 billion over the 
next 10 years to expand health coverage to millions of 
Americans. We are working to help Americans through tax 
credits, through purchasing pools, through Health Savings 
Accounts. We expect 12 to 14 million additional people to gain 
health insurance over the next 10 years as a result of those 
efforts. We also request $2 billion, a $304 million increase 
over 2005, to fund community health centers. This will help us 
complete the President's commitment to create 1,200 new and 
expanded sites to serve an additional 6.1 million people by 
2006. We also work to help needy children and families. We are 
committed to building upon the success of the 1996 reforms that 
gave people the resources they needed to move from dependence 
on a welfare check to independence in a paycheck.
    This Committee played a key role in the reauthorizing of 
TANF and in establishing it in the first place and 
reauthorizing it. I want to express my appreciation as a 
Governor at the time and now as Secretary, I look forward to 
working with you to reauthorize this very important program, 
and we hope to do it this year. All of these efforts seek basic 
reforms in the health system, and they will help us move toward 
a more personalized patient-centered medicine. To that end, the 
President's budget proposes an investment of $125 million to 
make electronic health records a reality. Another challenge I 
look forward to is the successful implementation of the 
Medicare Modernization Act, the prescription drug benefit, and 
the Medicare advantage regional plans in 2006. With MMA, we are 
helping seniors save money, improving preventative care, and 
increasing access to doctors and medical care. Between now and 
January 1 of 2006, we have a lot of work to do, and I want to 
give you my commitment that we will not fail.
    I know there was a great deal of discussion over the past 
week about the cost of the new Medicare drug benefit, and I 
would like to address briefly that issue today. Recent press 
reports have inaccurately claimed that our cost estimates have 
dramatically increased. This is simply not true. The main 
reason that the 2006 budget shows a higher cost for Medicare 
than the 2005 budget is that they reflect different windows. 
Last year's projection of the 2004 to 2013 looked at a period 
with 8 years of prescription drug benefit. This year's 
projection of 2006 through 2015 includes 10 years of that 
benefit. We shouldn't be surprised that we see a different part 
of the landscape when we look out a different part of the 
window.
    Now some have asserted that the estimate on MMA is now over 
$1 trillion. Again, I just want to emphasize this is not true. 
The trillion dollar figure is an estimate of the gross. To 
arrive at the actual estimate, the net estimate, you subtract 
out hundreds of billions of dollars of Federal revenue, such as 
beneficiary premiums and State payments. Focusing exclusively 
on the gross spending levels without considering the offset 
savings creates false impressions and does a disservice to the 
budget process as well as Medicare beneficiaries. In a little 
more than 10 months, almost 43 million Americans will be 
eligible to receive this much-needed assistance with the high 
cost of prescription drugs. So, I propose today, Mr. Chairman, 
that we put aside differences, and work together toward the 
goal of ensuring that seniors and people with disabilities, 
successfully sign up for these new benefits. We owe it to them.
    We also, work to protect the homeland. One of the areas 
that we have made our greatest achievements in and one of the 
areas we face our greatest challenges is in strengthening our 
public health infrastructure. Our proposed budget requests $4.3 
billion to continue this work. It is an increase of nearly 
1,500 percent over 2001. Including the 2006 budget request, we 
will have spent or requested nearly $19 billion since September 
11, 2001, and that investment is beginning to show tangible 
results. To support HHS's responsibility to lead public health 
and medical services during major disasters and emergencies, we 
are also, requesting $1.3 billion to support work at CDC and at 
the Health Resources and Services Administration to improve 
State and local health centers and hospitals with their 
preparedness.
    We are also, requesting $600 million to strengthen the 
national strategic stockpile, which would provide Americans 
with almost immediate access to needed medicines in the event 
of a major health emergency and to ensure that drugs and 
medical devices that Americans routinely use are both safe and 
effective and that they get to the market as quickly as 
possible. The budget includes requests for $1.9 billion for the 
FDA. That is an increase of $81 million over 2005. This would 
also, help us to combat threats to our food supply, improve our 
means of detecting contaminated food, and increase our search 
in ways to increase our food security.
    On Tuesday, I announced the creation of a Drug Safety 
Oversight Board to review the safety and the effectiveness of 
some of the drugs that may need further monitoring after they 
go to market and are in use. Because the foundations of society 
rest upon healthy moral values, the President has proposed $206 
million to support abstinence education programs. The 2006 
budget expands activities to educate adolescents and their 
parents about the risks associated with early sexual activity 
and to provide them with the tools they need to help make 
healthy choices as young people. We are also, requesting $150 
million to help us assist victims of drug abuse through access 
recovery initiatives.
    In conclusion, this is a strong, fiscally responsible 
budget at a challenging time in the Federal government, and we 
need to further strengthen the economy and continue to protect 
the homeland. We look forward to working with Congress and this 
Committee and the medical community and all Americans as we 
implement the new Medicare law and we carry out initiatives 
that President Bush has put forward to propose a healthier, a 
safer, and a stronger America. Mr. Chairman, thank you.
    [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 Chairman Thomas, Congressman Rangel, and members of 
the committee. I am honored to be here today to present to you the 
President's FY 2006 budget for the Department of Health and Human 
Services (HHS). The President and I share an aggressive agenda for the 
upcoming fiscal year, in which HHS advances a healthier, stronger 
America while upholding fiscal responsibility and good stewardship of 
the People's money.
    In his February 2nd State of the Union Address, the President 
underscored the need to restrain spending in order to sustain our 
economic prosperity. As part of this restraint, it is important that 
total discretionary and non-security spending be held to levels 
proposed in the FY 2006 budget. The budget savings and reforms in the 
budget are important components of achieving the President's goal of 
cutting the budget deficit in half by 2009 and I urge the Congress to 
support these reforms. The FY 2006 budget includes more than 150 
reductions, reforms, and terminations in non-defense discretionary 
programs, of which 19 affect HHS programs. The Department wants to work 
with the Congress to achieve these savings.
    The President's health agenda leads us towards a nation of 
healthier Americans, where health insurance is within the reach of 
every American, where American workers have a comparative advantage in 
the global economy because they are healthy and productive, and where 
health technology allows for a better health care system that produces 
fewer mistakes and better outcomes at lower costs. The FY 2006 HHS 
budget advances this agenda.
    The FY 2006 HHS budget funds the transition towards a health care 
system where informed consumers will own their personal health records, 
their health savings accounts, and their health insurance. It enables 
seniors and people with disabilities to choose where they receive long-
term care and from whom they receive it. Equally important, it builds 
on the Department's Strategic Plan and enables HHS to foster strong, 
sustained advances in the sciences underlying medicine, in public 
health, and in social services.
    To support our goals, President Bush proposes outlays of $642 
billion for HHS, a 10 percent increase over FY 2005 spending, and more 
than a 50 percent increase over FY 2001 spending. The discretionary 
portion of the President's HHS budget totals $67 billion in budget 
authority and $71 billion in program level funding. In total, the HHS 
budget accounts for almost two-thirds of the proposed federal budget 
increase in FY 2006.
    The Department will direct its resources and efforts in FY 2006 
towards:

      Providing access to quality health care, including 
continued implementation of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003;
      Enhancing public health and protecting America;
      Supporting a compassionate society; and
      Improving HHS management, including continuing to 
implement the President's Management Agenda

    Americans enjoy the finest health care in the world. This year's 
budget provides opportunities to make quality health care more 
affordable and accessible to millions more Americans.

Medicare
    HHS will be working in FY 2006 to successfully implement the 
Medicare Modernization Act (MMA), including the Medicare Prescription 
Drug Benefit and the new Medicare Advantage regional health plans. I 
know there has been a lot of discussion over the past week about the 
cost of the new Medicare proposal, and I want to address that issue 
today. Recent press reports have inaccurately claimed that our cost 
estimates have dramatically increased. This is simply untrue.
    The passage of time is the main reason that the FY 2006 budget 
shows a higher net federal cost ($723.8 billion) for 2006-2015 than the 
cost estimate for 2004-2013. In the original cost estimates, the first 
two years in the ten-year budget window were for years before the new 
drug benefit was implemented (2004 and 2005). The ten-year budget 
window reflected in the 2006 budget includes ten full years of actual 
drug benefit spending. In effect, the passage of time has dropped two 
low-cost dollar year estimates (only transitional assistance spending) 
from the budget window and added two high-cost years, due to 
anticipated increases in average drug spending and the growth of the 
Medicare population. People should not be surprised that the numbers 
look different as a result of the advance of time.
    Some individuals have asserted that the estimate for MMA 
implementation is now over a trillion dollars. This assertion is 
completely unsupported by facts. The trillion dollar figure is a gross 
estimate that neglects to subtract out hundreds of billions of dollars 
of federal revenue, including beneficiary premiums, state payments, and 
other offsetting federal savings. Focusing exclusively on gross 
spending levels without considering the offsetting savings creates 
false impressions and does a disservice to the budget process and to 
Medicare beneficiaries.
    Moving beyond the subject of funding, I hope we can all begin to 
focus on the task at hand--ensuring successful implementation of a 
strengthened and improved Medicare program with the new prescription 
drug benefit. Between now and January 1, 2006, we have a lot of work to 
do, and I give you my commitment that we will not fail. I know not 
everyone in this committee supported the passage of the Medicare bill, 
but it is now law, and in 10 = months, almost 43 million Americans will 
be eligible to receive much needed assistance with the high cost of 
prescription drugs. Let us put aside our differences and work together 
towards the goal of ensuring that seniors and people with disabilities 
are successfully sign up for their new benefits. We all owe that to 
them.

Uninsured
    In FY 2006, the President also proposes steps to promote affordable 
health care for the approximately 45 million Americans who are 
currently uninsured. The President proposes to spend more than $125.7 
billion over ten years to expand insurance coverage to millions of 
Americans through tax credits, purchasing pools, and Health Savings 
Accounts. To improve access to care for many uninsured Americans, the 
President's budget requests $2 billion, a $304 million increase from FY 
2005, to fund community health centers. This request does two things. 
It completes the President's commitment to create 1,200 new or expanded 
sites to serve an additional 6.1 million people by 2006. By the end of 
FY 2006, the Health Centers program will deliver high quality, 
affordable health care to over 16 million patients at more than 4,000 
sites across the country. In 2006, health centers will serve an 
estimated 16 percent of the Nation's population who are at or below 200 
percent of the Federal poverty level. Forty percent of health center 
patients have no health insurance and 64 percent are racial or ethnic 
minorities. In addition, the President has established a new goal of 
helping every poor county in America that lacks a community health 
center and can support one. The budget begins that effort by supporting 
40 new health centers in high poverty counties.
    Moreover, the President proposes a budget that would expand access 
to American Indian and Alaska Native health care facilities, staff six 
newly built facilities to serve the growing eligible population of 
federally recognized members of Native American Tribes, and address the 
rising costs of delivering care. In FY 2006, the Indian Health Service 
will provide quality health care through 49 hospitals, more than 240 
outpatient centers, and more than 300 health stations and Alaska 
village clinics. In total, the President proposes increasing health 
support of federally recognized tribes by $72 million in FY 2006, for a 
total of $3.8 billion.
    The President and the Department are also committed to resolving 
the growing challenges facing Medicaid. Medicaid provides health 
insurance for more than 46 million Americans, but as you are all aware, 
States still complain about overly burdensome rules and regulations, 
and the State-Federal financing system remains prone to abuse.1This 
past year, for the first time ever, states spent more on Medicaid than 
they spent on education. Over the next ten years, American taxpayers 
will spend nearly $5 trillion dollars on Medicaid in combined state and 
Federal spending. The Department proposes to make sure tax dollars are 
used more efficiently by building on the success of the State 
Children's Health Insurance Program (SCHIP) and waiver programs that 
allow states the flexibility to construct targeted benefit packages, 
coordinate with private insurance, and extend coverage to uninsured 
individuals and families not typically covered by Medicaid.
    The President proposes to give states more flexibility in the 
Medicaid program in order to enable states to increase coverage using 
the same Federal dollars. The tools we have at our disposal today were 
not available when Medicaid was created. States largely agree that 
current Medicaid rules and regulations are barriers to effective and 
efficient management. Over the past ten years, Medicaid spending 
doubled. At its current rate of growth (7.4%), the Federal share of 
Medicaid spending would double again in another ten years.
    The growth in Medicaid spending is unsustainable. I intend to enter 
into a serious discussion with Governors and Congress to decide the 
best way to provide states the flexibility they need to better meet the 
health care needs of their citizens.
    The President plans to expand coverage for the key populations 
served in Medicaid and SCHIP by spending $15.5 billion on targeted 
activities over ten years. The Budget includes several proposals to 
provide coverage, including the Cover the Kids' campaign to enroll more 
eligible uninsured children in Medicaid and SCHIP. In addition, the 
extension of the Qualified Individual (QI) and transitional medical 
assistance programs will ensure coverage is available to continue full 
payment (subject to a spending limit) of Medicare Part B premiums for 
qualified individuals, and provide coverage for families that lose 
eligibility for Medicaid due to earnings from employment. Also, 
community-based care options for people with disabilities will be 
expanded through the President's New Freedom Initiative, including 
authorizing $1.75 billion over five years for the Money Follows the 
Person Rebalancing demonstration.
    Overall, these efforts to expand health insurance coverage, as well 
as those in other Departments, work together to extend health care 
coverage and health care services to millions of people. Thanks to the 
comprehensive nature of this agenda, workers are already investing 
money tax-free for medical expenses through Health Savings Accounts, 
Americans have increasing flexibility to accumulate savings and to 
change jobs when they wish, and more Americans are accessing high-
quality health care. We estimate that 8 to 10 million additional people 
will gain health insurance over the next ten years. Together, these 
efforts to expand insurance coverage and improve the Medicaid and SCHIP 
programs will cost approximately $140 billion over the same period.
    At the same time, we are taking steps to ensure states can use 
their Medicaid funds to the fullest potential to reach more individuals 
in need of health care. The budget includes proposals that will assure 
an appropriate partnership between the Federal and state governments. 
We would like to work cooperatively with the states to respond to the 
challenges in Medicaid. We must eliminate the vulnerabilities that 
threaten Medicaid's viability. In our budget, we have proposed a series 
of legislative changes that will ensure Medicaid dollars are used 
appropriately to fulfill the program's purpose to provide health care 
coverage for low income families and elderly and disabled individuals 
with low incomes. Under this proposal, inappropriate federal spending 
on Medicaid intergovernmental transfers and spending resulting from 
other current loopholes in Medicaid law will decrease by $60 billion 
over 10 years.
    As a former Governor, I understand the pressure on states in 
developing their budgets, particularly given the lack of flexibility in 
the current Medicaid law. However, some state officials have resorted 
to a variety of inappropriate loopholes and accounting gimmicks that 
shift their Medicaid costs to the taxpayers of other states. Obviously, 
states that are not engaging in these activities will not be affected 
by the proposals in the same manner as states that are. Collectively, 
the overall impact of the $60 billion ten-year decrease in federal 
Medicaid spending on states will in reality be about $40 billion, 
because by changing the calculation of prescription drug payments to be 
based on the average sales price and by tightening asset transfer 
rules, approximately $20 billion in state spending will be saved. And 
it should be noted that two-thirds of the savings will occur beyond the 
initial five-year budget window.

Preparedness
    The HHS FY 2006 budget will also build on the Department's 
achievements in strengthening our ability to detect, respond, treat, 
and prevent potential disease outbreaks due to bioterrorist acts.
    It will enable the National Institutes of Health (NIH) to increase 
research efforts in developing bioterrorism countermeasures and to fund 
biomedical research at current levels, it will allow the Centers for 
Disease Control and Prevention (CDC) to expand the Strategic National 
Stockpile, and it will support the Food and Drug Administration's 
efforts to defend the nation's food supply. This proposal requests $4.2 
billion to continue this work, an increase of almost 1500% over 2001. 
This request raises to $19 billion the cumulative amount invested since 
September 11, 2001 on public health preparedness, and that investment 
is showing tangible results.
    Let me mention just a few of the highlights and also note that HHS 
works in close cooperation with DHS on many of these activities, 
including the medical surge initiative and food node threats and 
vulnerability assessments:

      HHS has a responsibility to lead public health and 
medical services during major disasters and emergencies. To support 
this, we are requesting $70 million for the Federal Mass Casualty 
Initiative to improve our medical surge capacity. We are also investing 
$1.3 billion to support work at CDC and the Health Resources and 
Services Administration (HRSA) to improve state and local public health 
and hospital preparedness.
      In the event of a major health emergency, one posed by 
either nature or through the intentional use of a weapon of mass 
destruction, the Strategic National Stockpile would provide Americans 
with almost immediate access to an adequate supply of needed medicines. 
In order to ensure the effectiveness of the Stockpile, we're requesting 
$600 million to buy additional medicines, replace old ones, provide 
specialized storage, and get any needed medicines and supplies to any 
location in the United States within 12 hours. $50 million of this will 
go to procure portable mass casualty treatment units.
      We're requesting $1.9 billion for the Food and Drug 
Administration (FDA)--an increase of $81 million over 2005. $30 million 
of this request would be directed to improving the agency's national 
network of food contamination analysis laboratories and to supporting 
vital research on technologies that could prevent threats to our food 
supply. HHS also proposes to dedicate $6.5 million more than in FY 2005 
to evaluating and communicating drug safety risks to the public and 
applying scientific expertise to explore the risks of medical products 
already on the market.

    We now have a heightened awareness that the nation's critical food 
safety infrastructure must be better protected. FDA quickly learned 
that pursuing more field exams, alone, is not the most effective 
strategy for providing this protection. The new Prior Notice 
requirement on the shipment of foods allows FDA to conduct intensive 
security reviews on products that pose the greatest potential 
bioterrorism risk to consumers in the United States. We intend to 
compliment these inspection efforts with further improvements to the 
national network of food contamination analysis laboratories, and to 
provide support for vital research on technologies that could prevent 
threats to food supply. Investments like these will allow FDA to work 
smarter in the future.
    The Food and Drug Administration is an integral component in our 
efforts to promote and protect the health of the United States public. 
Its mission is broad, and the agency's decisions affect virtually every 
American on a daily basis. In addition to food defense, the proposed 
$81 million increase will be focused on achieving specific improvements 
in drug safety and medical devices.
    The budget includes a total of $747 million for human drugs and 
biologics, an increase of $26 million. With these funds, we propose to 
strengthen FDA's Office of Drug Safety with an increase of $6.5 
million, for a total of $33 million. This increase will better equip 
the Office to carry out Center-wide responsibilities for drug safety 
analysis and decision-making. Critical staff expertise will be 
augmented in such areas as risk management, communication and 
epidemiology. Increased access to a wide range of clinical, pharmacy 
and administrative databases to monitor adverse drug events will be 
obtained. Also, external experts will also be used to a greater degree 
to evaluate safety issues.
    Medical device products regulated by FDA must be safe and 
effective. The budget requests $289 million, an increase of $12 
million, to improve timely performance in the review of applications, 
as well as, maintaining consistent high standards of safety and 
quality. Additional funds will also be directed towards medical device 
post-market safety activities.

Vaccines
    The FY 2006 budget also includes targeted efforts to ensure a 
stable supply of annual influenza vaccine, to develop the surge 
capacity that would be needed in a pandemic, to improve the response to 
emerging infectious diseases before they reach the United States, and 
to improve low-income children's access to routine immunizations.
    HHS plans to invest $439 million in targeted influenza activities 
in FY 2006, in addition to insurance reimbursement payments through 
Medicare. The budget includes a two-part $70 million approach to ensure 
industry manufactures an adequate supply of annual influenza vaccine. 
The Vaccines for Children (VFC) program will again set aside $40 
million in new resources to ensure an adequate supply of finished 
pediatric influenza vaccine. The discretionary Section 317 program will 
use $30 million to get manufacturers to make additional bulk monovalent 
vaccine that can be turned into finished vaccine if other producers 
experience problems, or unusually high demand is anticipated.
    To improve low-income children's access to routine immunizations, 
the budget includes legislative proposals in VFC that I believe should 
be strongly supported by the members of this Committee. This 
legislation would enable any child who is currently entitled to receive 
VFC vaccines to receive them at State and local public health clinics. 
There are hundreds of thousands of children who are entitled to VFC 
vaccines, but can receive them only at HRSA-funded health centers and 
other Federally Qualified Health Centers. When these children go to a 
State or local public health clinic, they are unable to receive 
vaccines through the VFC program. This legislation will expand access 
to routine immunizations by eliminating this barrier to coverage and 
will help States meet the rising costs of new and better vaccines. As 
modern technology and research has generated new and better vaccines, 
that cost has risen dramatically. For example, when the pneumococcal 
conjugate vaccine became available, it increased the cost of vaccines 
to fully-immunize a child by about 80 percent. FDA has recently 
approved a new meningococcal vaccine that will further raise the cost 
to fully-immunize a child--making this legislation even more important.
    To improve our Nation's long-term preparedness, NIH will invest 
approximately $119 million in influenza-related research--nearly six 
times the FY 2001 level. The budget also increases the Department's 
investment to develop the year-round domestic surge vaccine production 
capacity that would be needed in a pandemic, including new cell culture 
vaccine manufacturing processes, to $120 million. These research and 
advanced development efforts will be complemented by expanding CDC's 
Global Disease Detection initiatives from $22 million to $34 million to 
improve our ability to prevent and control outbreaks before they reach 
the U.S.

WELFARE REFORM
    It has been three years since President Bush first proposed his 
strategy for reauthorizing TANF and the other critical programs 
included in welfare reform. During this time, the issues have been 
debated thoroughly but the work has not been completed and States have 
been left to wonder how they should proceed. We believe it is extremely 
important to finish this work as soon as possible and set a strong, 
positive course for helping America's families.
    Building on the successes of the 1996 law, President Bush laid out 
a clear path for the next phase of welfare reform. The proposal is 
guided by four critical goals that will transform the lives of low-
income families: strengthen work, promote healthy families, give States 
greater flexibility, and demonstrate compassion to those in need. These 
are the guideposts that shaped the Administration's proposal for TANF, 
child support, child care and abstinence education. This framework has 
not changed.
    In FY 2003, States reported that only 31 percent of families with 
an adult recipient participated in the required 30 hours of TANF work 
activities. We need to reverse this trend so that all TANF recipients 
are given the opportunity to become self-sufficient. States also have 
been less effective in placing clients with multiple barriers (such as 
mental health issues, addiction, learning disabilities, and limited 
English proficiency) in work. We need to ensure that these barriers are 
addressed and that every family is given work opportunities leading to 
self-sufficiency. But our efforts cannot stop there. We also need to 
develop more effective models of post-employment supports that lead to 
career development and wage progression, programs that sustain and keep 
families together, and programs that enable low-income, non-custodial 
fathers to help their families both financially and in non-financial 
ways.
    In addition, given what the research literature tells us about the 
benefits healthy marriages confer on both children and adults, we need 
to promote policies that support the formation and stability of healthy 
marriage, and provide a strong and nurturing environment for raising 
children. The President's budget includes $200 million annually to 
promote healthy marriage through demonstrations, research and a 
matching grant program. Further, the budget also requests $40 million 
for the Promotion and Support of Responsible Fatherhood as mandatory 
funding.
    The child support enforcement proposals being considered as part of 
welfare reform reauthorization build on our success by focusing on 
increasing child support collections and directing more of the support 
collected to families. This focus on families represents a major shift 
away from the historic purpose of the child support enforcement program 
which was heretofore aimed at recouping Federal and State welfare 
outlays. In addition, we request proposals originally offered in the FY 
2005 budget aimed at improving and increasing the collection of medical 
child support, as well as several proposals to improve automation 
tools, strengthen existing enforcement tools, and assist families in 
gaining self-sufficiency. The totality of these proposals offer an 
impressive $3.4 billion in increased collections to families for a net 
Federal cost of just $52 million over five years.
    The Administration remains committed to preserving the key aspects 
of the child care program: parental choice, administrative flexibility 
for States and Tribes, inclusion of faith-based and community-based 
organizations, and development of literacy, numeracy, and other early 
learning skills for children in care; while maintaining the underlying 
structure and financing of these essential child care programs.
    Our proposal supports maintaining the historically high level of 
funding for child care, including $2.1 billion for the Child Care and 
Development Block Grant and $2.7 billion for Child Care Entitlement--a 
total of $4.8 billion for what is referred to as the Child Care and 
Development Fund or CCDF. In addition, States continue to have the 
flexibility to use TANF funds for child care both by transferring up to 
30 percent of TANF funds to CCDF, and by spending additional TANF money 
directly for child care. When TANF funds are considered, as well as 
Head Start and other State and Federal funding sources, over $18 
billion currently is available for child care and related services for 
children.
    The final piece of our welfare reform strategy supports 
reauthorization of the State Abstinence Education Program. Expanding 
abstinence education programs is also part of a comprehensive and 
continuing effort of the Administration, because they help adolescents 
avoid behaviors that could jeopardize their futures. Last year, HHS 
integrated abstinence education activities with the youth development 
efforts at the Administration for Children and Families (ACF), by 
transferring the Community-Based Abstinence Education program and the 
Abstinence Education Grants to States to ACF. The FY 2006 budget 
expands activities to educate adolescents and parents about the health 
risks associated with early sexual activity and provide them with the 
tools needed to help adolescents make healthy choices. The programs 
focus on educating adolescents ages 12 through 18, and create a 
positive environment within communities to support adolescents' 
decisions to postpone sexual activity. A total of $206 million, an 
increase of $39 million, is requested for these activities.

CHILD WELFARE
    The FY 2006 President's Budget includes three legislative proposals 
for Foster Care and related programs. First, the alternative funding 
proposal, which would allow states the option to receive their foster 
care funding as a flexible grant over five years to support a continuum 
of services to families in crisis and children at risk. This proposal 
will increase budget authority by $36 million in FY 2006, and it is 
budget neutral over five years. The second proposal brings the Foster 
Care and Adoption Assistance matching rate for the District of Columbia 
in line with the District's matching rate in Medicaid and SCHIP. This 
would increase the Federal matching rate for the District from 50 
percent to 70 percent. The cost in FY 2006 is $8 and $40 million over 
five years. The final proposal would clarify the process for 
determining Title IV-E eligibility in the program. On March 3, 2003, 
the Court of Appeals for the 9th Circuit held in Rosales v. Thompson 
that a child living with an interim caregiver may be eligible for Title 
IV-E foster care even though the child would not have been eligible in 
the home from which the child was legally removed. The Rosales decision 
contravenes the Department's long-standing interpretation of the Social 
Security Act that eligibility is based upon the home from which the 
child is removed, not the home of the interim caretaker. This proposal 
would amend the statute in accord with the Department's long-standing 
policy. It would save $84 million in FY 2006 and $399 million over five 
years.
    The budget includes $1.8 billion for the Adoption Assistance 
program, which supports families that adopt special-needs children. 
This is an increase of $26.9 million over the FY 2005 request. This 
level of funding will support approximately 369,500 children each 
month. States will use these funds to provide maintenance payments to 
adoptive families, absorb administrative costs associated with placing 
a child in an adoptive home, and provide training for professionals and 
adoptive parents.
    The budget also includes a continuation of $140 million for the 
Independent Living program to fund a variety of services to ease the 
transition from foster care for youth who will likely remain in foster 
care until they turn 18 and former foster children between the ages of 
18 and 21. And, the budget includes $305 million in mandatory funds 
under the Promoting Safe and Stable Families program to provide formula 
based funds to states to assist them in coordinating services related 
to child abuse prevention and family preservation.

Other Budget Initiatives
    The toll of drug abuse on the individual, family, and community is 
both significant and cumulative. Abuse may lead to lost productivity 
and educational opportunity, lost lives, and to costly social and 
public health problems. HHS will assist states in FY 2006 through the 
Access to Recovery program to expand access to clinical treatment and 
recovery support services, and to allow individuals to exercise choice 
among qualified community provider organizations, including those that 
are faith-based. This program recognizes that there are many pathways 
of recovery from addiction. Fourteen states and one tribal organization 
were awarded Access to Recovery funding in FY 2004, the first year of 
funding for the initiative. This budget increases support for the 
Access to Recovery initiative by 50 percent, for a total of $150 
million.
    Our request also includes approximately $18 billion for domestic 
AIDS research, care, prevention and treatment. We are committed to the 
reauthorization of the Ryan White CARE Act treatment programs and 
request a total of $2.1 billion for these activities, including $798 
million for lifesaving medications through the AIDS Drug Assistance 
Program.
    Finally, we constructed the FY 2006 budget with the knowledge that 
health information technology will improve the practice of medicine. 
For example, the rapid implementation of secure and interoperable 
electronic health records will significantly improve the safety, 
quality, and cost-effectiveness of health care. To implement this 
vision, we are requesting an investment of $125 million. $75 million 
will go to the Office of the National Coordinator for Health 
Information Technology, to provide strategic direction for development 
of a national interoperable health care system. $50 million will go to 
the Agency for Health Care Research and Quality to accelerate the 
development, adoption, and diffusion of interoperable information 
technology in a range of health care settings.

Program Performance
    The President and the Department considered a number of factors in 
constructing the FY 2006 budget, including the need for spending 
discipline and program effectiveness to help cut the deficit in half 
over four years. Specifically, the budget decreases funding for lower-
priority programs and one-time projects, consolidates or eliminates 
programs with duplicative missions, reduces administrative costs, and 
makes government more efficient. For example, the budget requests no 
funding for a number of smaller, duplicative community services 
programs and the Community Services Block Grant, which was unable to 
demonstrate results in Program Assessment Rating Tool evaluation. The 
Administration proposes to focus economic and community development 
activities through a more targeted and unified program to be 
administered by the Department of Commerce. It is due to this focused 
effort to direct resources to programs that produce results that I am 
certain our targeted increases in spending will enable the Department 
to continue to provide for the health, safety, and well-being of our 
People.
    Over the past four years, this Department has worked to make 
America and the world healthier. I am proud to build on the HHS record 
of achievements. For the upcoming fiscal year, the President and I 
share an aggressive agenda for HHS that advances a healthier, stronger 
America while upholding fiscal responsibility and good stewardship of 
the People's money. I look forward to working with Congress as we move 
forward in this direction. I am happy to answer any questions you may 
have.

                                 

    Chairman THOMAS. Thank you, Mr. Secretary. The Chair would 
like to thank the Members in the previous meeting in adhering 
to the 5-minute rule, and the Chair will indicate that there 
are going to be a series of votes somewhere between 12:30 and 
1:00. It will consist of a 15-minute vote on a substitute. 
There is expected to be then a motion to recommit, with 10 
minutes of debate and a 15-minute vote, and then a series of 5-
minute votes. The Secretary has a time schedule in which he has 
to go to the Senate. The Chair will, therefore, not use his 
customary time, and the Chair would urge those Members who are 
not strongly motivated in asking questions to consider the 
possibility of allowing other colleagues. The Chair will 
indicate that during the roll call vote those Members who 
anticipate asking questions who are near the next Member to be 
called should go over and vote at the beginning of that 15 
minutes and come back. Because the Chair intends to continue 
the hearing during the 15-minute substitute vote, the 10-minute 
motion to debate on the motion to recommit, and most of the 15-
minute vote on the motion to recommit. At the end of that 
period of time, we will no longer be able to proceed, given the 
time constraints of the Secretary. So, with that, the Chair 
would recognize the gentleman from Florida, Mr. Shaw, for the 
initial round of questioning.
    Mr. SHAW. Thank you. I thank you, Mr. Chairman; and I 
appreciate your recognizing me at this particular point. Mr. 
Secretary, you and I go back, back to the mid-nineties when 
this Committee formed a partnership with some of the better 
Governors, some of the more progressive, forward-thinking 
Governors in this country, and together we did welfare reform. 
I am very pleased to see you back and filling Tommy Thompson's 
shoes, to continue his fine work, as I was privileged to work 
with him also, in welfare reform along with Johnny Engler, Tom 
Carper, and my own Governor Chiles of Florida. You certainly 
were one of the leaders in that area. I have a particular 
interest that is of great concern to me. Twenty-5 percent of 
the deaths in this country are caused by cancer. One in three 
women will suffer from cancer during their lifetime, and one in 
two men will suffer from cancer. With this in mind, and knowing 
and having talked to the people out at NIH, NCI, and Andy Von 
Eschenbach and others, it is my firm belief that we can conquer 
cancer by the year of 2015. In fact, we have formed--Collin 
Peterson and I, both being cancer survivors, have formed a 
group of Members of Congress dedicated to that purpose.
    There is no more frightening words that anybody can hear 
that I can tell you than when they say, ``you have cancer.'' 
Mine was lung cancer. I am 2 years out. Very fortunately, I am 
cancer free at this point. That doesn't in any way change the 
fact that we need to go forward and find a cure for cancer. It 
is within our grasp. I am going to be asking the Budget 
Committee to include extra money within the congressional 
budget for that specific purpose and to continue that process 
until we do find a cure for cancer. I would--I do not find the 
funds that I am speaking of in the President's budget, and I 
understand that your job is, of course, to follow the 
President's budget. I want to let you know that some of us will 
be working very diligently and very hard in order to find those 
funds so, that we can go forward with the appropriation process 
and that we can be the lead in the world in this endeavor. I do 
also, have a question regarding the Medicare prescription drug 
benefit which goes into effect January 1 of next year. The 
rollout of the prescription drug discount card didn't go as 
smoothly as some of us had hoped it would. It was confusing, 
and I think some of our seniors had problems in navigating the 
Internet site or did not get their questions fully answered on 
the 800-Medicare phone line. How will we ensure that the drug 
benefit rollout will go more smoothly? If you would explain how 
an average senior can sign up for that benefit. Mr. Secretary.
    Secretary LEAVITT. Thank you. Mr. Shaw, may I reciprocate 
the pleasure I have in being able to work with you again. Those 
were remarkable days back in, say, 1995, 1996; and I believe we 
produced a great milestone in the history of the delivery of 
human services, one that has benefited many and I hope will 
continue.
    Mr. SHAW. The foundation of welfare reform was belief in 
the human spirit, and we were right.
    Secretary LEAVITT. Indeed we were. May I also, acknowledge 
your successful recovery from cancer and, understandably, the 
new insight that you have into the difficulty, the trauma and 
the disruption that that disease brings into the lives of so, 
many. Your willingness to champion it is something that I not 
only espouse but want to be supportive of as well. As you 
indicated, this is a commitment that we have made as a country. 
NIH estimates that it will spend $5.76 billion during the 
current fiscal year for cancer research. That is an increase 
from $5.6 billion from the previous year. For the National 
Cancer Institute alone, that would be $4.8 billion. We want to 
make a considerable coordinated commitment, not just in 
resources but assuring that the 60 cancer centers around this 
country are coordinating their activities so, that we have a 
focused objective to cure cancer as a country; and I believe, 
in fact, as you do, that we can do so.
    With respect to the Medicare rollout, it is clear to me 
that this is the main event in 2005 for the Department of 
Health and Human Services. This is another milestone 
opportunity on the road of human service delivery, and we have 
an opportunity to deliver into the hands of literally millions 
the capacity to have prescription drugs. We are committed to 
doing it well. We have all of the resources of the Department 
focused on it. I have recently begun to meet with leadership of 
Congress to ask that they engage with us in a partnership. I 
would hope that, as the Members of this Committee and the 
Members of Congress generally go out to their districts at 
every recess, that we are able to put into your hands 
information that in fact will help you as Members of this 
Committee help us and that together we can provide the 
information to each senior. Now, in terms of specifics, may I 
suggest----
    Chairman THOMAS. Mr. Secretary, might I indicate to you 
that each Member has 5 minutes in which the question and the 
answer is to be contained. The question that the gentleman from 
Florida asked is one that is important to the House. When a 
question is asked that can't be adequately answered in the 
timeframe, we would urge that a written response be made to the 
Committee; and I will make it available to all Members. 
Because, frankly, the details of the administration's plan to 
roll out the prescription drug program is one that concerns all 
Members, and I would prefer not to shrink it to the timeframe 
which has already expired but rather to get it on paper so, 
that we can examine it and then have an additional 
correspondence.
    Mr. SHAW. Thank you, Mr. Secretary.
    Chairman THOMAS. Thank you. The Chair recognizes the 
gentleman from California, Mr. Stark.
    Mr. STARK. Mr. Secretary, you suggest that you are going to 
cut or you are going to spend $50-odd billion in new tax 
preferences to help individuals purchase insurance, which is 
where I imagine you--part of where you will get this 8 to 10 
million people who gain health insurance. We have been unable, 
however, to get from your staff an estimate State by State of 
the $60 billion you intend to cut out of Medicaid, is going to 
knock a lot of poor people out of health insurance. My guess is 
that if you are going to spend 50 to give more well-to-do 
people Health Savings Accounts, if you cut 60 from poor people, 
you may be cutting 8 to 10 million people out or putting that 
burden on the Governors. So, I would ask if you could provide 
to us after these hearings, or have your staff provide to us, 
your own estimates, which you must have had to get to the $60 
billion, of how many people will lose their Medicaid coverage 
in each State. I think it will be of interest to all of us to 
see what your Department estimates. Now, understanding that 
States will have some flexibility, but, as I say, I am sure 
that your staff has been smart enough to anticipate that some 
States may be concerned about that, and I wonder if you would 
be good enough to share that information with the Members, and 
we could then make plans to how we answer to our own 
constituencies.
    [The written response from Secretary Leavitt follows:]

    Along with the President's proposals to spend over $125.7 billion 
over ten years to expand insurance coverage to millions of Americans 
through tax credits, purchasing pools, and Health Savings Accounts, we 
must restore fiscal responsibility to the Medicaid program while 
providing greater flexibility for states.
    We modeled anticipated changes to state programs based on the new 
flexibility in Medicaid to arrive at the estimates in the President's 
Budget. These changes will enable states to increase coverage for 
children and other populations for the same Federal dollars. In fact, 
the budget proposes $60 billion in savings over ten years for Medicaid 
and SCHIP. The net savings for these two programs, however, is $44.5 
billion because the budget also includes $16.5 billion in proposed new 
spending.
    The President plans to expand coverage for the key populations, 
primarily children, served in Medicaid and SCHIP by spending $16.5 
billion over ten years. The Budget includes several proposals to 
provide coverage, including the Cover the Kids campaign to enroll more 
children in Medicaid and SCHIP. In addition, the extension of the 
Qualified Individual (QI) and transitional medical assistance programs 
will ensure coverage is available to continue full payment (subject to 
a spending limit) of Medicare Part B premiums for qualified 
individuals, and provide coverage for families who lose eligibility for 
Medicaid due to earnings from employment. Also, community based care 
options for individuals with disabilities would be expanded through the 
President's New Freedom Initiative, including authorizing $1.75 billion 
over five years for the Money Follows the Person demonstration.
    The budget also includes proposals that will assure an appropriate 
partnership between the Federal and state governments as well as 
improve the longer term viability of the program. Over ten years, 
inappropriate federal spending on Medicaid intergovernmental 
transfers--which deprive providers the funds to which they are 
entitled, Medicaid drug pricing, loopholes on asset transfers for long-
term care eligibility, and spending resulting from other current 
loopholes in Medicaid law will decrease by $60 billion.
    Medicaid was created in an era when the tools we have at our 
disposal today were not available. Today, there are ways to better 
serve the Medicaid population that make better use of the taxpayers' 
dollars. For example, a tremendous amount of state evidence exists in 
the area of long-term care that shows serving these individuals in the 
community leads to more beneficiaries served at a lower cost and a 
higher level of satisfaction.
    The President's Budget provides goals to modernize Medicaid and 
bring the program into an era that is characterized by creative, 
innovative and adaptive solutions. Both the President and I want to 
work with Congress and the states to respond to the challenges in 
Medicaid and to remove the vulnerabilities that threaten Medicaid's 
long-term viability.

                                 

    Mr. STARK. Second, when you were sworn in, the President 
announced that--he basically issued a veto threat if there were 
any changes in the Medicare legislation dealing with the 
prescription drug plan. Many of us would like to give you the 
authority or the option to negotiate; and I would, of course, 
renew my bet with you and give you a chance to double or 
nothing on that thousand bucks to charity that you just lost--
unless you want to accept that bet. You haven't asked your 
staff yet. That is, a thousand dollar charity contribution in 
Utah might help. It sure would help in my district, if I am 
right.
    I also, am willing to bet you that, like Secretary 
Thompson, you would find some areas in which you could save 
money for my constituents and your program if you were given 
that authority. If you couldn't save it, I don't know what we 
have lost by giving you that authority. In other words, if we 
give you the option to see if you could save money, I am not 
sure what harm you could possibly do; and you might save us 
some money. Now, my question is, do you suspect that the 
President therefore would have to veto any bill that we 
introduced giving you the discretionary authority to bargain to 
save some money for the taxpayers? Is it your understanding 
that that would pull a Presidential veto?
    Secretary LEAVITT. Congressman Stark, the President made 
very clear his commitment to the Medicare drug benefit and I 
think made equally clear any effort to take that away from 
seniors would meet his veto. Now I would also, like to make 
clear that the President believes, as do I, that we should 
achieve the most competitive, least expensive opportunity for 
seniors to receive those drugs. He believes, as do I, that that 
is achieved with a robust market with a choice of alternatives, 
not just improved prices but improved service, with a capacity 
for not only drugs, and multiple drugs, but multiple providers 
and that history has demonstrated, and I believe this will as 
well, will provide the best possible opportunity for seniors to 
have both access and low prices.
    Mr. STARK. That is a very nice statement. I am sure, Mr. 
Secretary, you are aware that the Veterans' Administration buys 
pharmaceuticals at about 50 percent of what the seniors are 
going to be paying for it and you will be paying under this 
Medicare drug benefit and that we can all go to Canada, if you 
would let us, and buy our drugs there at a much lower price. I 
think that it is not being very creative in not taking 
advantage of the free market opportunities, and I hope you 
would reconsider. Thank you.
    Chairman THOMAS. The Chair thanks the gentleman from 
California and asks unanimous consent to place in the record a 
letter from the Office of the Actuary of the Centers for 
Medicare and Medicaid Services--Richard Foster is the name that 
we are familiar with--in front of this Committee and the 
Committee's strong desire for him to speak from a professional 
position. The letter that will be placed in the record 
concludes briefly, quote: We believe that direct price 
negotiation by the Secretary would be unlikely to achieve 
prescription drug discounts of a greater magnitude than those 
negotiated by Medicare prescription drug plans responding to 
competitive forces. We look forward to a continued dialog with 
the Chief Actuary at CMS and his independent professional 
analysis of the law as we move forward.
    [The information follows:]

DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
DATE: February 11, 2005
FROM: Richard S. Foster, Chief Actuary
TO: Mark B. McClellan, M.D., Ph.D., Administrator
SUBJECT: Effectiveness of Drug Price Negotiations by the Federal 
        Government versus Medicare Prescription Drug Plans

    Under the Medicare Modernization Act (P.L. 108-173), the new 
Medicare prescription drug benefit will be provided through private 
health insurance organizations. In general, health plans that can 
negotiate favorable retail drug price discounts and drug manufacturer 
rebates, and take other steps to manage utilization and costs 
effectively, will be able to offer lower premiums to beneficiaries. 
Prescription drug plans that are effective in these efforts can gain a 
competitive advantage over other plans.
    We have estimated that Medicare prescription drug plans can 
initially achieve an average cost reduction of 15 percent (compared to 
retail-level, unmanaged prescription drug costs), with this reduction 
increasing to 25 percent over a 5-year period.\1\ The ultimate savings 
level of 25 percent has frequently been achieved in practice by 
pharmacy benefit managers on behalf of large drug insurance plans. 
These savings assumptions were reviewed in 2004 by an independent panel 
of expert health actuaries and economists. The panel found the 
assumptions to be reasonable and did not recommend any changes to them.
---------------------------------------------------------------------------
    \1\ These estimated cost reductions reflect the combined effect of 
retail price discounts, manufacturer rebates, and utilization-
management programs.
---------------------------------------------------------------------------
    Under section 1860D-11 (i) of the Social Security Act, as added by 
the Medicare Modernization Act, the Secretary of Health and Human 
Services is prohibited from participating in the drug price 
negotiations conducted by Medicare prescription drug plans with drug 
manufacturers and pharmacies. Similarly, the Secretary cannot establish 
a price structure for reimbursing covered Part D drugs. The question 
has arisen as to whether allowing such a role for the Secretary could 
produce greater cost reductions than the negotiations of individual 
Medicare prescription drug plans.
    My staff and I have not prepared a formal estimate of the impact of 
eliminating section 1860D-11 (i). We have informally considered the 
issue and have reached the following tentative conclusions:

      As noted above, Medicare prescription drug plans will 
have a strong incentive to negotiate effective price reductions. 
Pharmacy benefit managers have had substantial experience with such 
efforts and have demonstrated their effectiveness for many years.
      The Secretary's ability to achieve price reductions would 
depend on the Federal government's willingness to use its large-
purchaser power in a forceful way. At one extreme, the Secretary could 
virtually dictate price levels to manufacturers and retail pharmacies. 
In theory, such a practice could result in very large discounts, well 
in excess of our expected levels under the MMA. In practice, however, 
it is not clear that manufacturers and pharmacies would be willing to 
sell prescription drugs at very low prices mandated in this fashion. 
Moreover, we do not believe that the current Administration or future 
ones would be willing and able to impose price concessions that 
significantly exceed those that can be achieved in a competitive 
market.
      Establishment of drug price levels for Medicare by the 
Federal government would eliminate the largest factor that prescription 
drug plans could otherwise use to compete against each other. This 
change would have implications for the degree of competition in the 
Medicare prescription drug plan market, by reducing the premium 
differentials among plans. Lower premium differentials would reduce 
beneficiaries' incentives to select a lower-cost drug plan.
      The past experience of Congress and the Medicare program 
in regulating drug prices has not been reassuring. A well-known example 
is the part B covered drugs. Prior to the MMA, these drugs were 
reimbursed at rates that, in many instances, were substantially greater 
than prevailing price levels.

    In considering these issues, we believe that direct price 
negotiation by the Secretary would be unlikely to achieve prescription 
drug discounts of greater magnitude than those negotiated by Medicare 
prescription drug plans responding to competitive forces. Please let us 
know if you have any questions about this information.

Richard S. Foster, F.S.A. Chief Actuary

                                 

    Chairman THOMAS. The Chair would----
    Mr. STARK. Mr. Chairman, unanimous consent request to ask 
at that point a Congressional Budget Office letter to Senator 
Wyden which says there is potential for some savings if the 
Secretary were to have the authority to negotiate prices and 
did not--from therapeutic--with drugs that didn't face 
competition from therapeutic alternatives and so, forth. I 
would ask that this letter also, be added with that.
    Chairman THOMAS. Without objection, the Chair would also, 
like to place in the record an additional letter from the 
Congressional Budget Office analyzing not to a particular 
Member but rather to the leader of the Senate his determination 
on exactly that same subject matter.
    [The information follows:]

CONGRESSIONAL BUDGET OFFICE
Douglas Holtz-Eakin, Director

February 9, 2005

Honorable William ``Bill'' M. Thomas
Chairman Committee on Ways and Means
U.S. House of Representatives
Washington, DC 20515

    Dear Mr. Chairman:

    At your request, this letter discusses the Congressional Budget 
Office's (CBO's) current projection of spending for the Medicare Part D 
benefit. That estimate, which was published in the January 2005 Budget 
and Economic Outlook, is nearly identical to the cost estimate for Part 
D that we prepared in 2003 (see attached table).
    In November 2003, CBO estimated that the Medicare Modernization Act 
(Public Law 108-173) would result in additional direct spending 
totaling about $395 billion over the 2004-2013 period. That amount was 
the net of a number of different types of expenditures and receipts 
that would result from the legislation. It included an estimated $552 
billion in mandatory spending for Medicare Part D--consisting of $771 
billion in payments for benefits and mandatory administrative costs, 
offset by $219 billion in premiums paid by beneficiaries and payments 
by states. (Those payments by states represent part of their share of 
the savings from shifting some Medicaid spending for prescription drugs 
to Medicare.) Those costs were further offset by net savings of almost 
$13 billion from changes to Parts A and B of Medicare and estimated 
savings of $145 billion in Medicaid and other federal programs because 
the Part D benefit would reduce spending in those federal programs 
(largely by shifting some spending for prescription drugs from those 
programs to Medicare).
    CBO recently updated its baseline projections for all Federal 
programs. As part of that exercise, we modified our estimate of the 
Part D benefits slightly, mostly to reflect the slightly higher 
inflation rate in CBO' s most recent economic assumptions. That change 
added about $6 billion to the projected cost of the Part D program over 
the 2004-2013 period, raising it from $552 billion to $558 billion. The 
estimated savings to Medicaid and other Federal programs are 
incorporated in our baseline projections for those programs and are not 
separately identifiable.
    The 10-year projection period that CBO uses for its baseline has 
changed since the MMA was enacted; it now extends through 2015, thus 
encompassing two more years of prescription drug benefits. Adding more 
years to the period covered by the estimate for any program will, of 
course, add to the total cost being discussed, even when the estimate 
has not changed at all. By CBO's estimate, net mandatory spending for 
Medicare Part D will total about $240 billion during those two 
additional years.
    CBO is currently preparing another update of its baseline 
projections. As part of the update process, we are reviewing the 
recently published final rules for the Part D and Medicare Advantage 
programs and refining our projection methodologies. The new 
projections, which will be released in March, will reflect those 
updated analyses and new information in the final rules.
            Sincerely,
                                       Douglas Holtz-Eakin Director

                                 

    Chairman THOMAS. Any additional dueling letters? With that, 
the Chair would recognize the Chairwoman of the Health 
SubCommittee, the gentlewoman from Connecticut, Mrs. Johnson.
    Mrs. JOHNSON. Thank you very much. Welcome, Secretary 
Leavitt. It is really a pleasure to have you here. I appreciate 
your comprehensive testimony, and we look forward to working 
with you in much greater detail on the plethora of health 
initiatives that the President has included in his budget, 
which will, without question, if implemented in an integrated 
fashion, begin to forcefully address the problem of the 
uninsured. I also, appreciate your acknowledging the problem 
with foster care children. With the Pew Foundation report out 
there, honestly, it would be irresponsible for this body not to 
move ahead on a foster care reform initiative that would 
improve our support for children, many of whom bounce around 
their whole childhoods from home to home and are thereby 
literally disabled in moving into adult life. So, I appreciate 
that. I want to put two questions on the record. I hope you 
will have time to comment, but they are very important to me.
    Let me, though, mention as we move into those questions 
that your dedication to health information technology is 
remarkable; and because of the leadership of this President and 
the Department of Health and Human Services, we are going to 
have electronic prescribing in place by the time we bring the 
gift of prescription drugs to our seniors, which will reduce 
adverse interactions and many, many errors, saving lots of 
many, saving many, many health problems, including deaths, 
amongst our seniors. So, let me just put two questions--sorry, 
one other thing I must mention. When you move dual eligibles, 
we have to find a special way to deal with the dual eligibles 
with mental health problems. We can't put them into a plan that 
requires them to go through a series of medications that they 
have either already tried or that would not interact well with 
the complex of drugs they are already taking. That is so, 
important to me, the unique problem of the mentally disabled, 
that I think we need to make some special attention there.
    My two questions have to do with costs and physician 
payment. I don't understand why your estimates, your re-
estimates of this bill didn't show savings. Your estimates 
reduced the number that we are going to take of Part D. That 
should have saved money. It shows more retirees are going to be 
able to stay with their employers. That should save money. Then 
it shows that the movement into the advantage plans will be 
slower. That should save money. In addition, your own disease 
management pilots you put out there--now, it is only 300,000 
out of the 40 million seniors, but only 20 percent of those 
seniors have five or more chronic diseases. These pilots focus 
exactly on that kind of senior, and, by agreement, they must 
save 5 percent. So, those pilots can be rolled out at simply 
your authority as they prove their success. So, surely over a 
5- to 10-year budget window they are going to have a 
significant impact on Medicare's cost. Because, for the first 
time, we are going to focus preventive care on the people who 
are using the majority of Medicare dollars. Yet that isn't 
reflected.
    So, between your leadership on technology issues, which 
isn't reflected, and your leadership on disease management, 
which isn't reflected, and some of the technical changes in the 
estimate, I do hope that you will take another look. Because I 
believe we have put in place a program structurally that will 
reduce Medicare costs as well as improve Medicare quality. On 
the same line, your budget doesn't provide any indication of 
your concern about the law that governs physician payment. 
Indeed, if we let that law go into effect, physician payments 
will be cut 5 percent for 7 years, for a total of almost a 
third and overall a swing of 50 percent. I mean, to imagine 
that that will not have any impact on seniors' access to 
physicians is to be paying very little attention. I know that 
nobody in the administration is paying little attention. We 
need your help in addressing that.
    Even CMS has suggested that drugs are an inappropriate 
component in the SGR formula. Just taking drugs out of that 
formula would be a huge step forward, and we had excellent 
testimony laying out the legal rationale for doing that. So, 
those two issues are pressing immediately on us, but I also, 
look forward to sitting down with you and, hopefully, with the 
whole subCommittee and looking at all of the different pieces 
you have put in place to help us move forward on the issue of 
the uninsured.
    [The written response from Secretary Leavitt follows:]

    Estimates of the impact of our disease management programs and the 
new preventive services need to be based on solid studies of the kind 
of patients that make up the Medicare population. To this point 
important studies of disease management programs include individuals 
covered in the private sector, not in Medicare. However, these studies 
showed enough positive results for Medicare to begin pilot programs in 
disease management. We expect that the Medicare pilot and demonstration 
programs will need at least a year to begin yielding any sort of useful 
data. It should also be borne in mind that several of our disease 
management pilots/demos are specifically structured to yield a 
particular level of savings. Whether expanding these programs 
nationwide could be done in such a way to encourage a similar level of 
savings is yet to be seen. Until these studies are complete, however, 
we do not have the data needed to begin making estimates as to how such 
modifications to the program might affect overall spending.
    The new preventive services provided for under the MMA should 
improve the quality of care beneficiaries receive. We expect that early 
detection of disease conditions could result in higher short-term costs 
as the new services are utilized and paid for, but may also result in 
better management and possibly lower costs in the long run. However, as 
with the disease management programs, we need to have experience with 
how these services affect the Medicare population before we can come to 
definitive conclusions.
    With regard to physician payments, CMS is very aware of the 
problems posed by the current statutory requirements. Some have 
suggested that CMS could act to alleviate some of this strain by 
retrospectively removing drugs covered under Part B from the definition 
of physicians' services. However, as we have indicated in the past, 
retrospective removal of drugs from the SGR is statutorily difficult. 
For example, the statute requires the estimated SGR be refined twice 
based on actual data. We do not see a legal basis to re-estimate the 
SGR and allowed expenditures for a year after they have been estimated 
and revised twice. Further, our current estimate is that removing drugs 
retroactively from the SGR would not result in a positive update for 
several years. Consequently, CMS believes that statutory change is 
needed to improve the physician payments. Moreover, such changes should 
do more than simply add substantial taxpayer and beneficiary payments 
to the current payment system.
    It is also important to note that our estimates of the impact of 
prospective removal of drugs from the SGR formula would not provide 
relief to the negative updates projected for 2006 and the succeeding 
several years. OACT estimates removing drugs prospectively would cost 
an additional $36 billion over 10 years. These changes would also have 
significant impacts on beneficiary premiums. Consequently, while we 
have carefully reviewed our authority to make this administrative 
change, we also have been working with the Congress and health 
professional organizations on payment reforms that would improve the 
effectiveness of the payment methodology for physicians without 
increasing overall Medicare costs.
    CMS agrees with you that we need to improve the quality of care 
delivered to Medicare beneficiaries. As an important first step 
relating to the quality of services delivered by physicians, in 2006 
CMS is implementing a voluntary reporting system to gather information 
on quality of physician services using a set of key consensus measures. 
We expect to build on this system in the future.

                                 

    Mrs. JOHNSON. So, I thank you for your presence. I am sorry 
I used up all my time, but you really have raised so, many 
health issues in your budget and so, constructively. I 
congratulate you on that, and I look forward to moving ahead 
with you on these specific issues.
    Chairman THOMAS. The Chairman looks forward to the 
gentlemen's written response to the Chairwoman's question. The 
Chair recognizes the gentleman from Louisiana, Mr. McCrery will 
inquire.
    Mr. MCCRERY. Thank you Mr. Chairman, I will be brief, but I 
want the Secretary to address the issue of child care funding 
as it relates to welfare reform. Child care expenditures, Mr. 
Secretary, have quadrupled since welfare reform was enacted, 
rising from $3 billion in 1995 to $12 billion in 2003. House 
Resolution 240 adds another $4 billion in Federal child care 
money over the next 5 years. It also, increases a share of TANF 
funds that can be used for child care and allows $2 billion in 
so-called carryover TANF funds to be immediately spent on child 
care. Plus, as you know, we now provide about $75 billion per 
year in various tax credits, earned income credit, child care 
credit, tax child credits to families with children, part of 
which they could spend on child care directly if they chose. 
What is the administration proposing on child care funding in 
the welfare system?
    Secretary LEAVITT. Congressman, as reflected in my earlier 
discussion with Mr. Shaw, we have seen in this country a 
dramatic improvement in our welfare system, and with it have 
come dramatic reductions in our caseloads. As a Governor, I 
want to acknowledge the fact that child care and its 
availability have been an enormous help and, in fact, could not 
have been done without the capacity to provide adequately for 
children whose parents are either working or making other kinds 
of preparations. With the reduction in caseload, we believe 
that the budget, as we have proposed it, provides substantial 
and sufficient funds for that to continue. $4.8 billion of 
total funding. Plus, we would like to see added flexibility 
provided for the States in using existing funds. We believe, 
with reduced caseloads, with this additional funding, that it 
is sufficient and that we can continue this remarkable 
performance that the American people have seen in the 
transformation of welfare.
    Mr. MCCRERY. So, in your view, the funding level for child 
care in your budget is adequate to take care of the needs of 
child care in the Nation's welfare system?
    Secretary LEAVITT. In our view, it is adequate. I would add 
to that, that if we were to take all of the children of every 
low-income qualifying person in the country, we will have seen 
a 27 percent increase in the amount available since 2001.
    Mr. MCCRERY. Exactly. Thank you, Mr. Secretary. I thank the 
gentleman.
    Chairman THOMAS. I thank the gentleman. The Chair would 
inquire if the gentleman from Michigan wishes to.
    Mr. LEVIN. Yes, I want to take up--and I think Mr. 
McDermott and others will follow up on child care--and welcome, 
Mr. Secretary.
    Secretary LEAVITT. Thank you.
    Mr. LEVIN. You know you talked about the additional people 
who would gain health insurance over the next 8 to 10 years. 
Your estimate, 8 to 10 million, as he pointed out doesn't point 
out those who would lose health coverage because of Medicaid 
cuts. I just want to say to you, or ask you, do you think when 
there are 45 million uninsured in this country, it is an 
adequate goal that 8 to 10 million would be added over the next 
10 years, even if you don't subtract those who lose it? Is that 
an adequate goal?
    Secretary LEAVITT. Congressman, no.
    Mr. LEVIN. Okay.
    Secretary LEAVITT. Our goal is 12 to 14 million.
    Mr. LEVIN. Of the 45 million?
    Secretary LEAVITT. I recognize that there are too many 
people in this country without health insurance. The numbers I 
hear are between 35 and 45, and there is a great debate as to 
what it should be. It is too many, we know that. It would be a 
constructive and frankly historic step forward for us to be 
able to improve the lives of 12 to 14 million people by putting 
health insurance with in their reach.
    Mr. LEVIN. It is about 1 million a year. That is 1 quarter 
of those who are uninsured, not taking into account those who 
lose it. All right. Well, let me go on to child care. I don't 
think that is an adequate target for the people of the United 
States. I don't think it is historic. I think it is shameful. 
Let me ask you about childcare. Has child care funding been 
essentially kept at the same level since 2002?
    Secretary LEAVITT. Since 2001, if you were to divide the 
amount of child care dollars by the number of children who 
would be in low-income qualifying homes, it will have gone up 
by 27 percent.
    Mr. LEVIN. Hasn't the funding been flat since 2002?
    Secretary LEAVITT. If we look at the per capita amount of 
money available per child for all qualifying families, who are 
in low-income categories, it will have gone up by 27 percent 
per capita.
    Mr. LEVIN. The funding, the funding has been flat, no?
    Secretary LEAVITT. I can speak to the 2006 budget, but I am 
not able to reflect on the previous ones.
    Mr. LEVIN. I ask because I remember being on the welfare 
Committee on child reform, and we struggled over child care--
according to our calculation with this funding, the number of 
slots of diminish over the next year's by 300,000. These are 
the administration's calculations. You mentioned about the 
transfer from TANF. Right now TANF moneys can be used for child 
care, no?
    Secretary LEAVITT. I am sorry, I missed your question.
    Mr. LEVIN. TANF funds can now be used for child care, 
right, there doesn't have to be a transfer to any other.
    Secretary LEAVITT. We looked for more flexibility.
    Mr. LEVIN. Okay.
    Secretary LEAVITT. One of the things to reconcile--your 
understanding, with what I have suggested, the caseloads have 
been cut in half during that same period of time. So, if you 
look at the per capita amount available for those that are 
eligible to be served, the amount has gone up 27 percent, and 
we are seeking $4.8 billion in increase this year, and we are 
also, looking to see more flexibility, so, that States have the 
capacity to serve those who have needs.
    Mr. LEVIN. All right. I will ask my colleagues to continue. 
I want to say a word or ask you about the proposal that has 
been delayed. You said for a number of years. I want to read 
you the Utah response to the administration's proposal. Yes, if 
a major redirection of resources in policy were to occur, Utah 
would have likely had to have abandoned the universal 
participation approach based on individualized employment 
planning. Employment counselors would become worksite 
developers and monitors instead of negotiating individualized 
employment plans tailored to meet the customer's needs to be 
employed. That was the response from, I think, your welfare 
director, I think while you were Governor. Would you be willing 
to sit down with us in a bipartisan basis, which has never 
happened in this Committee or the subCommittee, and talk about 
further welfare changes and welfare reform too? Would you be 
willing to sit down on a bipartisan basis with us?
    Secretary LEAVITT. Congressman, I would be delighted to do 
so. It was with bipartisanship that we produced what I think an 
extraordinary result in the State of Utah.
    Mr. LEVIN. Okay. We will take you up on that. Thank you.
    Chairman THOMAS. I thank the gentleman. The gentleman from 
Michigan, Mr. Camp, wish to inquire?
    Mr. CAMP. Would. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary. I just wanted to talk a little bit about the 
administration's estimates of the Medicare prescription drug 
benefit and the cost there. A number of news organizations 
erroneously reported that the spending for Medicare, the drug 
benefit, would increase significantly from what we had heard 
before. Is it not the case that those estimates did not take 
into account the savings on what I would call the acute side of 
Medicare, that even though seniors would have the benefit of 
cholesterol-lowering drugs that would help them manage their 
cholesterol, that that would not necessarily reduce later 
hospitalizations due to heart attacks? Were those kinds of 
factors taken into account?
    Secretary LEAVITT. The reports did. Those reports that 
estimated the number to be about 1 trillion, which was 
absolutely not true, did not take into account premium 
receipts, receipts from States or net Federal Medicaid costs.
    Mr. CAMP. It is reasonable to assume, is it not, that the 
prescription drug coverage would help offset other costs in 
Medicare?
    Secretary LEAVITT. Indeed it is. We expect that there would 
be other cost savings of about $188 billion over the period of 
time being discussed.
    Mr. CAMP. This Medicare legislation also, took a different 
approach to Medicare. There were--and I wonder if you could 
enumerate some of those--some preventive provisions put in, 
certainly the first time physical and others, that would help 
identify problems before they became serious or acute, and so, 
that ultimately would reduce the long-term costs that Medicare 
would have to incur. Obviously seniors would be healthier and 
receive those benefits, most importantly. Were there some of 
those items in that legislation as well?
    Secretary LEAVITT. Actually, Mr. Camp, many. Perhaps the 
most profound is a requirement that if at any point in time, 
general revenues of the government would go to support or would 
need to support at some point in the future more than 45 
percent of the total cost, it would trigger an action or a 
requirement on the part of the administration to make a 
proposal to remedy it. That has not been done before and is, in 
my judgment, responsible and an important provision of the 
bill.
    Mr. CAMP. Thank you. Thank you, Mr. Secretary.
    Chairman THOMAS. The gentleman from Maryland wish to 
inquire?
    Mr. CARDIN. Thank you very much, Mr. Chairman. Mr. 
Secretary, welcome to the Committee.
    Secretary LEAVITT. Thank you.
    Mr. CARDIN. We look forward to working on you. I want to 
follow up on one of the comments made by Mr. Stark and also, 
Mr. Camp and in regard to the cost of Medicare in the 
prescription drug bill. Again, I guess I am concerned that the 
actuary is pointing out that we can expect to get a savings of 
15 percent on the prescription drugs, maybe as high as 25 
percent, which would still mean that Americans, the government, 
would be paying for the same medicines for American seniors and 
disabled, almost twice as much as what the Canadians pay for 
the drugs, and, in some cases, three times more than our 
European friends pay for the exact same medicines that are 
manufactured here in the United States.
    So, my question to you is, I would hope that you would make 
a priority that the Federal taxpayer is not going to continue 
to subsidize the international communities use of medicines 
that are manufactured in the United States with help from U.S. 
taxpayers on research, and that we will fight for a competitive 
price here in America and tell us what you need in order to 
bring down the costs to the taxpayers and citizens of our 
Nation, because that is unacceptable to me. I want to also, 
move on to the welfare issues, and I want to quote a statement 
that you made back in 1996 that I agree with. That is, States 
can better administer programs designed to get people back on 
their feet, because they understand that people have individual 
needs and circumstances that are only implicated by the mounds 
of regulation.
    Good statement. I agree with it. I want to encourage you to 
please look at the welfare reform TANF bill that has been 
before this Congress in the last two Congresses, that increased 
the number of welfare recipients in federally-defined work 
activities that increased the number of work hours required of 
welfare recipients. Let me remind you that you, as Governor, 
could have set whatever standards you thought were right for 
the people of your State. Now, if this becomes law, it will 
micromanage what your Governor will be doing in Utah and around 
the Nation, reduce the State's discretion to count training 
toward work requirements, reduce the State's discretion to 
count work search toward work requirements. It goes on and on 
and on. If we are sincere in trusting our States, doesn't this 
run counter to that flexibility that you and I think is 
important for a State to assume responsibility to get its 
citizens to work?
    Secretary LEAVITT. Congressman, it heartens me to have a 
continued discussion of federalism on this subject. I do 
believe, in fact, that we have seen a remarkable thing occur in 
this country. My own State is a good example. We were able to 
take the Welfare Reform Act and provide a dramatic reduction in 
those that were served by welfare and dramatically increase 
those that are on payrolls. I believe that what is being 
proposed does provide flexibility for the States and as a 
Governor, I would be proud to work under it.
    Mr. CARDIN. Well, I appreciate that answer. I served on 
President Reagan's federalism Commission when I was a State 
legislator, and I do support federalism. I think it is 
important. I just don't understand why you would support a 
proposal that takes away the discretion from the States to 
define what is important for a person to get off of welfare. I 
mean, ultimately, they have to live up to a certain standard of 
getting people to work and off of the welfare roles. There are 
time limits and law that I support. It seems to me we should 
trust the States to come up with the best plans to do that and 
give them the discretion that they need. The language that you 
are using, I hope that the axle back up the language, so, that 
we can preserve federalism in the appropriate sense of the 
word. Let me just last mention provider issues. I have filed 
with Congressman English today a bill that removed the therapy 
cap on Medicare for providers, which I think makes no sense at 
all, and only hurts those people who have serious needs for 
rehabilitation services. I do think we need a game plan to deal 
with the provider issues in Medicare. We know the position 
reimbursement structure is outdated. I look forward to working 
with Mrs. Johnson, the Chairman of the Committee, Mr. Stark, 
Ranking Member, and I do hope that we can come up with a 
package to provide sensible changes in some of the provider 
issues been that have been really around since 1996, I guess, 
or 1997, since 1997, that we have yet to fully correct.
    Mr. LEVIN. I look forward to working with you on those and 
others.
    Mr. CARDIN. Thank you. Thank you, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman. Does the gentleman 
from Texas, Mr. Johnson, wish to inquire?
    Mr. JOHNSON. Thank you, Mr. Chairman. You are a refreshing 
addition to the administration. I appreciate your answers in 
spite of all the harassment you are getting. In the Medicare 
Modernization Act, we created health savings accounts, probably 
one of the most important law that is Congress has passed in a 
long time. A few of my colleagues and I were working on the 
President's SAO proposals to expand and strengthen them. 
However, in order for consumer-driven plans to work, there has 
to be accurate and comprehensible quality data available. 
Otherwise, you know, you are driving blind in respects. In my 
district, a private not-for-profit group called The Patient 
Safety Institute, you may be aware of it, has developed a 
clinical information network that requires only an Internet 
connection to access it. The benefits of their system are 
almost too good to be true.
    Rather than costing billions of dollars, their system 
functions off of a user fee much like the ATM system, and they 
have enjoyed huge success in every pilot city that they are up 
and running in. In fact, you may recall that the Western 
Governors Association supported their efforts along the way. 
Ideas like this have the potential to offer health consumers a 
huge advantage, and with minimal use of taxpayer money. I see 
that the President has made health information technology a 
priority in his budget. I wonder if you could tell me what 
efforts are being made to work with the private sector on this 
issue.
    Secretary LEAVITT. Congressman, may I say that my instinct 
leads me to precisely the same place that you have enumerated, 
and that is to transform healthcare in this country, we must 
provide for the benefits of technology to transform medicine. 
For its delivery. The President has made a proposal for $125 
million this year. More importantly than that, we need to turn 
to the power of every agency in government, every State 
government. We need to harness a collaborative effort between 
private organizations like the ones you have referenced and 
large payers, and we need to develop a system that will deliver 
healthcare in ways that will prevent mistakes, lower costs and 
provide better care, and we are capable of doing it. This is a 
country that can perform on this, and this is one that we have 
to perform on. We are now at the point where 15 percent of the 
gross domestic product is being devoted to healthcare. Many of 
those whom we compete with around the globe are doing it more 
efficiently than we are. Ultimately, that will come home to 
roost. We have to do this better than we are doing it, and the 
kinds of initiatives you have spoken of in my judgment are 
primary to that effort.
    Mr. JOHNSON. I appreciate it. Free enterprise does work, 
doesn't it. Thank you, Mr. Chairman. I yield back.
    Chairman THOMAS. I thank the gentleman. The gentleman from 
Ohio, Mr. Portman, wished to inquire, and prior to recognizing 
the gentleman from Ohio, I have been informed that there is a 
birthday card in the Democratic cloak room for those who 
remember or wish to sign the 80th birthday card from the former 
gentleman from Ohio, Mr. Louis Stokes.
    Mr. PORTMAN. Thank you, Mr. Chairman, and Mr. Secretary, 
welcome aboard. We are delighted to have you in this critical 
position during what will be a challenging year for all of us, 
dealing with Medicare and Medicaid costs. I just left the 
Budget Committee where we talked about the fact that if we 
don't do something to restrain the growth in healthcare 
spending that by the year 2040, Medicare and Medicaid alone 
will have costs that will exceed the current budget as a 
percentage of the GDP. So, clearly, we need to think smarter 
and, Mr. Johnson talked about some ways to do that which you 
talked about as well in information technology, and adding 
competition and transparency, and flexibility to the system. 
One of the issues that has come up in my State, and I know 
around the country, is the relationship between Medicare and 
Medicaid on so-called dual eligibles. Those are low income 
senior citizens, many of whom get long-term care from Medicaid. 
Although technically Medicaid isn't supposed to provide long-
term care it does through home health and skilled nursing 
facilities, but also, gets the prescription drugs through 
Medicaid. If you could talk a little bit about how it would be 
helpful to the Committee, how you think the proposed reforms in 
this budget to Medicaid, for instance, might impact the long-
term care service for dual eligibles, and specifically, how 
Medicare and Medicaid should interact with regard to dual 
eligibles. If you like to follow up with a letter, that would 
be fine. I wondered if you had any thoughts on that for us 
today.
    Secretary LEAVITT. I would like to address, Congressman, 
the topic generally on long-term care, because I believe it is 
among the more challenging topics we have to deal with. There 
has been some discussion in this Committee this morning about 
Social Security. That is a demanding issue that needs to be 
dealt with. Long-term care is every bit as critical as Social 
Security and being able to deal with it over the long term. 
There is a point in the life of every problem, when it is big 
enough that you can see it, but small enough that you can still 
solve it. That is where we are on long-term care. The President 
has proposed in his budget $3.7 billion over the next 10 years, 
to begin a transition for those who are served as elderly or 
disabled to be able to be served in their home or in their 
community as opposed to being essentially required to be served 
in an institution. That is just one of many reforms that I 
believe we can make in both our Medicaid and our Medicare 
system to allow us to cope properly with that.
    While I am on the subject of dual eligibles, may I make a 
reference on the Medicare rollout. A subject that has been of 
some concern, of grave concern to many, is how we will transfer 
those who are currently served by Medicaid onto Medicare to 
assure that there is no loss in their coverage or their 
capacity to reach prescription drugs. Because many of those 
seniors will be required to make a decision early, we have 
taken the action to ensure that no one drops through the cracks 
by ensuring that all of those seniors will have a decision made 
for them, if not by them. That shortly in the periods that 
ensue afterward, we will be highly flexible in working with 
each one of them to ensure that, in fact, it has been made in a 
way that suits their interest. No seniors, transitioning from 
Medicaid to Medicare will lose their coverage because of lack 
of action.
    Mr. PORTMAN. That is very helpful. I know, again, there is 
a concern, certainly, in my State and around the country on 
that, and that is very helpful, in particular, with regard to 
our dual eligible seniors. We also, appreciate, though, your 
willingness to better communicate, perhaps than we did, even 
with the prescription drug card to our seniors, what benefit 
will be available on January 1st of next year, and you and I 
have talked about this separately. I know the Committee is 
going to be eager to work with you on that rollout more 
generally as well. Thank you, Mr. Chairman.
    Chairman THOMAS. I thank the gentleman. Does the gentleman 
from Washington, Mr. McDermott, wish to inquire?
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Mr. Secretary, we 
welcome you. Here you are up and playing a new game. You were a 
Governor and when the Republicans sent out the new welfare 
program, the new TANF bill, you said resources will have to be 
diverted from current services such as pregnancy prevention, 
training programs, marriage initiatives, fatherhood programs 
and other child well-being initiatives in order to meet the 
cost of providing work sites to meet the Bush-proposed work 
requirements. Now, it sounds like, in fact, I know that you are 
one of the few States that counted 24 months of going to school 
as being work requirements. The President's budget, as 
presented that you are now here defending and going to try to 
implement, says you can only count 3 months.
    Now, I would like to hear you explain to me why you think 
the present Governor of Utah should have to cut that 
flexibility to see kids go or young women go through school for 
2 years and have that count, instead of cut it back to 3 
months. Where is the policy judgment? Where is the proof that 
this new work requirement makes it better? Because Ron Haskins, 
who was our former staff guy and worked in the White House, 
says there is no evidence for that. I wonder why, or how you 
feel about pushing that on your successor back in Utah?
    Secretary LEAVITT. Well, Congressman, we worked very 
successfully, as you have enumerated, in being able to 
transform the lives, not just the system, but the lives of 
those who were served. It ultimately resulted in a complete 
reordering of the way we approach it. We began to make our 
system, rather than a welfare system, into a system that helps 
people get back on their feet. You were part of that, most on 
this Committee was, and we worked very successfully under it. I 
have every confidence that the existing Governor of Utah will 
take the construct that I helped reauthorize and will 
responsibly balance those to do the same thing.
    Mr. MCDERMOTT. The system that you are implementing takes 
away his flexibility. Is it your intention to sort of ignore 
what is in the law and use your waiverability to let every 
Governor do what they want?
    Secretary LEAVITT. Congressman, we will keep the law.
    Mr. MCDERMOTT. Well, it is following the law. You are just 
ignoring the requirements of the law and give a waiver to a 
State to do something else. You are saying that you are sure 
you will be able to do it, because you will give them that 
power; correct?
    Secretary LEAVITT. In 1995 and 1996, when I appeared many 
times before Congress as a Governor to discuss this, it was an 
issue then. What we concluded, and I was in complete agreement, 
then and now, is that work is an ennobling virtue, that people 
need a plan to move foward in order to have their lives 
transformed.
    Mr. MCDERMOTT. I don't think anybody disagrees with that 
Governor, no one disagrees with that. The question is how rigid 
you make it and what you are willing to count. If education 
doesn't count anymore, then the question is it just getting 
people off welfare or is it trying to get them up the economic 
ladder, get them out into poverty, another kind of poverty, or 
do you want to give them the way to get out. I just want to 
call your attention to this chart over here. Because this is 
the chart that has to do with child care. Now the bottom part--
the top part of it is the 8.3 billion in costs, that part right 
there, that comes from the new work requirements. This is from 
CBOE. This isn't made up by Democrats. That is their 
requirement, and this part down here is what is maintenance of 
effort, right now. Your--this budget creates that much more 
capacity, and you leave yourself with $10 billion hole to fill. 
Now, I know you say we are going to fill it from money that is 
left in States. So, I went and got the list.
    The first 13 States at the end of 2003 had not one single 
dime of unobligated money, California, Colorado, Connecticut, 
Illinois, Indiana, Louisiana, Massachusetts, Oregon, South 
Carolina, Tennessee, Vermont, Washington and Missouri. None of 
those States had a single unobligated dollar and you are saying 
well, they will just move these dollars that they have been 
holding back over into this program. They don't exist. How are 
those governors going to raise this money? How are they going 
to provide the ability to fill that hole? I mean, that is a 
hole in every State legislature today. How are they going to do 
that?
    Secretary LEAVITT. Congressman, I have wrestled with these 
problems.
    Mr. MCDERMOTT. I know you did.
    Secretary LEAVITT. I know, in fact, it can be done and I 
know we were better off as a result. There are a number of 
areas, welfare being only one of them, where with additional 
flexibility Medicaid would allow States to be able to deal with 
these problems in a way that meets high national standards, 
expectations that we set for ourselves and at the same time be 
able to do just what is called for, and that is a continued 
movement of people off welfare and onto work.
    Mr. MCDERMOTT. I like what you say, but it doesn't follow 
the bill. The bill limits flexibility. That is the problem.
    Chairman THOMAS. The gentleman from Pennsylvania, Mr. 
English, wish to inquire?
    Mr. ENGLISH. Thank you, Mr. Secretary. Again, welcome. As 
we have seen from the hearing, from this hearing, that over the 
years, since we implemented the 1996 law, there are far more 
advocates of flexibility that when we started. On the point of 
the 1996 reform, sanctions for failure to work and time limits 
on benefits have been directly correlated with higher income 
gains among welfare recipients, which is exactly the opposite 
of what the critics have predicted. Unfortunately, in FY 2003, 
States reported that only 31 percent of families with an adult 
recipient, participated in the required 30 hours of TANF work 
activities. Given that work rates have fallen among welfare 
recipients, in 3 of the last 4 years, is the administration 
proposing any changes to its work requirements or check 
sanctioning in this year's TANF proposal?
    Secretary LEAVITT. Congressman, I am going to tell you, I 
don't know specifically what has been proposed to prior in to 
the last couple of months, so, I am not able to respond 
specifically to what the proposals in the negotiations have 
been.
    Mr. ENGLISH. Then may I specifically ask, is the 
administration now receptive to the notion of full check 
sanction, something that studies have demonstrated has the 
potential to engage welfare recipients and ultimately make more 
of them aware, in some cases, that they aren't meeting the 
standards?
    Secretary LEAVITT. I am being quickly briefed on just what 
the State of the discussions have been.
    Mr. ENGLISH. I understand.
    Secretary LEAVITT. I will say to you and other Members, I 
have been on the job now 20 days.
    Mr. ENGLISH. I fully understand.
    Secretary LEAVITT. Thank you. Congressman, let me just say, 
I am delighted to be working on this subject. This is a subject 
that is near and dear to me. I will work with you and other 
Members of the Congress. I believe strongly in the virtue, in 
the ennobling ability of work to transform people's lives. I 
recognize that that's the standard we are after. It has the 
capacity to balance the need between people to improve and 
continue to be self-reliant. I am not able to conduct a 
conversation on this point right now, but I would be delighted 
to do it either in writing or in person.
    [The written response from Secretary Leavitt follows:]

    The Administration continues to support State flexibility in use of 
the full check sanction as currently allowed under the TANF program. 
However, we recognize that there is a substantial body of research 
demonstrating the advantages of the full check sanction.
    The purpose of sanctions is to encourage compliance with work 
requirements leading to self-sufficiency. A critical benefit of strong 
work expectations and activities is the ability to acclimate recipients 
to a working lifestyle--not simply learning how to do a specific job, 
but to learn through experience what it takes to be employed and remain 
employed. A weak sanctioning policy could undercut these expectations 
and do serious damage to a family's prospects to achieve self-
sufficiency. When welfare-to-work participants who refuse to comply 
with requirements continue to receive partial benefits, they and their 
families also can be placed at considerable risk as their time-limited 
months of assistance are used.
    The frequency and severity of sanctions, including ``full-family'' 
or case closure, has increased under welfare reform. In some States, 
nearly half of all recipients experience a sanction over time. Most 
people are sanctioned because they fail to show up for appointments. 
Under current law, if an adult refuses to engage in required work, a 
State has the option to either reduce pro-rata or terminate the amount 
of assistance payable to the family, subject to good cause. In the 
first instance of noncompliance, 36 States impose a partial-grant 
reduction, 14 States impose a 100% grant reduction, and one State gives 
a written warning. All States increase the duration or the amount of 
the sanction for repeated noncompliance. Ultimately, 36 States impose a 
full-family sanction or 100% grant reduction, and 15 States continue a 
partial-grant reduction.

                                 

    Mr. ENGLISH. We will certainly do that. As a follow-up, Mr. 
Secretary, I have been--and this may also, be something we want 
to correspond on. I have noticed that the administration's 
budget proposes $1.5 billion in cuts to specifically Medicare 
funding for nursing home care. One of the ideas that I have had 
is that perhaps a better way to encourage quality is to expand 
the pay for performance concept to SNFs. Last year I introduced 
legislation on this subject and I intend to do it again. This 
legislation would for the first time link the amount of 
Medicare reimbursement received by a skilled nursing care 
provider to a qualified provider of that facility. I think this 
is the way to go to incentivize skilled nursing facilities to 
continue making quality improvement a top priority. In my view, 
this is maybe a better alternative than the scale of cuts that 
we have been contemplating, and I would welcome an opportunity 
to work with you on this issue.
    [The written response from Secretary Leavitt follows:]

    To clarify, the budget did not propose $1.5 billion in cuts, but 
rather it anticipated that CMS would implement SNF case-mix 
refinements, which under statute would result in the elimination of the 
add-ons. The add-ons were costing Medicare $1.5 billion per year, for 
every year that we did not implement the refinements.
    In the final SNF PPS update regulation for FY 2006, CMS implemented 
these refinements, which will result in more accurate payments. The 
refinements become effective on January 1, 2006, effectively extending 
the add-on payments for an additional calendar quarter. We made other 
adjustments to the payment system, resulting in retaining one-half of 
the amount of the add-on in the payment system. Finally, SNFs also 
received the full market basket update for FY 2006. The cumulative 
effect of these adjustments means that in FY 2006, total Medicare 
payments to SNFs will be about $20 million greater than payments made 
in FY 2005, which is an increase over the level payments we had 
predicted in the proposed rule.
    Linking quality performance to payment is where health care is 
heading in the future. Quality of care is a top priority for this 
Administration and linking payment to performance is a proven way to 
improve and promote quality care.
    Further, the Medicare Modernization Act of 2003 (MMA) propelled 
pay-for-performance forward by linking Medicare's annual update for 
inpatient hospital services to the submission of quality data. Nearly 
all of the nation's eligible hospitals have begun reporting data on the 
quality of care they deliver, which is a vital step in improving 
patient care.
    While we do not have a formal position on your proposed 
legislation, we strongly support the development of pay-for-performance 
programs for SNFs as well as for other care settings. In fact, we are 
actively exploring SNF pay-for-performance design options, and have 
identified several basic criteria that we think will lead to success.
    During the September 20, 2005 special Open Door Forum, CMS 
discussed the recent development of an initiative called Nursing Home 
Pay for Performance. Under this demonstration, financial incentives 
would be provided to nursing homes that meet certain standards for 
providing high quality care. As this demonstration is currently 
underway, we have been including stakeholders in the development 
process to ensure that this demonstration is a successful one.

                                 

    Secretary LEAVITT. Thank you.
    Mr. ENGLISH. Thank you, Mr. Chairman.
    Chairman THOMAS. Would the gentleman yield briefly?
    Mr. ENGLISH. I would be delighted.
    Chairman THOMAS. In a partial response to the gentleman 
from Washington's chart from the Congressional Budget Office, 
which we are, of course, by law, required to follow up, I think 
it is interesting, because obviously these are based on 
methodologies which may or may not be substantiated by looking 
at previous estimates and what occurred with the previous 
estimates. In 1996, when the program began, the estimate by the 
Congressional Budget Office was that by the year 2002 there 
would be a $14 billion shortfall. What occurred, of course, in 
2002, was a $6 billion-plus amount in State coffers that had 
yet to be spent. So, whenever someone tells me about a 
continuing pattern based upon assumptions that have proven in 
the past not to be accurate, you anticipate some modification 
and estimate as basically the caseload question whether or not 
the caseloads would be modified. I thank the gentlemen.
    Mr. MCDERMOTT. Mr. Chairman, following the regular order, 
may I comment on your response?
    Chairman THOMAS. I borrowed the time from the gentleman 
from Pennsylvania because his time had not expired, and he 
yielded me the portion of his time, which has now expired. The 
Chair recognizes the gentleman from Missouri, Mr. Hulshof.
    Mr. HULSHOF. Thank you, Mr. Chairman. I would say to my 
friend from Pennsylvania, it appears that we not only have new 
converts to flexibility, but new converts to welfare reform 
generally. Mr. Secretary, welcome. I think your appointment and 
confirmation, excuse me, has demonstrated yet again the 
President's extraordinary ability to appoint highly qualified 
individuals to important cabinet positions, and we look forward 
to working with you during your tenure, recognizing that the 
short time you have had on the job, I don't want to greet you 
with a high and tight fast ball, but I do want to express a 
concern, and it is a concern not just limited to Missouri, but 
a letter that we sent back in July of 2004, and it relates 
specifically to an interpretation by the Center for Medicare 
and Medicaid services that I think could compromise the use of 
volunteer faculty in graduate medical education programs.
    A scenario, Mr. Secretary, in rural parts of my district 
and really across the country, it is not uncommon for residents 
to train in a physician's office, in a clinic or in some other 
nonhospital sites. A recent Office of Inspector General report, 
in fact, illustrates that in many of these cases, the 
supervising physician is working on a volunteer basis. What 
doctors have told me and others is that gives them a sense of 
pride to really give back to the profession the ability to pass 
on their knowledge and their expertise to this younger 
generation of physicians. Last year, as I mentioned in this 
letter, there were, I think, 116 signatories from both 
political parties, some on this Committee, some not, that 
expressed our concern with then CMS's policy, and let me say 
even arbitrary policy, disallowing hospitals the ability to 
claim for payment purposes from GME payment purposes, the time 
that residents spent in these nonhospital settings.
    In fact, further concern is that in 2002, CMS began denying 
and sometimes retroactively through audits, payments for the 
time that residents spent in these nonhospital settings and 
where supervisory faculty volunteered their services. Again, 
those of us who sent the letter back in July of 2004 thought 
that this was really not Congressional intent. Along that line, 
when we passed the Modernization, the Medicare Prescription 
Drug and Modernization Act of 2003, we put in there a temporary 
moratorium on CMS's ability to have payment denial. So, again, 
I just set that up for you. What I would ask, because we never 
got a response to our letter, would be we would resubmit the 
letter to you, as we did back in July of 2004, please take a 
look at it. Again, this is just a concern, in light of this, 
the volunteer basis, and especially in these rural settings, 
and, again, I welcome you here. You don't need to comment 
necessarily, because this is kind of a specific point. I would 
welcome your response to that point as soon as you can make it. 
Thank you, sir. I yield back, Mr. Chairman.
    Secretary LEAVITT. I will do my best to respond in a 
written way.
    [The information follows:]

    Thank you for your continued interest regarding Medicare graduate 
medical education (GME) payments to hospitals for training residents in 
non-hospital sites. On April 12th of this year we sent you a letter 
discussing this issue. Specifically, we addressed your concerns 
regarding the Centers for Medicare & Medicaid Services' (CMS') policy 
requiring hospitals to pay for the cost of the teaching physicians that 
are volunteering their time to teach residents in the non-hospital 
setting.
    As we discussed in that letter, volunteerism is certainly 
encouraged under the Medicare Program and we are doing everything we 
can under the statute to facilitate the use of such volunteer faculty. 
As you know, the Social Security Act allows a hospital to include the 
time a resident spends in non-hospital settings in its indirect medical 
education (IME) and direct GME full time equivalent (FTE) count, ifthe 
resident is spending his/her time in patient care activities, and the 
hospital incurs ``all or substantially all'' of the costs of training 
the resident(s) in the non-hospital site. The response we sent to your 
letter detailed the specifics of the statute and our regulations that 
form the basis for our policies regarding reimbursement for graduate 
medical education rendered in a non-hospital setting.
    CMS recognizes the value of training more residents in non-hospital 
sites and we intend to make sure our rules are clear in order to 
encourage this activity. Since our response letter was sent to you we 
have posted on our website a list of frequently asked questions and 
answers on volunteerism and Medicare graduate medical education 
payments to clarify our policy for hospitals, non-hospital sites, and 
physicians. These FAQs can be found at the following web address:
    http://www.cms.hhs.gov/providers/hipps/nonhospQA.pdf
    In response to some additional questions and concerns that we have 
received on this issue, CMS has also had a number of formal and 
informal discussions with Members of the public and hospital industry 
to discuss how we could better clarify and convey our policies. These 
discussions are ongoing and we hope to emerge from them with a better 
understanding of volunteer training and the extent of potential 
reimbursement possible under the law.
    Thank you for your continuing interest and concern on this topic. I 
greatly appreciate all of the efforts you have made to ensure a full 
and fair payment system for the graduate medical education program. If 
you have any additional questions, or if I can be of any assistance, 
please do not hesitate to let me know.

                                 

Hon. Kenny Hulshof
House of Representatives
Washington, DC 20515

    Dear Mr. Hulshof:

    Thank you for your letter regarding Medicare graduate medical 
education (GME) payments to hospitals for training residents in non-
hospital sites. Specifically, you are concerned with the Centers for 
Medicare & Medicaid Services' (CMS) policy requiring hospitals to pay 
for the cost of the teaching physicians who are volunteering their time 
to teach residents in the non-hospital setting. Volunteerism is 
certainly encouraged under the Medicare Program and we are doing 
everything we can to facilitate the use of such volunteer faculty.
    The Social Security Act allows a hospital to include the time a 
resident spends in non-hospital settings in its indirect medical 
education (lME) and direct GME full time equivalent count, if the 
resident is spending his/her time in patient care activities, and the 
hospital incurs ``all or substantially all'' of the costs of training 
the resident(s) in the non-hospital site. ``All or substantially all'' 
is defined in regulations as the residents' salaries and fringe 
benefits (including travel and lodging expenses where applicable) and 
the portion of teaching physicians' salaries and fringe benefits 
attributable to training residents.
    In the case of volunteer physicians, many hospitals have written 
agreements with the teaching physicians that state the physician is 
volunteering his or her time and, therefore, the hospital is not 
providing any compensation to the non-hospital site for the teaching 
physicians' time. However, this may conflict with the requirement that 
in order to be reimbursed for GME the hospital must incur ``all or 
substantially all'' of the costs.
    In order for the hospital to incur ``all or substantially all'' of 
the costs, the actual costs of the time spent by teaching physicians in 
supervising residents in the non-hospital setting must first be 
determined. As long as there are teaching costs associated with the 
non-hospital training, the hospital must identify and reimburse the 
non-hospital site for those costs in order to count the residents 
training at that site for purposes of direct GME and IME payments. For 
example, in instances where the teaching physician receives a 
predetermined salary, the costs of training residents are included in 
the salary, and the hospital must reimburse the site for an amount 
based on the percentage of time the teaching physician spends training 
the resident(s). Determination of the teaching GME costs would be 
dependent upon the teaching physician's salary and the percentage of 
time he or she devotes to activities related to the residency program 
at the non-hospital site. Accordingly, the fact that the non-hospital 
site is incurring a cost (i.e., the salaries) for the physicians' time 
which includes teaching time, indicates there are teaching physician 
costs of training the residents, even if the physician states that he/
she is ``volunteering'' his or her time to supervise the training of 
residents.
    In other cases, there may truly be no supervisory teaching costs 
associated with the non-hospital training. For example, where the 
teaching physician is a solo practitioner, since the physician's 
compensation is based solely on the bills the physician submits for the 
patients he/she treats, there is no compensation, and therefore no 
cost, for the time the physician spends on GME activities. Accordingly, 
in that case it would be appropriate for the written agreement to state 
there are no teaching physician costs at that site to be reimbursed by 
the hospital. Before residents training at a non-hospital site can be 
counted by a hospital for GME purposes, the hospital must first 
determine, based on the specific arrangements at that site, whether 
there are teaching physician costs.
    Section 713 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) provided for a time-limited exception 
to the requirement to incur ``all or substantially all'' of the costs 
of training. Pursuant to this section, during the 1-year period from 
January 1, 2004, though December 31, 2004, CMS is to allow hospitals to 
count allopathic or osteopathic family practice (no other specialty) 
residents training in non-hospital settings for IME and direct GME 
purposes, without regard to the financial arrangement between the 
hospital and the teaching physician practicing in the non-hospital 
setting to which the resident is assigned. CMS implemented this 
provision in a one-time notification issued on March 12,2004, and 
solicited and responded to public comments in the fiscal year 2005 
Hospital Inpatient Prospective Payment System proposed and final rules.
    In accordance with section 713(b) of the MMA, the Office of the 
Inspector General (OIG) conducted a study of the appropriateness of 
alternative cost methodologies for costs of residency training in non-
hospital settings. The OIG issued a report in December 2004 that 
detailed the results of the study and made recommendations regarding 
Medicare payment for residents training in non-hospital settings. I 
have enclosed a copy of the OIG report and a copy of CMS' response to 
the report's recommendations.
    We appreciate the value of training of residents in non-hospital 
sites and want to facilitate further development of this practice in 
accord with the statute. Consequently, we intend to make sure our rules 
and our methods of implementing them are as clear as possible. In 
particular, we will be posting on our Web site a new set of frequently 
asked questions on volunteerism and Medicare GME payments.
    In addition, we are conducting a review of our audit procedures to 
determine whether we should update our guidance to our fiscal 
intermediaries. Given the rate of change in the practice of medicine, 
we want to make sure our rules and audit procedures are kept current. 
We also want to make sure we are meeting our primary objective of 
providing high quality, cost-effective care to Medicare beneficiaries.
    I appreciate your interest in this important issue. I will also 
provide this response to the cosigners of your letter.
            Sincerely,
                                     Mark B. McClellan, M.D., Ph.D.

                                 

    Chairman THOMAS. I thank the gentleman. The gentleman from 
Georgia, Mr. Lewis.
    Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman. 
Mr. Chairman, I would like to yield a minute to my friend and 
colleague from Washington, Mr. McDermott.
    Mr. MCDERMOTT. Thank you. Thank you very much. Mr. 
Chairman, your argument was that 1996 the child care estimates 
made by CBO were far off. Because they didn't take into account 
the caseload reduction, but what you didn't say was that in 
1996 we put in $4 billion. If you look at that chart now, you 
see we are putting in 1. If you put in 4 more, well, you would 
cut this down in half, and that's the real issue. You are only 
covering 10 percent of it now.
    Chairman THOMAS. Would the gentleman yield?
    Mr. LEWIS OF GEORGIA. Thank you, Mr. Chairman, Mr. 
Secretary. Welcome. Mr. Secretary, this budget is about our 
values. Our priorities, as a nation and as a people. Do you 
think, or do you really believe that this budget is friendly to 
the basic needs of the American people. If I might continue, is 
there anything in this budget that will close the growing and 
unbelievable disparity gap between the minority population and 
the majority population, African-American, Hispanic, native 
American, low-income groups and others. If you can elaborate.
    Secretary LEAVITT. Congressman, I do believe it is a budget 
that deals with the values of this Nation. Let me just use a 
couple of examples, community health centers. The President 
made a commitment that we would see 1,200 new and expanded 
community health centers. This budget not only helps meet that, 
but adds an additional 40 that will go to the poorest counties 
in America, and will serve some 6.1 million additional people 
over the course of the next year. Another example, Medicaid. 
Much has been said already about the fact that the President 
has proposed some changes in Medicaid. I would like to explain 
what those changes are. One of the changes is a clear statement 
that we are paying too much for prescription drugs in Medicaid, 
and that if we were to make a change in the way we do so, we 
could save $15 billion in the next 10 years. That money in 
large measure could be used to care for children. In fact, he 
has proposed an additional $10 billion to go for the care of 
children. He has also, proposed that we allow for families to 
be able to care for the elderly and the disabled in their home 
if they choose to, as opposed to institutions. I think that 
speaks to the values of this country, that we believe in caring 
for our parents and being supportive of them and being able to 
support those who care for--so, Congressman, yes. I believe 
that there are many provisions of this, that speak directly to 
our values.
    Mr. LEWIS OF GEORGIA. Let me just ask you, have health 
centers substituted for coverage and disparities that exist?
    Secretary LEAVITT. Congressman, it would be my aspiration 
that health insurance would be within the reach of every 
American. Sadly today, somewhere between 35 million and 45 
million have not yet achieved that. Among those, however, are a 
large population of people who have not yet accessed health 
insurance but do receive healthcare.
    Mr. LEWIS OF GEORGIA. Mr. Secretary, I don't want to 
interrupt you but I travel a great deal. I have been to Provo, 
I have been to Park City and I have been to other places in 
Utah, and I have been all across America, and in the heart of 
the American south, and the southwest and Appalachia. You may 
have some health centers in some and they are doing good work. 
The gap in disparity is unbelievable when you come to the 
question of hypertension, diabetes, prostate cancer, HIV and 
AIDS. As a nation and a people, we should be able to do much 
better.
    Secretary LEAVITT. Congressman, that is the American 
aspiration, and this budget is directed to that. The President 
sees a nation where, in fact, we do have the capacity to 
someday, ensure that every American has health insurance within 
their reach. He sees the capacity for us to do away with cancer 
and diabetes as diseases and has appropriated billions of 
dollars toward that end. To better manage those dollars he 
suggested and proposed changes in the way we go about it to 
ensure that we can. That is a dream we share.
    Mr. LEWIS OF GEORGIA. My time is about to run out, but 
there is a recent study on medical bankruptcy that found about 
50 percent of all bankruptcies were filed because of high 
medical bills. Are you concerned about that at all?
    Secretary LEAVITT. Deeply concerned.
    Mr. LEWIS OF GEORGIA. Well, why is the administration 
pushing these high deductibles?
    Secretary LEAVITT. Because we would like to see health 
insurance within the reach of every American, and we are 
dealing with a system that is fundamentally not efficient, that 
is a way for us to make it more efficient and to put it into 
the hands of more people. Congressman, I have recently changed 
my own medical insurance to a health savings account. I see it 
as a great opportunity. While I was Governor, I worked to 
create health plans that would allow us to provide could have 
acknowledge, some coverage to more people, as opposed to a 
limited number having all coverage. Those are the kinds of 
value judgments I believe we need to make, all reaching to the 
same goal, and that is for health insurance to be within the 
reach of every American.
    Mr. LEWIS OF GEORGIA. Thank you, Mr. Secretary.
    Chairman THOMAS. The gentleman from Florida, Mr. Foley.
    Mr. FOLEY. Thank you, Mr. Chairman, and I welcome you, Mr. 
Leavitt, to our hearing and thank you for your emphasis and the 
President's on community health-based solutions. I represent 
some of the poorest counties in America and the richest. So, I 
have a dichotomy of population, Glades County, Hendry County 
and I visited personally the community health centers 
delivering quality care in an atmosphere of compassion for 
those who have meager incomes, don't feel as if they are 
charity, they feel they are getting good quality health care. 
Medicaid--and you will be receiving from Florida's Governor Jeb 
Bush, I believe, the President's favorite governor, maybe 
second to you, some interesting revamping of Medicaid in our 
State from a top to bottom State-run system to a more market-
based, citing community health centers as one of the ways to 
triage. I hope you will be favorable to some of the request of 
waivers he may make of your department. Second, I think we all 
agree that there have been some horrific cases in the news 
regarding child care in Florida, in New Jersey, in the foster 
care system. I am one who generally likes to see the States 
handle their own work product. I feel there's an urgent need 
for us as a nation to look at the quilt of laws that apply to 
child welfare and look at ways in which we can either 
streamline or better protect the children in the custody of 
foster parents. We track library books better than we do our 
children, and we have seen too many cases of abuse.
    I would like to urge you, as Secretary, to undertake a 
thorough look see at how the States operate and how we may be 
able to work as partners, if you will, sharing information 
across State lines and the fitness of people. People move. They 
leave States. We can't go after their backgrounds and find out 
if they have prior criminal convictions or child abuse 
convictions. So, a lot of things I think could be helped by 
your agencies efforts in that direction. Finally, again, on the 
health centers, just to underscore the importance the President 
placed at the State of the Union and, of course, followed up 
with real dollars. I also, wanted to take a moment in that same 
line of thinking, because the pharmaceutical industry does come 
under attack by almost everyone, both Republican and Democrat. 
They have provided some valuable resources to some of the 
poorest in my community through the sharing programs, taking 
care of those who have no eastbound come to provide drugs, 
provide opportunity for them. So, I think while we can lambaste 
them for a number of things, I do think we also, have to 
acknowledge some of the significant role they play in delivery 
of drugs to those who cannot afford any type of coverage.
    Secretary LEAVITT. Congressman, just two quick responses. 
The first is that there is now a spirit of innovation that I 
believe is occurring in States with respect to providing access 
to health care to more people through Medicaid. There is great 
concern on the part of Governors, for example, that they are 
being forced to release from coverage optional groups that they 
badly want to cover. Governor Bush, I look forward to hearing 
more about his waiver request. With respect to child welfare, 
may I tell you that this was among the most difficult problem 
that I dealt with as Governor, and I believe any Governor. I 
have knocked on the doors of families and said with a 
caseworker to a mother, I need to speak with you privately or 
your children privately. I know the anguish that they face 
every day. This is among the most difficult things that a 
government deals with. We need high national standards that 
States can meet. We also, need to give States the capacity to 
meet them with the levels of flexibility and the means by which 
they can find the best way to do so.
    Mr. FOLEY. I would love to work with your legislative staff 
to develop some proposals.
    Secretary LEAVITT. Thank you.
    Mr. FOLEY. I yield to the Chairman if he wishes inquire.
    Chairman THOMAS. I thank the gentleman. Would the gentleman 
from Connecticut wish to inquire?
    Mr. LARSON. Thank you Mr. Chairman and Mr. Secretary, and 
thank you for your distinguished service as Governor.
    Secretary LEAVITT. Thank you.
    Mr. LARSON. From everything I have heard about you, your 
reputation precedes you and from this dialog this morning is 
suggestive of your commitment. I think the President has chosen 
well.
    Secretary LEAVITT. Thank you.
    Mr. LARSON. My concern is a direct one for the constituents 
in my district, especially as it relates to prescription drugs. 
Quite frankly, they feel like they are refugees from their own 
healthcare system. Having to travel to Canada, in order to 
afford prescription drugs, while their neighbor next door goes 
to the local VA and gets a deep discount, or the person next 
door who works for Wal-Mart who has their corporation negotiate 
directly on their behalf. I am all for market forces. As Mr. 
Cardin points out, when we end up having the more than 40 
million elderly in our country, in essence, subsidize the rest 
of the world, why they continue to pay exorbitant prices for 
prescription drugs, is it the moral responsibility of 
government to step in at this point and negotiate directly? My 
question is, if we were able to give you the authority to do 
that, would you encourage the President not to veto that in a 
proposal that would change the current law?
    Secretary LEAVITT. Congressman, we have an opportunity, I 
believe, in the next year, that is historic, and that is to put 
into the hands of our seniors and those who will be otherwise 
eligible, a powerful new tool and benefit, not only to receive 
prescription drug, but to receive them at the lowest possible 
price. That tool is a robust market with choices, not just of 
plans but of medicines. There is no power on Earth greater than 
a market to find that place, and I believe that we will. In 
fact, seniors----
    Mr. LARSON. Should the market fail to produce the robust 
kind of discount, would you be willing to negotiate directly on 
behalf of the more than 40 million people for the discounts, 
the same kinds of discounts that are enjoyed by the VA or by 
people in the corporate sector who negotiate directly for those 
same kinds of discounts, but not nearly with the kind of 
leverage that you could have with more than 40 million people.
    Secretary LEAVITT. Congressman, as recently as day before 
yesterday, we received the good news that one marriage company 
will be offering a national plan. Others, I believe, will 
follow. We will have, in fact, robust competition in every 
significant or insignificant market in this country. Seniors 
will have choices. They will have people competing for their 
business, and they will not only have better prices, but better 
service as a result.
    Mr. LARSON. Unfortunately, the choices that they face 
currently are between heating and cooling their homes and the 
food that they have to put on the table and the expensive cost 
of prescription drugs. Let us hope that you are correct. 
Because for them, it is a God-awful decision.
    Secretary LEAVITT. This is a great moment in history for us 
to be able to take that choice and put it into the past for 
many seniors.
    Mr. LARSON. I hope you are correct.
    Chairman THOMAS. I thank the gentleman. The gentleman from 
Colorado, Mr. Beauprez, wish to inquire?
    Mr. BEAUPREZ. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary, for coming before us today. I would like to continue 
down the path my colleague just established a little bit, 
perhaps in a little different venue, but this Committee, and 
this Congress is wrestling with the rather weighty issue of 
Social Security, and if we reform, how we reform, concern about 
the growing unfunded liability out in front of us, and as large 
as that is, as some of us look at the complexity of the rest of 
government, and specifically healthcare, it somewhat pales by 
comparison to the looming cost in front of us to challenges in 
front of us as to how in the world do we deal with at least the 
path of escalation that we have established for escalation of 
cost. From your perspective, which I would acknowledge is a 
reasonably powerful perspective, a well informed perspective, 
especially having been a Governor, how do we get our arms 
around that? What are the opportunities that exist in front of 
us to not only reach the edge of the cliff, but total off of 
it, which we would, of course, like to avoid?
    Secretary LEAVITT. Congressman, that is a complex subject, 
but I would offer 2 points as a beginning. The first is the 
foundation, which is the use of information technology to 
transform the health sector. It is behind woefully, and it is 
beginning to challenge or to be a weight on our competitiveness 
as a nation. Once that is back in place, I see us moving toward 
a system that is focused on the consumer as opposed to 
organized to the convenience of the system itself. We need a 
system that will begin to respond to the consumer and allow 
direct access to the consumer, and then the capacity to tie it 
together with technology to where we have a system, very 
shortly, I believe, that can eliminate the inefficiency, for 
example, of a written prescription, where a person takes a 
piece of paper that they may or may not be able to read and 
takes it to a drugstore and waits for it to be filled.
    I see a day very shortly where a doctor will be able to 
with a PDA write a prescription that will have been coordinated 
to the electronic health record of a patient, that before the 
patient leaves the physician's office, it will be being filled 
by a neighborhood pharmacy and deliverable either at their home 
or at their reach. That is the kind of inefficiency--and we 
have all experienced this. We don't have to explain this to 
each other. We all know that it is fundamentally inefficient, 
and that we have got to transform it, not simply tinker around 
the edges.
    Mr. BEAUPREZ. It is my observation that if anywhere that 
old adage ``time is money'' is true, it is certainly true in 
healthcare. It has been called to my attention that as much 
as--in the most expensive point of delivery in healthcare in 
our entire system, emergency rooms, for an hour of patient 
time, we, and I use that very collectively, we, but a lot of 
it, the government, have burdened our healthcare providers with 
an hour of paperwork. It seems to me that maybe we have 
overdone what was probably a very good idea with excessive 
regulation.
    I would offer you more as an observation than really a 
question, that perhaps we should be aggressively looking there 
as well, to try to wring some of the escalating costs, again 
assuming that time is money, the costs out of health care and 
let docs and nurses take care of patients. Last, in what little 
time I have--and maybe you have to respond in writing--you had 
mentioned that there is considerable savings with Medicare, and 
I believe I wrote it down correctly, intergovernmental 
transfers and other inappropriate actions. Can you respond with 
what exactly you meant by that?
    Secretary LEAVITT. The President has indicated his belief 
that we should wrestle with three problems with Medicaid this 
year. In 26 seconds I will just tell you. The first is we are 
overpaying on prescription drugs. There is general agreement 
among the States and the Federal government on that point. The 
second is that there are loopholes in our law that have 
provided a means by which people could give their assets to 
their children and qualify for Medicaid. That needs to be 
changed. The third is that there are some honest disputes 
between States and the Federal government about who should pay 
what share. Those are called intergovernmental transfers. It 
would take a while to describe it. It is time to fix it.
    Mr. BEAUPREZ. I thank the Secretary, and I yield back, Mr. 
Chairman.
    Chairman THOMAS. I thank the gentleman. Does the 
gentlewoman from Pennsylvania, Ms. Hart, wish to inquire?
    Ms. HART. I do, Mr. Chairman. Thank you. First, Mr. 
Secretary, I want to thank you for the work you did in your 
prior position, especially with regard to the reason with which 
you approached a lot of questions that we work with you, and I 
expect the same----
    Secretary LEAVITT. Thank you.
    Ms. HART. In this position, although it is probably going 
to be a little more trying, I would imagine. also, I am 
interested in a lot of the same things that Congresswoman 
Johnson is interested in. She had mentioned something earlier 
about mental health clients. We actually identified some 
concerns at home for mental health clients moving from Medicaid 
to Medicare and some of the unique problems that they have and 
they face. I commend that to your Department, and I hope to 
work with you along with a couple of the national organizations 
that are advocates for people with mental health issues. I 
don't have a particular question about it right now, but I look 
forward to working with you.
    Secretary LEAVITT. May I say that the conversation we have 
had today about mental health and this transition has raised 
questions in my mind that I want to further investigate, and I 
appreciate having the conversation. It has been stimulating to 
me in that respect.
    Ms. HART. We will share some of the concerns that were 
brought up. I just had a meeting in the district on Monday 
about it. My main question, though, is regarding the Medicare 
Modernization Act, some of the things that I think are really 
wonderful as part of it. I know that as those who are getting 
their health care through Medicare will learn, that it is going 
to be really helpful to them, especially the preventative 
solutions to health care issues. Many experts believe, 
obviously, this is going to be helpful to the quality of life 
and therefore, obviously, the quality of their health for 
seniors and for others on Medicare. If we are proactive like 
this, as all the private plans really are becoming, health care 
costs could be confronted and reduced like never before. I know 
there has been a number of issues that have been identified by 
your agency about that. I would like it if you would spend a 
little bit of time speaking to those issues specifically as you 
view them as we begin to implement the new Medicare 
Modernization Act (P.L. 108-173).
    Secretary LEAVITT. It would seem that many of those issues 
might be best responded to in writing so, that I can give you a 
considered response. As I understand your question, you would 
like to know how I basically feel with respect to mental health 
issues.
    Ms. HART. No, not mental health. Just in general health 
issues for people on Medicare as a result of this preventative 
focus that Medicare will take as a result of the modernization.
    Secretary LEAVITT. I think one of the great opportunities 
that has come about from the Medicare Modernization Act is the 
Welcome to Medicare physical. Not only will that provide a 
foundation for us to begin to treat those things that need to 
be healed, but it can also, provide us with a foundation of 
wellness. The transformation that needs to occur in our country 
is not simply providing technology for our records; it is a 
mindset. It is about not simply looking for ways to heal but 
for ways to keep us well. I envision a society where we have 
fewer people who are sick because more people have done things 
to prevent themselves from becoming ill. That is the 
opportunity that I think the Medicare Modernization Act sets 
forward for every senior as they enter, to have a wellness 
physical, a benchmark so, that we can begin not just to treat 
what ails them, but prevent those things that could ultimately 
shorten their life. I view the job the President has given me 
as the Secretary of Health and Human Services to fundamentally 
help people live longer and healthier lives, and to do it in a 
way that will help us maintain economic competitiveness as a 
nation. I think this is fundamental to that purpose.
    Ms. HART. Aside from being a life-fulfilling sort of idea, 
as far as seniors being healthier as they age, do you also, see 
it as a cost-saving measure?
    Secretary LEAVITT. No question about it. Not only will it 
be cost saving as we prevent it, but it also, provides great 
benefit to those who ultimately have longer lives and live 
better.
    Ms. HART. Are there any estimates that the Department might 
have that might help us to discuss that when we are in our 
districts?
    Secretary LEAVITT. I feel confident that there are. I am 
not able to articulate them, but I would be pleased to respond 
in writing.
    [The written response from Secretary Leavitt follows:]

    We understand your questions to be addressing potential health 
benefits and cost savings related to the new Medicare preventive 
benefits enacted in the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA). As of January 1, 2005, all newly 
enrolled Medicare beneficiaries are covered for an initial preventive 
physical examination, all beneficiaries are covered for cardiovascular 
screening blood tests, and those at risk for diabetes are covered for 
diabetes screening tests.
    These new benefits can be used to screen Medicare beneficiaries for 
many illnesses and conditions that, if caught early, can be treated and 
managed, and can result in far fewer serious health consequences. Such 
conditions as obesity, diabetes, heart disease, and asthma could be 
made far less severe for millions of Medicare beneficiaries.
    For example, approximately 129 million U.S. adults are overweight 
or obese, which costs between $69 billion to $117 billion per year. 
Obesity also has a significant impact on Medicare beneficiaries' 
quality of life and on Medicare spending. For the period between 1996 
and 1998, a 15 percent increase in annual per capita Medicare spending 
is attributable to being overweight, and a 37 percent increase is 
attributed to being obese (Finkelstein EA, Fiebelkorn IA, Wang G. 
``National medical spending attributable to overweight and obesity: how 
much, and who's paying?'' Health Affairs-Web Exclusive. 2003 Project 
Hope).

      Additionally, in 2002, an estimated 20.8 million people 
(7.0 percent of the population) had diabetes, costing the U.S. 
approximately $132 billion.
      Heart disease and stroke are the first and third leading 
causes of death in the United States. Cardiovascular diseases cost the 
U.S. more than $300 billion each year.
      Approximately 23 million adults and 9 million children 
have been diagnosed with asthma at some point within their lifetime, 
with costs near $14 billion per year.

    By providing an initial physician examination for all newly 
enrolled Medicare beneficiaries, seniors and disabled Americans will 
have the opportunity to discuss with their physician the importance of 
preventive care and living a healthy lifestyle.
    Smaller amounts might be spent preventing these conditions, given 
accumulating evidence that much of the morbidity and mortality 
associated with these chronic diseases may be preventable. Combined 
with other screening and preventive services already covered by 
Medicare, the MMA's new preventive benefits could result in Medicare 
spending less overall to treat beneficiaries with these conditions.

                                 

    Ms. HART. I would be pleased to receive that. I think it is 
part of the measure that has been underdiscussed, and I do now 
know, as people are starting to understand, that there is this 
Welcome to Medicare physical. They are pretty excited about it, 
I know, people that are approaching that age. The other issue, 
of course, for them is just the opportunity to know up front, 
early, and not really seek treatment when they are really sick. 
Thank you. I yield back.
    Chairman THOMAS. The Secretary, as a welcome to Washington 
informational piece, needs to know that the $1 billion cost of 
the physical provided no savings under the cockamamie scoring 
structure under which we operate here. He will find that there 
are a number of issues that, as you settle in, you will realize 
that getting this place to focus more real world in terms of 
cause and effect will produce savings. I am pleased to say this 
Committee and this Congress accepted the cost, after 6 years, 
of getting the physical in place anyway because we know, even 
if it doesn't produce any real savings, quality of life will go 
up significantly, whatever price tag you may place on that. 
Does the gentleman from Illinois, Mr. Emanuel, wish to inquire? 
We go back and forth between the Democrats and the Republicans; 
and if there were another Democrat, I would call on them, but 
you are the only one here.
    Mr. EMANUEL. I feel like a Member of the Agatha Christie 
novel, ``And Then There Were None.'' So, I am here. Is 
cockamamie--can you find that in the dictionary?
    Chairman THOMAS. Actually, that is HHS jargon.
    Mr. EMANUEL. I would hate to break it up into separate--
maybe we should give it to Mr. Safire, he has some free time. 
Thank you, Mr. Chairman. Thank you, Mr. Secretary, for being 
here, working with you at EPA. You know, I know I missed my 
colleague from Connecticut's question about obviously the issue 
of direct negotiation. I think one of the unfortunate--talked 
about a couple issues. One is on Medicare; second is on health 
care for children; and then on welfare. Hopefully I can get it 
in in short order. As your answers to periodic questions about 
the prescription drug bill and letting the market forces detail 
in that area and deal with price, the biggest issue as relates 
to seniors are prescription drugs--where it represents now 6 
out of every 10 cents of dollars, or 60 cents out of every 
dollar that they spend is on prescription drugs, where it used 
to be 10 cents--was the issue of affordability and price. I 
think the prescription drug bill missed dealing with that issue 
both in the areas of direct negotiation, reimportation, or 
moving generics to market quicker to compete against name 
drugs.
    In every one of those areas you could use market forces 
correctly and tools from the marketplace to get lower prices. 
Every purchasing agent for any corporation uses bulk 
negotiation. That is how Sam's Clubs does it; that is how 
Lowe's does it. They force the competitors to make--and then 
because of purchasing power, use their bulk purchasing to drive 
down prices. Everybody on this side says, why doesn't the 
government copy the private sector? Here is one example we want 
to copy the private sector and we rule it out, and yet we could 
get savings for taxpayers and for senior citizens. Second is, 
you know about my passion for reimportation because here in the 
United States we pay 40 percent more than anybody else in the 
world. It may not be the cure-all, but it would be one way to 
dent and bring competition to bear in the marketplace. The 
third would be bringing generics to the market faster, not 
allowing frivolous lawsuits by pharmaceutical companies to keep 
generics off the market for a long period of time. Every one of 
those are proven marketplace tools to bring prices down.
    Now, your predecessor--and you know, you have been asked 
here by others--would have liked to have that negotiating 
authority. You had it. Just in the prior question to my 
colleague from Colorado, you mentioned Medicaid pays too much 
for prescription drugs is one of the dictates by the President 
to deal with that. Medicaid can do certain things, Veterans 
Administration can do certain things, the purchasing agent at 
Sam's Clubs can do certain things, all leading to lower prices 
and getting the best price. We are preventing that from 
happening. I would hope at some point in your period of time 
here, rather than hiding behind the issue of safety--or we 
allow the insurance companies to do it--you can negotiate. I 
have full faith and credit that you can negotiate on behalf of 
41 million purchasers of pharmaceutical products. So, I want to 
make that statement, because I don't think we are using the 
market correctly.
    Second is, there was an article the other day, I think it 
was on Monday, in the Wall Street Journal about how many 
middle-class families have been letting their kids--rather than 
purchase the health care through their company because it is 
too expensive--to go into basically the SCHIP program. They are 
middle-class families. Have you ever looked at basically a 
consumption tax, a nickel, 4 cents, as a way to pay for 
universal health care for kids zero to 18, and make the 
commitment that for every kid zero to 18 we would pay for their 
health care? How much would that cost, and could we do a 
financing mechanism? I mean, I would be open to using a 
consumption tax on that basis to pay for health care for kids. 
Have you ever seen what would it cost to have universal health 
care up to 18 years old in this country? Do you have a cost 
estimate?
    Secretary LEAVITT. I do not.
    Mr. EMANUEL. Could it be something that the Department 
could look at?
    [The written response from Secretary Leavitt follows:]

    The MMA prohibits the federal government from interfering in the 
price negotiations between Part D plans and drug manufacturers and 
pharmacies. While the MMA does not allow government price negotiation, 
this does not mean that aggressive price negotiation will not take 
place. The MMA relies on private sector price negotiation and other 
cost management efforts to deliver substantial savings for 
beneficiaries. While some have called for the government to become 
directly involved in drug price negotiation under Medicare Part D, 
doing so would not save money and would have unintended adverse 
consequences.
    Both CBO and the CMS Actuaries have concluded that allowing the 
government to negotiate drug prices would not generate additional 
savings under Medicare Part D. The MMA relies on health plans and their 
related PBMs to negotiate deep discounts with manufacturers and to 
manage costs through proven techniques. Both CBO and the CMS Actuaries 
believe these plans will be able to achieve 25 percent cost management 
savings over time and that beneficiaries will save in a competitive 
market by migrating to more cost-efficient plans with lower premiums.
    Private sector price negotiation and other cost management 
activities have delivered substantial cost savings for other federal 
programs like the Federal Employees Health Benefits program (FEHBP). 
FEHBP leaves price negotiations up to the private plans that provide 
coverage for federal retirees. It has worked well for these plans, and 
we believe it will for Medicare as well. Enrollees in FEHBP plans have 
benefited from the favorable prices negotiated by these plans, likely 
resulting in lower out of pocket costs for copays and premiums.
    In addition, price setting by a program as large as Medicare could 
be disruptive to the health care market. Medicare beneficiaries account 
for about 40 percent of the dollars spent on prescription drugs in the 
U.S. If Medicare undertakes a heavy-handed government approach to drug 
prices, the implications for the market could be large. While some 
government programs have had some success with mandated pricing, these 
programs are much smaller than Medicare, and their pricing strategies 
do not have as great an impact on the health care market. Price setting 
by a program as large as Medicare may not permit adequate investment in 
research and development that we need for the future.
    We do not believe that Medicaid's approach to determining drug 
prices would generate larger savings than private sector efforts under 
the Medicare Part D program. While CMS data suggest that the Medicaid 
program receives rebates equal to about 22 percent of expenditures, the 
Medicaid program generally pays higher prices for brand drugs at the 
retail pharmacy than private insurers, which means that the ultimate 
prices paid by Medicaid are not as low as 22 percent rebates would 
suggest. The overall savings experienced by the FEHBP program from 
discounts, rebates, and cost management activities and the overall 
savings projected by CBO and CMS Actuaries under private Medicare Part 
D plans compares favorably to the Medicaid experience.
    Due to differences in the circumstances under which the Department 
of Veteran's Affairs and Medicare provide drug coverage, we believe 
that the VA model would not generate additional savings for Medicare. 
The VA directly purchases and delivers drugs to many individuals, 
whereas the Medicare program offers beneficiaries a choice of private 
plans and pharmacies. Many of the prices for VA drugs are determined 
not by price negotiation, but instead by statutory requirements related 
to the federal supply schedule.
    Experience with the Medicare Drug Discount Card Program suggests 
that private sector price negotiations have the potential to yield 
substantial cost savings for beneficiaries. The Medicare Drug Discount 
Card program has delivered substantially lower price for beneficiaries, 
and has done so without the leverage that an insured benefit will have. 
CMS estimates that the Medicare drug discount card program offers 
prices for brand name drugs that are about 12 to 22 percent lower than 
national retail cash prices, based on analysis of prices offered by 
card programs for 6 illustrative baskets of drugs. A private plan that 
administers a drug benefit is likely to have substantially more 
leverage in negotiating discounts and rebates than a discount card 
program. Thus, the success of the Medicare drug discount card sponsors 
in negotiating substantial discounts and rebates bodes well for the 
potential of Part D plans to meet our expectations of substantial cost 
savings for beneficiaries.

                                 

    Secretary LEAVITT. I am sure that between the able 
budgeteers at CBO and with technical assistance from HHS we 
could perhaps assist----
    Mr. EMANUEL. Get a price? Okay. To the issue of welfare 
reform, and having worked on it and worked with you when I was 
in the administration, one of the things that, besides child 
care, you know the Medicaid health care 1-year transition ends 
after the first year, and then a parent--as you ably show, one 
of the best benefits of welfare is to that child. Welfare 
reform that is. Because the person now working, that child is 
part of a culture of work. Yet, when that parent loses their 
health care, you are making them choose between work and being 
a good parent, and many times, as you know, the data shows 
people slip off of work and independence back into welfare, 
because that is the only way they can be a good parent and get 
the health care. I would hope that we look at in the proposal, 
of getting a second year of Medicaid transitional health care 
for people who leave welfare and go to work rather than just 1 
year. It gives them a longer time in the workplace.
    Chairman THOMAS. Does the gentleman from Ohio, Mr. Chocola, 
wish to inquire?
    Mr. CHOCOLA. Indiana, Mr. Chairman. I would be happy to 
inquire. Thank you.
    Chairman THOMAS. Would the gentleman yield just very 
briefly?
    Mr. CHOCOLA. Sure.
    Chairman THOMAS. Because, as new Members to the Committee, 
I would just tell the gentleman from Illinois that, as he 
knows, that the question of moving from patent drugs to 
generics is in fact in the jurisdiction of the Energy and 
Commerce Committee and not in this Committee's jurisdiction. In 
addition to that, in requesting CBO analysis of the Medicare 
modernization bill prior to its passage, the question was, were 
we to follow the Medicaid procedure of best price for drugs, 
that would cost us $18 billion. The ``to market'' strategy 
employed in the Medicare modernization bill saved $18 billion. 
The very point the Secretary made about saving money on 
Medicaid is, in fact, the use of best price, and their leaving 
money on the table that could be available through the market 
price structure. I thank the gentleman for yielding.
    Mr. CHOCOLA. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary, for being here, and thanks for your service. You 
might be able to surmise from where I am sitting in the 
Committee here and the order of the questioning here, I am new 
to the Committee. In fact, I am relatively new to Congress. Not 
long ago I was in the private sector. Unfortunately, I just 
caught the tail end of my colleague from Colorado's question, 
but I think he was asking you about information technology and 
the value of that. Certainly I would encourage you, having seen 
the magic of implementing information technology on 
productivity gains and lowering costs--improving quality, 
serving our customers better in the health care field I think 
could truly be magical if we can utilize that. So, I am glad to 
hear that you support that.
    Part of my goal as a Member of Congress is to bring some 
business practices and procedures to Washington. One of the 
things that certainly perplexes me and disturbs me is OMB has 
reported, I think last year, up to $45 billion of payments were 
made improperly and about 40 billion of that was in programs 
under the jurisdiction of this Committee. Certainly information 
technology can help us identify and prevent those. We talk 
about how much we spend on programs, and unfortunately our only 
measurement of success is how much we spend but not how well we 
spend. If we can identify those things and prevent those 
things, certainly we can spend much better. Do you have any 
thoughts now, or could you provide them later, on ways we could 
work together to make sure we prevent those improper payments 
in the future?
    Secretary LEAVITT. Every morning when I wake up, health 
information technology implementation is on my mind for that 
very reason. I believe it is the transforming power to allow us 
to have a more efficient system, to maintain our 
competitiveness as a nation, to deliver health care to more, to 
reduce the number of mistakes that are made in health care, to 
provide lower costs and better care.
    Mr. CHOCOLA. Well, I look forward to working with you and 
seeing ways we can accomplish that, because certainly I think 
it is very important. Just one quick other point. We have heard 
about questions about reimportation from places like Canada. 
One of the things that I never hear the other side of is the 
fact that the United States has about 50 percent of the drug 
market in the world; Canada has about 2 percent of the drug 
market in the world. It strikes me that we could reimport 
essentially every pill in Canada, and we could not really 
address the problems that we have here in the United States. It 
sounds like a good solution, but in fact it is not a very 
practical solution, because Canada simply does not have the 
supply. I think some of the leading pharmacies have come out 
and pointed that out, that they cannot fulfill America's drug 
needs. Do you have any thoughts on that?
    Secretary LEAVITT. We have spent most of our time today in 
the brief interchanges we have had on this subject focused on 
the cost. I will just acknowledge the fact that there is a lot 
of dispute on the economics of that subject, and I won't 
further that discussion today. What we have not talked about is 
safety. Drug counterfeiting is real and it is serious and 
dangerous. We have no idea at times whether a drug is a 
counterfeit drug or whether it is a real drug. There could be 
substantial differences in the quality of that product. My 
predecessors have very clearly indicated that they did not 
believe we had the capacity to guarantee the safety of those 
pharmaceuticals. I am new at this job. I am only forming my own 
opinion, but I am very quickly coming to the realization that 
drug counterfeiting is real and dangerous.
    Mr. CHOCOLA. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman. I yield back.
    Chairman THOMAS. I thank the gentleman. The Chair, for a 
very brief round of questioning, will recognize the gentleman 
from Washington, Mr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. I appreciate that. 
One of the issues that we talked about briefly earlier was 
health care coverage in this country. You were talking about 
the tax credits. In the past, the administration has estimated 
that 60 percent of the people who participate in the tax-credit 
program would have been previously insured. In other words, 
they already have coverage, and for one reason or another they 
now start taking the credit. Is that--does that really add to 
the--I mean, are you biting into the 44 million that don't have 
health insurance if what is happening is that 60 percent of the 
people who come into the--you say there is going to be 6 to 12 
million, something like that. If you expect that 7 or 8 million 
of those are going to be people who already have insurance and 
just are simply taking advantage of the credit, or their 
employer is saying we are going to raise the cost because you 
can now get a credit, I mean, I can see the manipulations that 
will go on. Are you anticipating that will come out of the 
individual market people are buying for themselves or people 
who are in company-sponsored things?
    Secretary LEAVITT. Congressman, I have spent considerable 
time in recent days working to reconcile what the number of 
uninsured individuals actually is, and I have discovered a 
rigorous debate that exists. You can hear numbers between 32 
and 48 million, and you can hear them larger than that or 
smaller than that if you choose to understand their arguments. 
One thing I have concluded is that there are broad groups of 
that population who are receiving care, but we don't call them 
insured because they don't have a policy. The community health 
center system is a part of that. The Indian Health Service is 
also, an example of that.
    It is equally difficult then to begin to estimate what the 
impact of one program or another will be on the permanent 
capacity for people who have health insurance. There are people 
who receive it, who give it up for various reasons at different 
times, and it is hard to come up with an exact number. What I 
have concluded through the advice of extraordinarily gifted 
people, economists, is that over the course of the next 10 
years we can assist 12 to 14 million people to be among the 
rolls of those who are insured. I----
    Mr. MCDERMOTT. Presently uninsured people?
    Secretary LEAVITT. That is correct.
    Mr. MCDERMOTT. With the indulgence of the Chairman, if you 
would give us the best of your analysis, because I think this 
issue will come up in this Committee.
    Chairman THOMAS. It is an important question, and I think 
the Secretary should submit an analysis, especially focusing 
on--the gentleman's time has expired--focusing on the way in 
which people define the uninsured; because there are a number 
of people who are, for want of a better term, periodically 
uninsured, there are those who are chronically uninsured, and 
there are those who technically are uninsured, but, as the 
Secretary said, receive significant health care.
    [The written response of Secretary Leavitt follows:]

    The health insurance tax credit proposal will benefit up to 4.6 
million Americans who would otherwise not have coverage. The health 
insurance tax credit proposal provides a subsidy for low-income 
individuals with modified income of less than $30,000 and families with 
modified income of less than $60,000. These eligible individuals and 
families have the option of using their tax credits to purchase a high 
deductible health plan (HDHP) and contribute to an HSA or to use their 
tax credits to purchase non-HSA eligible health coverage. The health 
care tax credit is only for lower-income individuals and families, who 
are unlikely to be eligible for subsidized employer-sponsored health 
insurance.
Additional information to respond to Chairman Thomas' question:
    How the uninsured are measured is an important issue to consider. 
People can be uninsured for various reasons, such as being between 
jobs, out of school and no longer covered by a parent's plan, not 
offered or ineligible for coverage through an employer, or not able to 
afford the coverage that is offered or available. In addition, a person 
can be covered for a relatively short time (between jobs) or for 
extended periods (unable to afford any coverage). The Agency for Health 
Care Research and Quality (AHRQ) has conducted analyses on data from 
the Medical Expenditure Panel Survey (MEPS) that provides some insight 
into some of these measures of the uninsured.
    AHRQ indicates that 79.8 million people under age 65 were uninsured 
for at least one month during the two year period between 2001 and 
2002, the most recent MEPS data available. Of this group, approximately 
31% (24.6 million) were uninsured for at least two years (long-term 
uninsured).\1\ But another 30% (24.0 million) of this group was 
uninsured for 6 months or less, while about 19% (15.0 million) were 
uninsured for 7 to 12 months and about 20% (16.1 million) were 
uninsured for 13 to 23 months.
---------------------------------------------------------------------------
    \1\ AHRQ defines the long-term uninsured as those survey 
respondents without health insurance for the entire two-year period 
they were surveyed. This population is compared against individuals who 
were uninsured for any length of time.
---------------------------------------------------------------------------
    While the Administration seeks to expand access to coverage for all 
those who are uninsured, clearly those who are chronically uninsured 
for the long term (two years or more) are of the greatest concern. 
These long-term uninsured are disproportionately older, poorer, and 
more likely to be Hispanic than those who are uninsured for shorter 
lengths of time.
    Among all individuals, those between the ages of 18 and 24 have the 
highest rates of uninsurance and the highest rates of long-term 
uninsurance. Despite the high rates among younger individuals, older 
individuals make up a disproportionate share of the long-term 
uninsured, even with their low overall rates of uninsurance, with 40% 
of the uninsured between 55 and 64 years of age remaining uninsured for 
two years or more.
    AHRQ analyses have shown that individuals below 200% of poverty are 
disproportionately represented among the long-term uninsured, even more 
so than among the total uninsured population. The poor (individuals 
below 200% of poverty), while comprising 12% of the total population, 
make up 19% of the total uninsured population and 21% of the long-term 
uninsured. Conversely, while high-income individuals make up 38% of the 
population, they make up 20% of the total uninsured and 16% of the 
long-term uninsured.
    Hispanics have the highest overall rate of uninsurance and the 
highest probability of being uninsured long-term. Hispanics make up 15% 
of the population, but 24% of the total uninsured population and 36% of 
the long-term uninsured. Of the 53% of Hispanics that lacked health 
insurance at some point during the two-year period, almost half (24%) 
were uninsured for two years or more.

                                 

    Chairman THOMAS. It is necessary for the Chair to note 
that, on the other side of the coin the gentleman just 
described, there are 40 percent of people who were not 
otherwise insured prior to the program who are now insured. The 
old adage of one size doesn't fit all is, I think, exactly 
right in this case. We are going to have to look at a number of 
not only legislative responses but, frankly, outreach programs 
to identify those folks to begin to bring them in. The Chair 
appreciates the concern of the gentleman from Washington and, 
frankly, wants to work with him in examining the current 
programs, how we can maximize the effectiveness of those, and 
look for some alternative programs; because, frankly, any 
number short of a technically correct 100 percent coverage 
isn't good enough.
    Mr. MCDERMOTT. I think, Mr. Chairman, the reason I raise 
this issue, and I think the Governor knows and you know, that 
many States have tried to maximize their Medicaid coverage and 
they have played all kinds of interesting games to do that. 
What I am wondering about is the kind of shifting that will go 
on when we put a tax credit out there, what will be the effects 
of all that? Anything you can do to give us an analysis of that 
would be very helpful.
    Chairman THOMAS. Not just an analysis of the consequence, 
but some gaming as to how we can anticipate and therefore be 
ahead of the curve.
    Secretary LEAVITT. Mr. Chairman, just a reminder, and I am 
sure all of you are aware of this. Those are administered 
through the Department of Treasury. We look forward to that 
kind of coordination and would be delighted to be part of a 
collaborative effort, but it is not specifically something 
within the mission or budget at HHS.
    Chairman THOMAS. I would tell the gentleman how fortunate 
he is in appearing before the Committee that has direct 
jurisdiction and responsibility for the Department of the 
Treasury, and we look forward to inviting you to a coordinated 
effort in that regard.
    Secretary LEAVITT. Thank you.
    Chairman THOMAS. Without any additional questions, the 
Chair thanks his colleagues, the Committee stands adjourned.
    [Whereupon, at 1:24 p.m., the hearing was adjourned.]
    [Questions submitted by The Honorable Jerry Weller to 
Secretary Leavitt and his responses follow:]

              Questions Submitted by Representative Weller

Question: Last year I engaged then HHS Secretary Thompson in a dialogue 
about rates of reimbursement for Federally Qualified Health Centers 
(FQHC) within the Medicare program. Specifically I had a concern that 
the per visit payment limit might be negatively impacting access to 
care, particularly among low income beneficiaries. In May of 2004 I 
received a letter from Secretary Thompson in which he shared my concern 
for ensuring access to care, although he believed the rates for FQHCs 
to be adequate. To his credit and because of the importance the 
President has placed on utilization of health centers, the Secretary 
did direct the Centers for Medicaid and Medicare Services (CMS) and the 
Health Resources and Services Administration (HRSA) to look into the 
FQHC payment limit, specifically how that limit was derived and whether 
it was appropriate to recalculate the limit.
    Almost a year later, I am now getting word from health centers 
inside my district and my state that this issue is a ``dead issue'' 
within CMS and that there is no intent to pursue the issue any further. 
I am obviously dismayed; particularly since I had the word of the 
previous Secretary to look into this matter.
    Secretary Leavitt may I have a commitment from you that you will 
pick up where your predecessor left off and direct CMS and HRSA to 
evaluate the FQHC payment limit and respond to my concern in writing to 
you?

Answer: As you know, the Federally Qualified Health Centers (FQHCs) are 
paid for their reasonable costs to treat Medicare beneficiaries, 
subject to a limit on a per-visit payment. For calendar year 2005, the 
per-visit payment limit is $109.88 for FQHCs located in urban centers 
and $94.48 for FQHCs in rural areas. The FQHCs can also bill separately 
for certain other services that are not included in the per-visit 
limit, such as x-rays, electrocardiograms, and clinical lab services. 
The FQHC per-visit limits have continued to be updated for increases in 
medical practice costs.
    Expanding access to health care for medically underserved Americans 
continues to be an important priority for this Administration. The 
FQHCs serve a very important role in providing health care in rural and 
other underserved areas. I strongly share your concerns in ensuring 
accessible care in these areas. Federally Qualified Health Centers 
(FQHCs) provide primary care services and the current Medicare payment 
amount adequately reimburses for this care. Although we believe the 
payment cap is appropriate and reasonable, we will continue to monitor 
FQHC payment amounts to ensure that FQHCs are paid appropriately.

Question: One of the rarely discussed improvements coming out of the 
Medicare Modernization Act was the adjustments made to the Medicare 
FQHC program. It is my hope that changes made to the program will 
increase access to care for low income seniors at community health 
centers. In Illinois, only 4% of health center revenue is derived from 
Medicare and I think the adjustments will help improve that percentage 
in my state.

    Relative to the adjustments made in the law:
    Is CMS on target to implement the FQHC ``wrap around'' payment for 
services provided under the Medicare Advantage (MA) program? My 
understanding is that CMS plans on implementation in 2006.
    I also understand that CMS is near completion of the regulations 
governing the FQHC Medicare program. When will they be available for 
comment?
    Relative to Medicare Advantage, I am concerned that low income 
beneficiaries living in very poor rural and urban communities may not 
have access to services provided at health centers, particularly those 
low income beneficiaries who choose an MA plan. I understand there is 
little support for requiring MA plans to contract with FQHCs, but how 
does CMS intend to assure access to FQHC services through the MA 
program?

Answer: Medicare Advantage (MA) organizations must provide adequate 
access to services for enrollees and, before contracting with MA 
organizations, CMS conducts reviews to ensure that the network of 
providers is adequate to meet the health care needs of expected plan 
enrollees. MA organizations are free to contract with FQHCs but they 
are not required to do so. The Medicare law explicitly prevents CMS 
from mandating the entities with which MA organizations contract to 
provide services. In order to ensure that requirements for enrollee 
access to needed services are met, MA organizations are also able to 
request capacity limits on their enrollment if their network is not 
large enough to care for additional enrollees. Also note that changes 
to the Medicare law made in 2003 address certain financial 
considerations related to payment for services provided by FQHCs under 
contract with an MA organization. Specifically, the law established a 
wrap-around payment beginning in calendar year 2006 to make up for any 
shortfall between what an MA plan pays an FQHC under contract and the 
payments the FQHC would receive from the Medicare fee-for-service 
program for similar services. Note that the MA plan must pay the FQHC 
the same amount it pays other contracted providers for similar 
services. We believe this change in the law may help facilitate 
contracts between MA plans and FQHCs.

Question: In a recent paper released to explain the upward revision in 
the Medicare Part D cost estimate, the Centers for Medicare and 
Medicaid Services (CMS) referenced the implementation of competitive 
bidding for services as a step they are taking which will ``provide a 
stronger foundation to keep Medicare sustainable.''
    Assuming that access in rural areas and quality standards are 
protected, does the Administration support extending competitive 
bidding to additional items and services paid for by Medicare?

Answer: CMS is in the process of implementing a Competitive Bidding 
Program for Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies (DMEPOS), as mandated by section 302 of the Medicare 
Modernization Act (MMA). This program is based in large part on a prior 
Medicare demonstration project, which obtained significant savings on 
DMEPOS items at the two demonstration sites.
    MMA section 302 also requires a competitive bidding demonstration 
for clinical laboratory services. The CMS Office of Research, 
Development, and Information is now working on a clinical laboratory 
bidding implementation plan.
    We expect the current DMEPOS bidding program and the clinical 
laboratory demonstration to offer insights into whether additional 
items may be good candidates for competitive bidding. Thus, we will 
look to the results of those programs to inform any future competitive 
bidding initiatives.

                                 

    [Submissions for the record follow:]

    Statement of Marlena Roberta Bryson, Canyon Country, California

    Our 15yr old daughter went to a party without our permission and 
her father and I found out about it. She refused to let us know where 
she was, refused to come home because she knew she would be grounded 
and we had taken her computer away. So we called the police and 
reported her as a runaway on December 17, 2004. We didn't hear from her 
for over 2 weeks. When we were finally notified of her whereabouts, it 
was by DCFS. Martin Tillinger notifies us that our daughter has been 
with her maternal grandmother (who we haven't spoken to in 6 months due 
to a family dispute, has made allegations of abuse by us and she is too 
afraid to come home. The next day, Martin comes to our home, does an 
investigation, interviews me and my three younger children, checks out 
our home and decides that our 15yr old daughter hasn't proven her 
allegations to be substantial and she was released back to us. 
Unfortunately, she was extremely mad and hit me with her fist in my 
left eye right in front of the DCFS office. I sustained a deep gash 
next to my eye that required stitches. At that time, Martin sent her to 
stay with her paternal grandparents. I did not press charges against my 
daughter. Martin proceeded to close the case on. On 1/13/2005, a 
different CSW Manjit Walia re-opened the case and on 1/14/2005 my three 
younger children were detained and taken out of school by DCFS. We were 
told that we were in violation of a previous dissolution custody order, 
which was in fact dismissed because my husband and I reconciled. Manjit 
assumed the order was still in affect. That same day, we meet with 
Manjit and Martin. We provide them with the notice of entry dismissal 
and proof of service that was filed in Ventura County. Then she says 
well 10 years ago there was a domestic violence issue and the all three 
younger children said that we were going to lock our 15 yr old daughter 
in her room, mind you, she has a bedroom window or bathroom window to 
sneak out of. So right away we knew Manjit wasn't being honest with us. 
These are bogus and false statements. She never once has come over to 
see our home. Our children were sent to live in a 2bdrm home with 
senior citizens (paternal grandparents), they sleep on the floor, they 
have been told that they are not wanted there, that only there 15yr old 
sister was the one they wanted to stay with them, they are threatened 
to get whipped with a belt and split up in different foster homes. 
Their paternal grandparents tried to tell us how to raise and reprimand 
our 15yr old and when we disagreed with them, they felt disrespected. 
That is when, I feel, they collaborated with the maternal grandmother( 
who has given them money during this time) get the kids away from us, 
because we haven't let her visit our children in over 6 months due to 
our dispute). Now, as of 1/20/2005, all 4 children were court ordered 
to temporarily stay with their paternal grandparents while the hearing 
was continued for further investigation. My 3 youngest cried out loud, 
as well as my husband and myself, in court. They want to come home with 
us. They told Manjit they wanted to come home. Even Martin told Manjit 
to let them go home to their parents. She refused. On 1/21/2005, my 
husband is notified that our 3 youngest children have run away from 
their grandparents. We eventually find them hiding in our back yard. On 
Monday 1/24/2005, reluctantly I had to return them to the Santa Clarita 
Sheriffs. At that time, I was arrested on felony parental abduction 
charges. I was booked and incarcerated for approx 23 hours. I wasn't 
read my rights until about an hour before I was released because the 
D.A. rejected my case. My children were sent to a foster home in 
Palmdale. I almost didn't make it to the emergency hearing on 1/27/
2005. I was never notified by DCFS about the hearing or that I had a 
right to attend. It was only when the foster mother informed me of the 
hearing and that I had a right to be there. I attended that hearing and 
was given a monitored visit with my three youngest children. Even 
though the foster mother is very nice, my children are not happy there. 
My son was on a basketball team and has since been kicked off. My two 
girls are in Girl Scouts and are missing troop meetings and cookie 
sales. My youngest daughter was supposed to perform in a school play. 
Our family has goals in life. We are on a mission to do things in life. 
We have had our problems in the past. We are not perfect. We love our 
family very very much. My husband and I have been together for over 21 
years and married approximately 16 years. Unfortunately, neither one of 
us had a good childhood upbringing. Therefore, we don't have a solid 
background of how normal families should be. So we are learning day by 
day. I do believe that has hindered us in living life on our own. I now 
understand the deep impact that has had on our family's lifestyle. We 
are not trying to make excuses for our actions--we are just 
acknowledging the facts that lead us to where we are today. Our kids 
know we love them as we know they love us. We are very involved in 
daily activities with them. My whole world surrounds my family. I am 
determined to do whatever it takes to get us back to the way we were. 
No matter what the paper trail appears to be, we are focused on our 
family. It is our family. We aren't cruel people. We are only human. We 
are open to suggestions for help with situations that we cannot 
maintain. We know we deserve an opportunity to help our family succeed 
and stay together. We don't deserve to be separated, without a chance 
to repair what has gone wrong. No one has given us chance to heal our 
problems. No one has stopped to even ask us if there's a problem or to 
offer advice. We're sorry for our wrong doings. We are aware of our 
actions. We also are learning from them. Don't punish our family 
without at least giving us a chance to improve.
    I have written a letter to several politicians, local, national and 
state agencies requesting information as well as help. Approximately 
80% have replied with offers to help. Assemblyman Keith Richman's 
office is investigating DCFS on my behalf. I recently heard from 
Governor Schwarzenegger's office and they too are concerned with DCFS's 
actions against my family. I am so grateful to receive help from these 
officials. Now, that DCFS became aware of their involvement, they have 
change their position and have recommended our children be returned to 
us immediately.
    I still believe that CPS/DCFS needs to be completely reformed. The 
CPS/DCFS agencies have been given too much authority/control over 
family's daily lifestyles. They have continued to violate civil rights 
and pass judgment without thorough investigations. Unfortunately, 
monetary incentives seem to be at the root of their intentions. They 
manipulate and sabotage every family they come in contact with. These 
agencies are staffed with the most corrupt rogue workers there are.

                                 
   Statement of Molly K. Olson, Center for Parental Responsibility, 
                          Roseville, Minnesota

            Title IV-D--Welfare Reform--Budget Savings Idea

 Clarify that IV-D is Intended for the NEEDY not any Private Domestic 
                            Relations Action

    State Agencies are Misusing Title IV-D to Obtain Federal Funding

   Is this a State Issue or a Federal Issue? State Legislators Need 
                             Clarification.

    This written testimony is a BUDGET SAVINGS IDEA applicable to 
federal Title IV welfare reform, with a potential to save taxpayers 
nationwide as much as $88 billion a year.
    The Title IV-D program is unnecessarily costing taxpayers (federal, 
state, local) as much as $88 billion in direct and indirect costs 
because of the misapplication of federal law resulting in an overreach 
of authority by the state's IV-D agency, under the direction of the 
Federal Office of Child Support Enforcement (OCSE), a division of the 
U.S. Department of Health and Human Services (DHHS), which take their 
instruction from Congress and the President.
    Title IV-D of the Social Security Act is a federal program that 
states are mandated to implement if they voluntarily participate in and 
want federal funding for Title IV-A (TANF). Title IV-D is a federal 
program that is administered by the state or a local agency within the 
state. All Title IV programs are meant for the needy and most 
vulnerable families. We need to continue to protect this class and 
promote independence from government.
    My concerns are particular to Minnesota, but the issues are 
identical in all other states that implement their IV-D program void of 
any eligibility standards and means testing.
    ISSUE: The OCSE has directed the state IV-D agencies to exceed 
their authority through their unwarranted practices, which are contrary 
to congressional intent, defying the purpose of the Title IV program, 
and unnecessarily costing taxpayers billions. This program must be 
restrained to protect the public purse and protect the privacy and 
independence of our families. The program has become over-inclusive 
because of the misapplication of the law, creating an excessive burden 
to the taxpayers. The program is violating individual rights because of 
an unlawful overreach of IV-D authority into private domestic relations 
matters, which are reserved to the states. Absent a determination of 
financial need prior to approval of the IV-D application, there is no 
pecuniary or protectable interest for the government to provide Title 
IV-D services.
    LAW/RULE: A change or clarification of the law or regulation, or a 
clarification to the states from the OSCE are needed to restore the 
program to its intended purpose and stop unwarranted government 
intrusion of the Title IV-D program into non-needy families nationwide. 
According to the congressional record Title IV-D requires:

    1.  First, Title IV as a whole, is limited to ``needy'' families 
who have become ``dependent'' on the government for financial support.
    2.  Title IV-D requires an ``absent parent'' and a ``needy'' 
family. The congressional record indicates the definition of the term 
``absent parent,'' for the purpose of Title IV, includes those parents 
who were not at all involved with their children, who abandoned the 
family to public assistance, and who are not fulfilling their 
responsibility to raise the children, thereby resulting in a ``needy'' 
family.
    3.  The congressional intent of Title IV-D clearly limits the class 
of IV-D recipients to two:
         a.  those on welfare, then IV-D becomes a cost recovery 
        program, to save taxpayer money by collecting money through IV-
        D to reimburse the IV-A agency, and
         b.  those at risk of falling on welfare (former and never 
        welfare recipients), to protect those who would become 
        ``needy'' if they don't receive their support payment 
        privately, to ensure payments as a cost avoidance measure.

    Currently, loving, involved, responsible, regular paying non-
custodial parents (good parents) are unnecessarily falling under the 
control of the government IV-D program even when their children are 
fully taken care of and at no risk of becoming part of a ``needy'' 
deprived family. Private domestic relations family matters are being 
unnecessarily drawn into the IV-D program even when: 1) there is no 
support problem and the non custodial parent has a history of 
consistently paying, and 2) the custodial parent (IV-D applicant) is 
financially well off (earning as much as $100,000 a year) and has never 
been on public assistance, is not likely to ever need public 
assistance, and could afford to take care of all collection privately--
so in effect, self-sufficient and even affluent people are using IV-D 
services because they get the services free or substantially subsidized 
by the taxpayer. State and local agencies encourage ALL divorced people 
to participate in the IV-D program regardless of need or circumstance, 
because the MORE people that are in the program, the MORE federal 
funding the state/local agency receives. The IV-D agency is growing on 
the backs of good people who have no need for the government program, 
but who are encouraged (even erroneously ordered) to use it, just 
because it is available. Larger IV-D agencies may be good for the 
agency, but it is not good for our families, and it does not promote 
efficient government.
    Unfortunately, nationwide, the practices under IV-D have exceeded 
the law and defeat the purpose of the program, using scare public 
resources to provide services to a class Congress did not intend to 
serve. Testimony, as far back as 1997, has warned of this problem 
created by perverse incentives to the states.

       Responsible Public Servants Warned Congress of the Problem

             Ms. Frye, Chief, Office of Child Support in CA

                      For the Welfare Reform Bill

                                3/20/97

    She states:
    ``As we understand it, the proposal goes far beyond the 
Congressional intent to develop an incentive system that rewards good 
outcomes and in fact encourages states to recruit middle class 
families, never dependent on public assistance and never likely to be 
so, into their programs in order to maximize federal child support 
incentives''. She goes on to say, ``And my colleagues across the 
country have already informed me how I can win at this system; recruit 
the middle class, bring those higher orders into your system and that 
way you will be able to benefit like some of the other states from the 
cap removal on the never-welfare population''.
    As an ``agent'' of the federal government, for the purpose of 
delivering IV-D services, the Minnesota State Department of Human 
Services shows their misunderstanding of the program, as they falsely 
inform our state legislators and judicial officers that IV-D is an 
``entitlement'' program. The MN DHS has also declared to the other 
branches of government that: 1) IV-D is a stand alone program, and 2) 
that the federal government requires the state to provide all the IV-D 
services to anyone and everyone who applies. The U.S. Supreme Court 
decision, Blessing v Freestone, made it clear that IV-D is NOT an 
``entitlement'' program.

              Title IV-D is NOT an ``entitlement'' Program

                           U.S. Supreme Court

               Blessing v Freestone, 520 U.S. 329 (1997)

    ``Title IV-D was not intended to benefit individual children and 
custodial parents, and therefore it does not constitute a federal 
right. Far from creating an individual entitlement to services, the 
standard is simply a yardstick for the Secretary to measure the system-
wide performance of the State's Title IV-D program. Thus, the Secretary 
must look to the aggregate services provided by the State, not whether 
the need of any particular person have been satisfied. . . . As such, 
it does not give rise to individual rights.''

 The intended beneficiary of the IV-D program is not an individual, it 
                           is the government.

    TITLE IV-D PROGRAM IMPLEMENTATION: The state and federal OCSE is 
mis-interpreting 42 USC 654 (4)(A)(ii), and using the phrase ``any 
other child'' to swallow up every child in the country, when an IV-D 
application is filled out. Because of the federal incentives to the 
state, the local IV-D agencies are encouraging everyone to apply. 
Currently, there are only two criteria for an applicant to enter the 
IV-D program and receive IV-D services. In Minnesota and other states, 
the two step need determination assessment process for IV-D services is 
limited to: 1) did one parent fill out an application and sign it, and 
2) are the two parents living in different households. Subsequently, 
even the upper middle class are being added to the program, absent a 
finding of financial need. There is nothing on the congressional record 
to support this over-inclusive eligibility standard--or lack thereof. 
Serving the affluent is contrary to congressional intent of Title IV 
and outside the scope of Title IV-D, which is to provide services to 
financially ``needy'' families only, which is clear limitation of all 
Title IV programs. This over-inclusive practice leads to a violation of 
many individual rights because the loving, involved, responsible, 
regular paying non-applicant parent is not provided an opportunity to 
object to the delivery of IV-D services in their private domestic 
relations case.
    The IV-D program was designed to recapture money from legal 
``deadbeats,'' not dads who involuntarily moved out, but relocated down 
the block so they could stay involved and see the children 3-4 days a 
week and maintain a strong record of regular support. However, once 
under the snares of the administrative IV-D agency, all non custodial 
parents find they have no individual rights and are assumed to be 
deadbeats, which increases conflict between the parents, which 
negatively impacts the children. The stated goal of the state IV-D 
system is to ``maximize federal funding.'' It's not about the children. 
The system doesn't have the best interest of children in mind, because 
the state is primarily after their own financial interest--that is, the 
federal funding. Loving, involved, responsible, regular paying dads do 
have their children's best interest in mind, and these efforts are 
often thwarted and discounted by the IV-D agency. Many non-needy 
middle-class custodial parents ignorantly sign up for full IV-D 
services just for the wage-withholding service, because they are misled 
to do so by the local IV-D agency and told ``IV-D is the easiest form 
of wage-withholding.'' With modern technology, private domestic 
relations cases have many private banking options for wage-withholding 
and direct deposit, and all divorced people do not need the IV-D 
program.
    The state IV-D agency and the federal OCSE are misinterpreting 42 
USC 654(4)(A)(ii), 45 CFR 302.33, and 45 CFR 303.2 to mean the federal 
government requires the states to ``provide'' full IV-D services to 
anyone and everyone who applies regardless of need or circumstance. On 
its face, the regulation merely states the services ``must be made 
available.'' Clearly ``made available'' is very different than 
``provide.'' A ballpark is ``made available'' to everyone, but that 
doesn't mean everyone is ``provided'' entry on the day of a game or a 
seat of their choice, unless they meet certain requirements.
    By allowing everyone and anyone into the IV-D program, when they 
simply fill out an application, we are creating a welfare program for 
the affluent. The IV-D program is making self-sufficient people 
dependent on the government, contrary to our welfare program 
objectives. This defies logic and common sense, and is unsupported by 
the record. (see attachment, with statement from GAO report).
    Wade Horn, Assistant Secretary, Administration for Children and 
Families, U.S. DHHS provided testimony to the U.S. House Ways and Means 
Committee on February 10, 2005 (before the subcommittee on Human 
Resources). In his testimony, he indicated that the purpose of ``these 
programs'' (referring to Title IV programs) is ``to improve the lives 
of families who otherwise would become dependent on welfare.'' As many 
as 40-60% of all current IV-D cases nationwide would not be eligible 
for services using the congressional purpose to limit the program to 
applicants: 1) on welfare, and 2) at risk of falling on welfare. Mr. 
Horn further testified that the next steps are to make ``economic 
independence within the reach of America's neediest families.'' People 
earning $80,000--$100,000 a year do not fit that focus or achieve the 
goals established by Congress for the IV-D program. Providing services 
to this class of people must stop or the whole system will eventually 
crash and go bankrupt (see attachment, with statement by former 
Secretary DHHS).
    Congress may not be opposed to providing IV-D welfare service 
funding to the wealthy. However, if the states are opposed to this 
practice and want to limit IV-D services to the ``needy,'' consistent 
with congressional intent, it seems that Congress should make it clear 
that the states are allowed to limit IV-D services based on an 
assessment of ``need'' and be assured they can do this without being in 
violation of any federal law, regulation, or the State Plan.
    Is this a federal question or a state question? The Minnesota 
Department of Human Services claims the authority to determine who is 
provided IV-D services is ``a federal issue'' further claiming ``the 
feds make us do it'' (i.e. provide IV-D to the wealthy families who are 
receiving their support with no problem, but apply for IV-D). If 
providing IV-D services to the non-needy and even affluent families is 
not a federal requirement, but rather, a choice the state can make or 
not make, and still be in compliance with IV-D, this must be made clear 
throughout the entire IV-D system nationwide.
    CONCLUSION/SOLUTION/WHAT CONGRESS CAN DO: Minnesota citizens and 
state legislators want to change state law to clarify that IV-D 
services are limited to those ``needy'' families Congress intended to 
serve: 1) those on welfare, and 2) those at risk of falling on welfare 
if they don't receive their private support payments. State taxpayers 
nationwide need to know the delivery of IV-D services must be limited 
to ``needy'' families. The MN DHS claims the Federal government WILL 
NOT ALLOW MINNESOTA to limit IV-D services to needy families, and that 
the state must provide services to everyone and anyone who applies. 
This means Minnesota (and all other states) are providing IV-D welfare 
services to the non-needy, who have never been on public assistance, 
display no evidence they are ever likely to need public assistance, and 
have never experienced a support collection problem. To provide clarity 
to the states, if this is not the position of Congress, please dispel 
the notion that the Secretary of DHHS can require that the states 
``must provide'' services to the non-needy who are outside the scope of 
the purpose of the Title IV-D program and beyond the stated intent of 
Congress.
    BOTTOM LINE: Minnesota has wide bi-partisan support for a deficit 
reducing measure that would limit the non-public assistance IV-D 
services to the ``needy.'' We are assured other states would follow. 
The Minnesota state legislative body is seeking documentation from the 
federal government that would ensure:
    1) Minnesota will not be out of compliance with the Title IV-D 
State Plan or federal law, if we enacted a state law that would limit 
IV-D services as Congress intended to: 1) those on welfare, and 2) 
those at risk of falling on welfare if they didn't receive their 
support privately.
    Please help solve this problem of the over-reach of authority by 
the IV-D agency, resulting in unwarrated intrusion by the government, 
impacting the privacy rights of non-needy families, and causing an 
excess burden to taxpayers at all levels: federal, state, and local. I 
represent a 100% volunteer organization, and we have no paid lobbyists, 
and ``we the people'' need your help. We have been seeking an answer 
from Congress on this issue for more than two years; 201 Minnnesota 
legislators are waiting for a response. The awareness of this 
misapplication of the IV-D program is spreading over the internet and 
emails are being forwarded nationwide to expose the problem.
    WE WANT OUR FAMILY ATONOMY BACK. We expect fiscal responsibility 
with our tax dollars. Congress and federal and state agencies are 
charged with the task of allocating limited funds across a range of 
needy families. Private domestic relations matters should remain 
private absent a compelling state interest. When there is no pecuniary 
interest for the government, nor a need to invoke parens patriae powers 
to protect the child, the government should not be involved in the 
family. Putting loving, involved, responsible, regular paying non-
custodial parents and high earning custodial parents into the Title IV-
D program unnecessarily increases conflict, destroys what little is 
left of the fractured family, thereby harming children, and is nothing 
short of a fraud upon the taxpayer. We have 7 people on our research 
team with 38 years of cumulative experience researching Title IV-D. We 
would appreciate the opportunity to share more of our research with 
you, and answer any questions at anytime.

             The GAO has already figured out this problem.

             Why has this report has been largely ignored?

    June 13, 1995 ``Opportunity to Reduce Federal and State Costs''

                       Report # GAO/T-HEHS-95-181

           By Jane L. Ross, Director, Income Security Issues

    ``. . . many non-AFDC clients may not be within the population the 
Congress envisioned serving.'' p. 6
    According to the Bureau of Census 1991 data, ``about 65% of these 
reported incomes, excluding any child support received, exceeding 150% 
of the federal poverty level.'' p. 6
    ``. . . about 45 percent reported incomes exceeding 200 percent of 
the poverty level and 27% reported incomes exceeding 300 percent.'' p. 
6
    ``. . . the rate at which child support services are being 
subsidized appear inappropriate for a population that Congress may not 
have originally envisioned serving.'' p. 5-6
    ``The non-AFDC child support program--many are not within the low-
income population to which Congress envisioned providing child support 
enforcement services.'' p. 3

             The US DHHS has made a strong policy statement

Why has OSCE policy changed to require that a full range of services be 
                      provided to all applicants?

   U.S. Supreme Court Case--Blessing v Freestone, 520 U.S. 329 (1997)

      Silver's Reply Brief (page 5) to the Eleventh Circuit Court

    Policy Statement From Donna Shalala, US Secretary DHHS:
    ``. . . a guarantee . . . of the full range of . . . child support 
enforcement services--for all individual cases--would bankrupt IV-D 
agencies across the country.''

                                 

             Submission of Tammy Lee O'Dell, Mesa, Arizona

    I am writing on behalf of my sister and her problems with CPS. I 
feel that CPS is wrong in so many ways. After telling my sister she 
must come up with clean UA's she would get her baby (2months) back and 
they wouldn't come get her other 2 children whom are 3 and 5 yrs. old. 
After doing UA's for 3 months they showed up at her door with an 
officer and forcefully took her 3 yr. old little girl from her arms 
claiming they already picked up her 5 yr. son from school. They reason 
they gave was because she was living at a house they told her she 
couldn't stay at. If that was the case why did they go where she 
actually was. At the next mediation they said that they were not going 
to give the baby back because he has been in the care of the 
grandmother and is use to her. They would schedule supervised visits 
and them not bring her children for 3 months. Her 5yr. old son thinks 
his mom doesn't want him. CPS want to know why her son has so much 
anger built up not remembering they could be that reason. For the 3 
months my sister did not see her children they told her it was because 
she never called her parent aide the day before and my sister said she 
hasn't been able to get ahold of her. It just so happened on the same 
day my sister shows up to see her children which they weren't there, 
CPS tells my sister that they haven't been able to get ahold of her 
parent aide for 2 weeks. Cps has made up stories in her file that are 
not true. Things like she had a baby die in California which she has 
never lived or been in California. I remember the very first mediation 
she had with all the CPS workers and her lawyer and we told her lawyer 
that she wanted to fight the grandmother who took the baby from her. We 
tried to explain that the grandmother has been after my sister since 
the day she refused to not do the abortion in which the grandmother was 
gonna pay for. She even wrote a letter to my sister begging to adopt 
the baby and continued until after he was born. My sister refused. When 
she told her lawyer that she wanted to fight the grandmother he said 
ok. But when we got into the court room that is not what happened. He 
told the judge that she agreed to do the parent assessment program. And 
since you cant say anything in court to the judge and that fact that we 
really didn't know what was going on until afterwards and he explained 
it to us and thought that would be for the best we were very angry.
    I tried writing to the ombudsman office but all I get from them is 
we will look into it and that's as far as it goes. My sister may loose 
her parental right to her baby and other children if something isn't 
done. And that would be what ever game CPS would like to play and by 
their rules. Either way I fear she may loose. I have tried myself to 
take care of the children and they once told my other sister that they 
(CPS) would do what ever it takes to see that these children do not go 
to any member of this family. I really don't know how these so called 
child protectors can go into a happy home remove children and wonder 
why these children are so mentally and emotionally a wreck. They should 
look into the mirror and quit blaming the parents. I really hope that 
if nothing else I can care for these children, they can grow up with 
their own family members and not be bounced from one home to another. I 
leave you with this to think about, what if it was your own child taken 
from you, not knowing where he or she was cause they wont tell you. 
Wondering is he being taken care of. I pray for all of those parents 
whom are innocent.

                                 
        Statement of Chris P. Nelling, Mercersburg, Pennsylvania

    We have read with interest about The Committee on Ways and Means 
Hearing on President's Fiscal Year 2006 Budget for the U.S. Department 
of Health and Human Services and would like to add our point of view. 
We are joining the growing community which believes our tax funds would 
be put to better use helping preserve families rather than tearing them 
apart. Although organizations like Child Protective Services and U.S. 
Department of Health and Human Services claim they are protecting 
children by removing them from abusive homes, a recent study suggested 
that over 85% of children in foster care have not been abused by their 
biological family. (See Shell, Susanne. 2001. Profane Justice. Sage 
Wisdom Press). In most instances the children are taken from their 
families without a trial, hearing or even due process because if any of 
these rights (which are supposed to be guaranteed by our Constitution) 
had been granted to the family then the state would surely lost their 
bid to remove the children. We would like to share with you our case.
    Cumberland County Children and Youth took four of our five children 
in May of 2004 (they first started trying in Spring of 2003), based on 
accusations that they completely made up. They placed two of the 
children with their biological father ``Mark'' and two in a foster 
home. At the first hearing (where they took the children) we did not 
have documentation to contradict what they testified to since we had 
not been informed of the accusations at that time. Children and Youth's 
lawyer had several months to prepare their case against us, we met our 
lawyer about 10 minutes before the hearing. After the first hearing, 
when we learned about the accusations we knew we could get physical 
documentation (medical and court records) to disprove the allegations. 
During the time we were preparing our case against CCCY, the case 
worker told us that Mark no longer wanted the two children placed with 
him, but he did not want them to go back to Charolette either. Mark and 
CCCY told us that if Charolette agreed to let four children get 
adopted, they would drop the case against our youngest daughter. We 
were having trouble with our court appointed lawyer at the time (he was 
supposed to a court appointed ``free'' lawyer for those who can not 
afford one, but he kept implying that we should be giving him money, so 
we agreed.
    During one visit in August, one of the children ``Gabby'' told 
Charolette that Jeff was hurting her and Jeff was touching her. 
Charolette asked the caseworker who Jeff is and he turned out to be the 
foster mother's biological son. The case worker also informed 
Charolette that Gabby had killed Jeff's cat (she has never harmed 
animals before). Charolette asked for this to be investigated but CCCY 
denied the need for an investigation. Gabby repeated her accusations at 
the next visit, Charolette again asked for an investigation and was 
again denied. After the second consecutive visit where Gabby informed 
her mother that someone at the foster home was hurting her, CCCY 
started cancelling visits with the biological mother (once because the 
phone system there supposedly quit working, once because the children 
supposedly had the flu and once for an undetermined reason). After the 
third cancelled visit we received a family service plan to revue and it 
contained a line that said ``no further visits to be scheduled with the 
biological mother.'' Charolette continued asking CCCY to investigate 
the accusations against Jeff.
    Charolette did not sign the adoption papers because she was unsure 
that the children were going to a safe place. We then started working 
on our case again because CCCY decided to try to terminate Charolette's 
parental rights. At the second and third hearings we had the 
documentation (outlined below) to show that their allegations against 
us were false, but the master of the hearing would not allow us to read 
or show them because CCCY did not think it was appropriate.

------------------------------------------------------------------------

------------------------------------------------------------------------
                                                ALLEGATIDOCUMENT

  1 Charolette denied medical treatment to Ashley      Hospital records
        (oldest daughter) on 04/30/04 and 05/05/05     from not only
                                                       those two dates
                                                       but a third as
                                                       well that clearly
                                                       state Biological
                                                       mother wants
                                                       treatment,
                                                       biological father
                                                          denies

2 Charolette has a history of child abuse and Mark     Charolette passed
                                          does not     child abuse
                                                       clearance Search
                                                       that same year.
                                                       Police record of
                                                       Mark's arrest for
                                                       abuse (in 1997).
                                                       Report from
                                                         Meadows
                                                       Psychiatric
                                                       Treatment Center
                                                       stating Mark has
                                                       abused wife and
                                                        children

      3 Charolette was apathetic towards Ashley's      Charolette fought
           disability (she has Tourette's Syndrom)     for safety belts
                                                       on Ashley's bus
                                                       at school.
                                                       Charolette
                                                       initiating The
                                                       treatment at The
                                                       Meadows and at
                                                       Chambersburg and
                                                        Carlisle
                                                       Hospitals (see
                                                       References
                                                       above). Mark was
                                                       not present At
                                                       any of the safety
                                                       belt hearings and
                                                       opposed the
                                                        hospital
                                                       treatments

    4 CCCY has had previous founded cases against      Letter from
           Charolette in which she admitted guilt.     previous case
                                                         stating
                                                       ``assessment
                                                       complete,
                                                       unfounded, no
                                                        services
                                                       required''

5 Charolette was uncooperative towards Family Based    Report from FBS
          Services (one of Ashley's treatment/care     dated 4/1/04 (one
 organizations) and did not attempt to meet the FBS    month before
                                            goals.     children were
                                                       taken) listing 7
                                                       long term goals,
                                                       4 were completed,
                                                       2 approaching
                                                       Completion and
                                                       one in progress
------------------------------------------------------------------------

    Again, we had these physical documents there and were not allowed 
to show them or read from them. After the hearings, we were 
congratulated for ``winning'' the case because they failed to terminate 
Charolette's parental rights. We did not feel like we had won, however, 
because we still did not have our children back.
    Less than a week after the last hearing (Nov 10), we received a 
letter stating that after play therapy, Gabby has decided it was not 
Jeff who hurt her, but rather it was Chris. So after three and a half 
months of living with Jeff's mother and without any contact with us, 
when the child changes the name from Jeff (who was never investigated) 
to Chris, Chris had to undergo an investigation including police 
questioning. When the questioning began the officer started out using 
the term molested and on one occasion, rape. When Chris told them that 
``Gabby'' had been seen by a doctor just a few weeks before she was 
taken from us and that he would testify that there were no signs of 
abuse then . . . the officer looked at the CCY caseworker, she nodded 
her head and the officer turned back to Chris and said ``We have 
decided to reduce the accusation from molestation to inappropriate 
touching'' or in other words from something that we could prove Chris 
didn't do to something that is impossible to prove either way. Chris 
requested a lie detector test which they said he could take by the 
third week of December and when they failed to make an appointment for 
that and I again requested the chance to take one they avoided the 
question and changed the subject. It is now almost March and Chris 
still has not had a chance to do this. In the second week of February, 
we received a letter informing us that the case against Chris is 
founded and his name is being added to the sexual predators list. This 
has been done without a trial, without a hearing or even without a 
chance to present his case with a lawyer present.
    We know this is not an isolated incident. When we were in the 
waiting room before one of the hearings, a girl ``Julie'' came up to 
Chris. She recognized him from the store he owned at the time and 
started talking. Eventually she said she wished she could see her mom 
and step-dad and Chris asked if they had done something to her and if 
that was why she couldn't see them. She replied that she told them over 
and over that her step-dad ``Mike'' didn't do what they were asking but 
they kept asking so finally she said yes so that they would just stop. 
An older woman that was with the girl (we aren't sure if she was a 
caseworker or foster parent) just sat there smiling, like she was 
pretending not to hear.
    We agree with the need to stop child abuse, but we do not believe 
U.S. Department of Health and Human Services actually contributes to 
stopping abuse. In many cases, such as ours, they even contribute to 
the abuse done to children. We believe that funds should be used to 
protect families, not destroy them. Children and Youth investigations 
concentrate on the poorer populations in society because the 
organization knows that these families can not afford a lawyer on their 
own and the court appointed lawyer will have no chance after being 
familiar with the case for only a few minutes. In most cases, the 
parents are not even made aware of who the representing attorney will 
be or even what the actual charges are until just before the hearing. 
How can a family defend itself this way? Funds would be better 
appropriated in such a way as to give innocent families a chance to 
defend themselves against false accusations. Use funds to make sure the 
court appointed family lawyer has time to prepare a case. Use funds to 
help families provide day care for their children so they can get 
better educated or find jobs. Do not use funds to support the taking of 
children from innocent families and handing them over to true abusers. 
The recent election showed that America's top priority now is the 
preservation of family rights and values; lets not fund organizations 
that are trying to erode those values.

                                 
       Statement of Roberta Lynn Reightley, Tehachapi, California
    I am writing this on behalf of my granddaughters Evinee and Desiree 
Romero, who are twins. They were born on 9/15/04. They were born 
premature by emergency c-section to my daughter Virginia Romero. Her 
toxicology report was positive for meth and marijuana. Needless to say 
C.P.S. got involved. My daughter stated that she would like either 
myself or my oldest son and his wife to gain custody, while speaking 
with the hospital social worker, and I am a witness to this matter 
because I was in the hospital room visiting with her when the hospital 
social worker came in to interview her. Yet this is not what happened. 
They didn't fully investigate the family before they made their 
decision to place them in the home of pre-approved foster adopt 
parents.
    The twins were in the hospital for almost two months, and the 
foster parents were visiting with the twins before they even left the 
hospital. The youngest twin Desiree left the hospital the day before 
our first court date, and the oldest twin Evinee left about a week and 
a half later.
    I was about to take my very first vacation, yet the twins birth 
changed my plans and I stayed in the valley, I reside in Tehachapi, 
which is about an hour and 45min away.
    For about the first month and a half, I was at the hospital 
participating in their lives, bathing, changing, and feeding them, I 
would hold them, talk to them, pray for them, I went out and bought 
them clothes and blankets. After I returned to work I visited as often 
as possible. My daughter had a set of bands and I had the other which 
would allowus to visit with the twins, I would take the family so they 
would be able to visit.
    Our first day in court we addressed the court with letters of 
recommendation that I obtained from Law Enforcement Officers, Prison 
Officials, and others in the community, in which I reside, and we also 
offered my oldest son and his wife as an alternative for placement of 
my granddaughters. The attorney that I have spent over seven thousand 
dollars on then file a defacto parent application, and I also received 
a call from a supervisor at social services who had received the 
letters of recommendation, Nancy Patt who apologized and said that she 
was going to let me have the twins. I don't know the date of the call, 
yet for the next court date she wrote a excellent report on my behalf 
and told me to take the car seats with me, the date 11/8/04,the judge 
ordered a home assessment, that came back with a triple a rating. I 
didn't have parents who cared to raise me and I was put in the streets 
at 11, I was almost12 years old and I went through so much and I didn't 
have a good background, yet who I am today should have made the 
difference, the courts were coming against me for things I was never 
convicted of and then they hade me jumping hoops stating you have three 
felonies and two would be acceptable so I had one expunged, I did 
everything they asked me to do. And for the next hearing which was the 
defacto parent application Nancy Patt wrote another good report in 
hopes that I would obtain custody of my granddaughters. Minors counsel 
who was a social worker turned attorney stated that the letters I had 
obtained were letters from my druggy friends I did not catch this 
comment my attorney did, I had a full drug screen that was witnessed 
that I paid for done it came back clean to all drugs yet, minors 
counsel stated that the stress of raising my granddaughters would put 
me back on drugs. I was clean for eight year and went through a 
situation with my oldest son, I lapsed for a period of three months and 
I have been clean and serving the Lord ever since, my son and his 
family is doing the same. The defacto parent application was denied at 
this present time but the doors were left open as my attorney stated 
that we would file for a pardon. Visits had been ordered from the first 
day in court and I have been driving 147 miles one way every week. I 
called my daughter in-law and I stated I am tired of playing their 
games, and asked her and my son to go down and get live scanned my 
daughter in-law has made numerous calls to social services before this, 
they went down to the social services office and were live scanned. 
When the results of the life scan came back they were told they could 
be approved in twenty minutes because my son only had misdemeanors on 
his record and they were almost 8 years old. Yet they got a call back 
stating that family preference had been closed and I know for a fact it 
had not been closed. My daughter in-law called the fifth district and 
spoke with a person named Rene Quinn and she was then referred to a 
woman named Shirley Logan, my daughter-in-law Pam Romero explained the 
situation to Shirley who in return stated that something was not right 
and she would have this investigated, and they would get back to her 
within 10 days. Pam had to call her back because they had not returned 
her call within the ten days, Pam then received a call from a 
supervisor named Alberto Marro who stated that he looked through the 
court minutes and that family preference was never ruled on and that 
something was not right, and he could not understand why this had 
happened but that he would further investigate the situation and get 
back to her. He called her back and stated he had no answers for us, 
Pam then called Shirley Logan back who stated that It was out of their 
hands because it was already in the court system.
    We appeared in court, myself my daughter my son and my daughter in-
law on 1/25/05 in dept 114 and my attorney had prepared a document 
pertaining to my son Eloy and my daughter in-law Pam the Judge stated 
the she was not going to reopen family preference, yet this had never 
been closed, they were going off of Rod Louden's report to the courts 
who is against the family getting the twins. The judge did order that 
we all were able to visit each of us were granted one hour a week, and 
my daughter was granted two hour visits, the judge was informed that we 
had already been denied one visit so she ordered a make up visit. Which 
still has not been granted in fact I was denied two more visits. I 
called Rod Louden pertaining to the first visit that was denied, he 
leaves the foster mom in charge of all visits, and when I called him 
this first time after court he stated, you are calling me why, I spoke 
to him in regards to the visit that was denied and he stated that if it 
were up to him family preference would have already been taken away and 
that we wouldn't have any visits at all. And he told me that there was 
nothing he could do about it. My daughter in-law Pam and I went and 
spoke to another Attorney who we retained, and he suggested that since 
my last visit was denied to call the socialworker directly to set up 
the visit, I did call Rod Louden to try and set up the next visit I 
first called and left a message and he did not call me back, so I 
called again and he answered the phone, I said hi Rod this is Roberta 
he very sarcastically replied Roberta, Roberta who, I replied Roberta 
Reightley his reply was oh well you didn't leave your last name or a 
phone number when you left your message so I didn't know who you were 
and that is why I didn't call you back, I deal with 200 people a day, 
yet he knew who I was without stating I had left a message. I asked if 
he could set up my visit for this week, he asked did you call the 
foster mom, I replied no I am calling you because my last visit was 
denied and I would like to see the twins this week, he said he would 
call the foster mom and call me back, and he stated by the way the 
higher ups the people you called are investigating the case, he was 
very sarcastic with me almost to the point of being rude. He called me 
back and he said the foster mom told you that you and your family were 
supposed to get together and all visit on the same day for one hour, 
and I told him we had discussed this and it would be impossible, due to 
our different schedules and I had already change my days off at work to 
accommodate the foster mom's original requested days which were Mon. or 
Tues. and that I have been visiting on Tues. since we started the court 
ordered visits. He told me call the foster mom and discuss this with 
her. I did so and was denied this visit as well. We did set up a visit 
for the following Tues. I called Rod back and told him that this visit 
was also denied and that I won't be able to see them until next Tues. 
his reply was, well it will just have to be next Tues. then.
    My attorney called and spoke with Ms. Johnson the day of court 1/
25/05 due to the first missed visit and she assured my attorney that 
Rod would now set up the visits and that the foster parents would no 
longer be the monitors when it came to the visits. Ms. Johnson also 
stated that my daughter would be the only way we would be able to get 
the twins back into the family. The foster mom is still in charge of 
the visits they are also not in compliance with the court orders, and 
the foster mom has made false accusations against us stating that we 
have intimidated her, this same day we had previously had set up the 
visit for this day and the foster parents were in court with us this 
day, the social worker Rod Louden had told them to go to court because, 
he was hoping and had told my daughter in-law that after this court 
date that all visits for the family would stop. The foster mom was in 
the courtroom when the judge made her ruling about the visits and that 
we were owed a visit for the missed visit, yet when we met for our 
visit that day my daughter was with us and the foster mom would not 
allow a two hour visit.
    We have continued to fight this matter any way we know how we've 
made more phone calls to Los Angeles county, we've called human 
resources who referred us to social services, who referred us to child 
services and they have told us that this does not sound right and that 
they would investigate the situation, I feel that there is something 
very wrong about this whole situation, they are keeping things under 
lock and key. They would not allow my daughter to look at her file, I 
took her to the court house to look at her file, they told her that the 
file was confidential and that she would have to write to the judge in 
order to be able to get any information from her file. We then called 
her attorney who didn't return the call until a week later, the 
attorney stated that if she had I.D. she should have been able to view 
her file, and asked why did she want her file that she had already told 
her what she needed to do.
    I feel there is something very wrong about this whole situation, we 
have spent almost 15 thousand dollars on attorney fees and furniture 
because they told us we had to have everything prepared in our homes. I 
feel that there have been games played throughout this whole situation, 
and there are two precious lives at stake here who deserve to be raised 
in the house of the Lord and raised in the ways of the Lord.

                                 

    Statement of Bob Moore, The Oklahoma Taxpayer, Lawton, Oklahoma
    Freedom from Federal Personal Income Tax
    President Bush's Inaugural Speech was about FREEDOM. Below are some 
ways the federal government can create more freedom for the American 
people.
    I was telling a small group of friends about my Eight Year Plan 
when one lady spoke up to say, ``Bob, you do not understand, the 
Federal Government is not into SIMPLE''. I had to agree. I am into 
SIMPLE. I use the ``KIS Theory'' Keep It Simple.
    First example of SIMPLE is the federal income tax on interest 
earned on bank accounts. Why have income tax laws for 300 million 
people when the federal government should have the financial 
institutions (appr. 10,000) pay a monthly tax being a percentage of the 
total dollars paid as interest to clients. No tax due from the 
citizens, the bank pays the tax, SIMPLE.
    Same is true with stock dividends, have the corporations pay the 
government a percentage of the dollar amount paid to the stockholders. 
No tax due from the citizens, the corporations pay the tax, SIMPLE.
    Second example, most taxpayers believe there is at least 2% waste 
in the federal government. If the President reduced the size of 
government by only 1.25% each year. That would be 8 X 1.25 = 10% 
totally reduction in the size of government at the end of eight years. 
That is a huge 10% savings, just that SIMPLE.
    Third example of SIMPLE is the 40-40 Tax on Gasoline. As a child, I 
asked where does the .9 of a cent go? Years later, I still don't really 
know. Keep the tax simple and honest such as:

a.

eliminate the .9 cent;

b.

this tax shall not be amended for forty (40) years;

c.

a total tax of forty (40) cents a gallon tax according to the following:

d.

twenty (20) cents shall go to the federal government and

e.

twenty (20) cents shall go to the originating State government

f.

gasoline tax to ONLY go toward roads and bridges.

    Fourth example of SIMPLE: Toll Roads, Sales Tax and Income Tax
    Can you image driving up to the toll booth to pay the toll and the 
person starts asking you financial questions such as how much money do 
you make; how many children do you have; how many cars do you own. Then 
says according to your credits and deductions; the toll will be X 
dollars.
    Next event, you visit Wal-Mart, when you check out, the Cashier 
starts asking you financial questions to figure out the amount of sales 
tax you will be charged.
    Does this sound silly? Can you image how many people this type of 
tax system would require? How much un-necessary work this would cause?
    Now look at the Federal Income Tax System with all the forms, 
credits and deductions, etc.
    See the comparison? How simple the Federal Income Tax System could 
be with a flat tax. Our citizens live in fear of the IRS and hate April 
15th.
    There is a better simpler system available if people will demand 
it. With the follow system, we could eliminate the dreaded April 15th 
deadline.
    Simple Tax System: Use the right formula then adjust spending to 
the amount of money collected. Truthful Tax Reform--Federal Tax Payroll 
Deduction Program.

1.

``TOTALLY'' Eliminate the Personal Income Tax ``TOTALLY''.

2.

Fact: FICA tax is over 15% of the employees' paycheck. Federal Courts have 
ruled the FICA is a tax not a retirement fund. The Federal Government needs 
to be honest and declare that FICA tax goes to the general fund to pay for 
government spending programs. Re-name FICA tax to Federal Tax Payroll 
Deduction Program.

3.

Government taxes should be on commission, just like all private businesses 
and private business' employees. The government spending can only grow if 
more people make more money.

4.

Payroll deduction is the most efficient way to collect taxes. The Federal 
Tax Payroll Deduction Program will be the only federal tax that wage-
earning Americans will pay. Never a personal income tax form to file with 
the IRS.

5.

Keep the system simple, one rate for all taxpayers. Ten (10%) Percent is 
good enough for GOD, then Ten (10%) Percent should be good enough for the 
government. However the federal government is not as efficient as GOD so 
lets put the maximum rate at twenty (20%) percent. The Federal Tax Payroll 
Deduction Program shall be 20% ``Maximum'' of which Ten (10%) Percent to be 
withheld from the wage-earners' pay to be matched by Ten (10%) Percent from 
the Employer. Rate shall not be raised for Fifty (50) years.

6.

Earmark how the money shall be allocated, such as:

a.

2% to Citizens Retirement Fund, a 401K type program--private social 
security fund for each person;

b.

4% to Social Security Fund for Senior Citizens retirement only;

c.

1% Senior Citizens Medical Fund;

d.

1% Disability Fund;

e.

1% Family Dependent Fund;

f.

1% National Defense; and

g.

10% for the other spending programs.

    A total of 20% of the wage-earners' salary to go to the Federal 
government.
    ** Would be great if each State Government would ``totally'' 
eliminate State Personal Income Tax to be replaced by receiving one 
(1%) percent of this 20% total.
    This type of system would result in no forms, no worry and a much 
smaller I.R.S. No tax forms to file each year. No tax credits to be 
given or taken away by the Federal government. No increase or decrease 
in the tax rate.
    This would get the Federal Government out of micro-managing the 
daily life of the taxpayers. It is called FREEDOM!
    Social Security; at this point, the government should just pay 
everyone the same amount each month once the person has reached age 62 
or 65. Yes I would increase the monthly check for everyone.
    An advantage given by the government to one person means an unfair 
dis-advantage to all other Americans. Our Founding Fathers believed 
that small government and less taxes means more freedom.

                                  
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